Occurrence vs. Claims-Made Insurance: What Every Contractor Must Understand

Most contractors don't know whether their policies are written on an occurrence or claims-made basis. This distinction is one of the most important in all of contractor insurance — and not understanding it can result in a zero-coverage situation on a claim you thought was covered.

The fundamental difference

Occurrence policy: Coverage is triggered by when the incident happened (the "occurrence"). If the incident occurred while your policy was in force — even if the claim is filed years later, after the policy expired — you're covered.

Claims-made policy: Coverage is triggered by when the claim is made (reported to the insurer). The claim must be made during the active policy period. If you cancel or let the policy lapse, claims filed after cancellation generally aren't covered, even if the incident happened years ago while you were covered.

Which policies use which form

GL is almost always occurrence-based. This is significant: a completed-operations claim filed four years after you finished a job is covered under your GL occurrence policy from when the work was done, even if your current policy is with a different carrier.

Professional liability (E&O) is almost always claims-made. This is the form that trips contractors. If you provide design, consulting, or professional services and then cancel your E&O, claims filed after cancellation aren't covered — even if the professional act happened while you were insured.

Other lines by form:

• Workers' compensation: occurrence
• Commercial auto: occurrence
• Pollution liability: usually claims-made
• Employment practices liability: claims-made
• Directors and officers: claims-made

The retroactive date — the critical number on claims-made policies

Every claims-made professional liability policy has a retroactive date — the earliest date from which acts are covered. Acts that occurred before the retroactive date are NOT covered, even if a claim is made during the policy period.

Example: If your E&O policy has a retroactive date of January 1, 2024, and a claim arises from work you did in 2022, the claim is denied — the act predates the retroactive date.

What to do: Always match or push earlier the retroactive date when you switch E&O carriers. The standard is "full prior acts" — a retroactive date that goes back to the first day you ever held professional liability coverage. Anything more recent than that creates a gap.

The tail period — what protects you after cancellation

When a claims-made policy ends (cancelled, non-renewed, or switched to a new carrier), any claims reported after the policy end date aren't covered. To protect against claims that arise after cancellation for acts that happened while you were insured, you purchase a tail — also called an extended reporting period (ERP).

A tail extends the reporting window (commonly 1, 3, or 5 years, or unlimited) for incidents that occurred before the policy ended. It does NOT provide coverage for new acts going forward — only for reporting claims on past acts.

Tail cost: Typically 100–200% of the final year's annual premium for a 3–5 year tail; unlimited tails can be 300%+. Worth every penny when you're ending a professional services practice.

Why this matters most on completed work

The danger of claims-made without understanding the tail: you do design-build work for three years, carry E&O the whole time, then retire or change firms and cancel your E&O. A design defect surfaces two years after project completion. The client sues. Your old E&O is cancelled — no tail purchased — and the claim is filed after cancellation. Result: zero coverage, even though you were insured when the work was done.

This scenario plays out more often than you'd think. It's the primary reason professional liability has the reputation of being complex.

The one simple rule

Occurrence: The coverage goes with when the incident happened. You can switch carriers freely; the old policy's occurrence period still covers it.

Claims-made: The coverage goes with where the claim lands (which active policy period). Switching carriers or cancelling without a tail can leave you exposed.

Know which form your professional liability policy uses. If you don't know, call your agent today and ask: "Is my E&O written on a claims-made or occurrence form, and what is my retroactive date?"

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Contractors Choice Agency places professional liability on the right policy form with full prior-acts retroactive dates and tail options. Call 844-967-5247 or get a quote online.