Claims-Made vs Occurrence Policies
Claims-made policies cover claims filed during the active policy period, regardless of when the incident occurred (as long as it falls after the retroactive date). Occurrence policies cover incidents that happen during the policy period, no matter when the claim is eventually filed. This distinction has major implications for long-tail liability exposures that law firms commonly face.
Claims-Made
Advantages
- Lower initial premiums that gradually increase as the policy matures
- Retroactive date can be set to cover prior acts from before the policy inception
- Most commonly available form for legal malpractice insurance, giving firms more carrier options
- Easier to adjust coverage limits at renewal since each policy period is self-contained
Disadvantages
- Requires continuous, uninterrupted coverage or tail coverage to avoid gaps
- Premiums increase each year until the policy matures, typically over five to seven years
- Switching carriers can create coverage gaps if retroactive dates are not carefully managed
Best for: Most law firms, since legal malpractice insurance is predominantly written on a claims-made basis and carriers offer the broadest options in this form.
Occurrence
Advantages
- No need to purchase tail coverage when changing carriers or retiring
- Premiums remain relatively stable from year to year
- Coverage remains in effect for incidents during the policy period even if the claim is filed years later
Disadvantages
- Significantly higher premiums compared to claims-made policies
- Very few carriers offer occurrence-based legal malpractice coverage
- Carriers face open-ended liability exposure, which limits availability and can restrict policy terms
Best for: Firms that can find and afford it and want the simplicity of permanent coverage for each policy year without worrying about tail or retroactive dates.
Verdict
For the vast majority of law firms, claims-made is the practical choice because it is the dominant form in the legal malpractice market and offers more competitive pricing and carrier options. The key is to maintain continuous coverage and budget for tail coverage when the time comes. Occurrence policies offer peace of mind but are rarely available and come at a steep premium.
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