In today's increasingly litigious business environment, managing liability risk has never been more critical. Owners of real estate businesses, general contracting firms, landscaping companies, and other organizations frequently purchase commercial general liability (CGL) insurance as their first line of defense against unforeseen incidents and claims.
However, not all coverage is created equal—and the distinction between claims-made and occurrence policies represents one of the most consequential decisions in your risk management strategy.
For property managers handling dozens of vendor relationships or general contractors coordinating multiple subcontractors across job sites, understanding these policy distinctions is a critical component of comprehensive risk management. One missed detail in your insurance coverage could potentially expose your business to millions in liability.
The complexity compounds when you're also responsible for tracking certificates of insurance (COIs) from all your vendors and subcontractors. Each of these third-party relationships brings its own insurance considerations, creating a web of policies that must be properly verified and monitored to ensure continuous protection.
Let’s break down both claims-made and occurrence policies so you can ensure appropriate coverage when you need it most and build safer business connections through proper risk transfer. We'll explore the fundamental differences, examine industry-specific considerations, and address common coverage gaps that could leave your business exposed.
Key Takeaways
Claims-made insurance policies are a specific type of coverage where protection is provided for claims made and reported to the insurer during the policy period. Unlike occurrence-based policies, which cover events that happen during the policy period, claims-made policies require both the alleged incident and the claim to occur within the policy's timeframe.
These policies often have a retroactive date. Claims arising from incidents before this date may not be covered. Additionally, if a policy is canceled or a premium isn't paid, any claim that comes through will not be covered—even if the incident occurred during the policy period.
Example: Bob the businessman purchased claims-made insurance in 2018 and continued coverage through 2020, then canceled it. He does not purchase any extension—or, tail coverage—to extend its original limits. In 2021, Bob was sued for an incident that occurred in 2019. Since the claims-made policy is no longer in effect and he did not purchase tail coverage, Bob is the liable party—meaning he is obligated to pay for damages, as his former insurance carrier does not cover it.
Also known as an extended reporting period (ERP), tail coverage is an additive option that extends the limits of claims-made coverage indefinitely, and becomes available only after a policy has been terminated.
This endorsement protects policyholders from past incidents and covers claims filed after expiration or cancellation.
Example: Bob the businessman purchased claims-made insurance in 2018 and continued coverage through 2020, then canceled it. He then adds tail coverage. In 2021, Bob was sued for an incident that occurred in 2019. Since he was continuously covered at the time of the incident and purchased extended coverage, his old insurance carrier is still liable to pay for the suit, even though the original policy is no longer in effect.
Occurrence policies cover events happening during the policy period, regardless of when claims are filed. Unlike claims-made policies, the trigger for coverage is the occurrence of an event rather than the timing of the claim report.
Occurrence policies have no retroactive date, providing simplicity and long-term clarity regarding the incidents covered. This type of insurance will provide coverage even if the claim is filed after cancellation, as long as the incident occurred within the time frame set by the initial policy. These are commonly used in general liability insurance, such as commercial general liability (CGL) policies, as well as in some other liability insurance categories.
Example: Bob the business owner purchased an occurrence policy in 2018 but switched to a new form of coverage in 2023. Bob got sued in 2025 for an incident that occurred in 2020. In this case, Bob is still covered by his original occurrence policy because it was active at the time of the incident.
General contractors face unique challenges when selecting between claims-made and occurrence policies. The nature of construction work—with its inherent dangers and potential for latent defects—makes insurance coverage decisions particularly consequential.
Naturally, property managers and real estate owners have different risk profiles that influence their insurance policy decisions.
Healthcare facilities face even more specialized risk considerations that impact their insurance decisions.
Even with appropriate insurance in place, businesses often encounter coverage gaps that leave them exposed to unexpected liability. Here are the most common gaps and strategies to address them.
The Gap: When a claims-made policy expires or is canceled without tail coverage, you lose protection for incidents that occurred during the policy period but haven't yet resulted in claims.
Solution: Always secure appropriate tail coverage when canceling or changing a claims-made policy. While this comes at an additional cost, it's significantly less expensive than facing an uninsured claim. Implement automated COI tracking systems that flag policies lacking proper tail coverage to ensure continuous protection.
The Gap: Claims-made policies typically include a retroactive date, before which incidents aren't covered. When switching insurance carriers, misalignment of these dates can create coverage gaps.
Solution: When changing insurance providers, ensure your new claims-made policy's retroactive date matches or precedes your previous policy's date. Document this carefully in your risk management system and verify it through your COI tracking process.
The Gap: Claims-made policies typically require prompt notification of potential claims. Failing to report incidents within the specified timeframe can result in denial of coverage.
Solution: Implement clear incident reporting protocols within your organization. Train staff to recognize and report potential claim situations immediately. Use vendor management systems to track incidents and ensure timely reporting to insurers.
The Gap: Both policy types may have geographic limitations that don't cover incidents occurring outside specified territories—a particular concern for businesses operating across multiple regions.
Solution: Review policy language carefully for territory limitations. For businesses operating in multiple locations, consider endorsements that extend coverage to all relevant territories. Verify geographic coverage through your COI tracking process for all vendors and subcontractors.
The Gap: Relying on vendors or subcontractors without properly verifying their insurance coverage type and limits can create significant liability exposure.
Solution: Implement a robust certificate of insurance tracking system that verifies not just the existence of insurance but also confirms policy types, limits, additional insured status, and appropriate endorsements. Automated COI tracking solutions can dramatically reduce the risk of overlooking critical details in vendor policies.
By understanding these common gaps and implementing appropriate risk management strategies, your business can significantly reduce its exposure to uninsured claims. Proper certificate of insurance tracking plays a crucial role in identifying and addressing these gaps before they result in costly liability issues.
Regardless of your insurance coverage, bcs full-service and self-service tracking solutions make managing third-party processes a whole lot simpler.
After hiring vetted vendors via the bcs network, seamlessly onboard them or encourage self-onboarding through the vendor mobile app.
Our frictionless certificate of insurance (COI) tracking solutions enable you to easily message tenants, highlight and correct deficiencies with AI-powered alerts, and guide wayward third parties back to compliance.
With capabilities that handle the full gamut of your vendor management processes, bcs does it all, so you don’t have to.
bcs is a leading, automated COI tracking solution offering self-service and full-service COI options, streamlined document storage, automated RFP broadcasting, and so much more. To learn more, schedule a demo or contact our team today.