This insurance does not apply to:

c.Material Published Prior to Policy Period

“Personal and advertising injury” arising out of oral or written publication of material whose first publication took place before the Retroactive Date, if any, shown in the Declarations.

 Analysis

 This exclusion simply recognizes the claims-made policy with its use of retroactive dates. Since the beginning of coverage under a claims-made policy depends on the retroactive date, this exclusion is stating that personal injury and advertising injury liability coverage is not applicable if the publication of the offending material took place before the policy took effect, that is, before the retroactive date shown in the declarations. This exclusion complements that part of the insuring agreement stating that the insurance applies “only if the offense was not committed before the retroactive date … shown in the declarations”.

Conditions 

 Analysis

 This discussion of the duties of an insured makes clear that, under a claims-made policy, simple notice to an insurer of an occurrence or an offense is not considered notice of a claim. The claims-made policy trigger is the first making of a claim during the policy period or any extended reporting period and just notifying the insurer of an occurrence is not going to satisfy the duty of the insured. For example, suppose the insured falsely detained a suspected shoplifter and then notified the insurer that such an event happened. If the alleged shoplifter later made a claim for personal injury against the insured, the insured would have to notify the insurer of that claim in order for the claims-made CGL form to apply; the notification of the earlier offense of false detention is not enough.

 Part b. of this duty is different from the occurrence version of the CGL form in that the word “suit” is missing in the claims-made version. The importance of this item is limited in that part c. of the “duties” clause requires the insured to “immediately send … copies of any … summonses or legal papers received in connection with the claim or the suit”. The bottom line is that the insurer wants to know of a claim or a lawsuit against its insured quickly and it is in the best interests of the insured to do just that.

 4.     Other Insurance

 Analysis

This clause is declaring that the claims-made policy will be considered excess insurance under certain circumstances. For example, suppose the insured had an occurrence type coverage form with a policy period of 6/1/12 to 6/1/13. Then he bought a successor claims-made coverage form, but did not have a retroactive date put on the declarations page. This, in effect, allows coverage to exist under the claims-made form for a claim that is first made during the policy period of the claims-made form, even if the damage occurred during the 6/1/12 to 6/1/13 occurrence policy period. This clause declares that such coverage under the claims-made form is excess coverage; primary coverage is properly placed with the occurrence type policy.

 The same situation exists if the claims-made policy has a retroactive date that is prior to the expiration date of the occurrence form. Using the prior example, if the insured chose a retroactive date for his claims-made policy of 5/1/12, and an event occurred on 5/15/12 leading to a claim being first made against the insured on 6/15/13, then both the claims-made policy and the occurrence policy are applicable; this clause declares that the occurrence policy is considered primary and the claims-made policy as excess coverage.

 10.     Your Right to Claim and “Occurrence” Information

 Analysis

 This condition is unique to the claims-made version of the CGL form. The insurer is promising to deliver to the first named insured a list of occurrences of which it is aware, plus a summary of payments made and amounts reserved for the previous three years. The insurer, in effect, is letting the insured know not only his or her loss history, but also occurrences that may become part of a future loss history.

 After making this offer, the insurer then adds some reservations. The amounts reserved are not settlement amounts and the insured and others should not take them as such. The information is not to be shared with a claimant. Unless the policy is cancelled or nonrenewed by the insurer, the insured must request, in writing, the information. And, finally, the insurer does not guarantee the accuracy of the loss history information; efforts are made to compile and report accurate information, but if some of that information is not correct, the insurer does not want to set itself up for a lawsuit by touting the information as 100% correct, 100% of the time.

Extended Reporting Periods

 1.     We will provide one or more Extended Reporting Periods, as described below, if:

a.     This Coverage Part is cancelled or not renewed; or

b.     We renew or replace this Coverage Part with insurance that:

(1)     Has a Retroactive Date later than the date shown in the Declarations of this Coverage Part; or

(2)     Does not apply to “bodily injury”, “property damage”, or “personal and advertising injury” on a claims-made basis.

2.     Extended Reporting Periods do not extend the policy period or change the scope of coverage provided. They apply only to claims for:

a.     ”Bodily injury” or “property damage” that occurs before the end of the policy period but not before the Retroactive Date, if any, shown in the Declarations; or

b.     ”Personal injury and advertising injury” caused by an offense committed before the end of the policy period but not before the Retroactive Date, if any, shown in the Declarations.

Once in effect, Extended Reporting Periods may not be cancelled.

3.     A Basic Extended Reporting Period is automatically provided without additional charge. This period starts with the end of the policy period and lasts for:

a.     Five years with respect to claims because of “bodily injury” and “property damage” arising out of an “occurrence” reported to us, not later than 60 days after the end of the policy period, in accordance with Paragraph 2.a. of the Section IV – DUTIES IN THE EVENT OF OCCURRENCE, OFFENSE, CLAIM OR SUIT Condition;

b.     Five years with respect to claims because of “personal and advertising injury” arising out of an offense reported to us, not later than 60 days after the end of the policy period, in accordance with paragraph 2.a. of the Section IV – DUTIES IN THE EVENT OF OCCURRENCE, OFFENSE, CLAIM OR SUIT Condition; and

c.     Sixty days with respect to claims arising from “occurrences” or offenses not previously reported to us.

     The Basic Extended Reporting Period does not apply to claims that are covered under any subsequent insurance you purchase, or that would be covered but for exhaustion of the amount of insurance applicable to such claims.

4.     The Basic Extended Reporting Period does not reinstate or increase the Limits of Insurance.

5.     A Supplemental Extended Reporting Period of unlimited duration is available, but only by an endorsement and for an extra charge. This supplemental period starts when the Basic Extended Reporting Period, set forth in paragraph 3. above, ends.

     You must give us a written request for the endorsement within 60 days after the end of the policy period. The Supplemental Extended Reporting Period will not go into effect unless you pay the additional premium promptly when due.

     We will determine the additional premium in accordance with our rules and rates. In doing so, we may take into account the following:

a.     The exposures insured;

b.     Previous types and amounts of insurance;

c.     Limits of Insurance available under this Coverage Part for future payment of damages; and

d.     Other related factors.

     The additional premium will not exceed 200% of the annual premium for this Coverage Part.

     This endorsement shall set forth the terms, not inconsistent with this Section, applicable to the Supplemental Extended Reporting Period, including a provision to the effect that the insurance afforded for claims first received during such period is excess over any other valid and collectible insurance available under policies in force after the Supplemental Extended Reporting Period starts.

6.     If the Supplemental Extended Reporting Period is in effect, we will provide the supplemental aggregate limits of insurance described below, but only for claims first received and recorded during the Supplemental Extended Reporting Period.

     The supplemental aggregate limits of insurance will be equal to the dollar amount shown in the Declarations in effect at the end of the policy period for such of the following limits of insurance for which a dollar amount has been entered:

     General Aggregate Limit

     Products-Completed Operations Aggregate Limit

     Paragraphs 2. and 3. of Section III – LIMITS OF INSURANCE will be amended accordingly. The Personal and Advertising Injury Limit, the Each Occurrence Limit and the Damages to Premises Rented to You Limit shown in the Declarations will then continue to apply, as set forth in paragraphs 4., 5., and 6. of that section.

Analysis

 The purpose of the extended reporting periods, set forth under Section V of the claims-made form, is to provide coverage under an expired claims-made policy for claims first made after the policy has expired.

 Extended reporting periods, sometimes called “tail” coverage, may be needed in a number of situations. Consider the following examples: an insured goes out of business and simply cancels its claims-made policy; an insured's claims-made policy is cancelled by the insurer and the insured is unable to obtain new insurance; an insured's claims-made policy is replaced with an occurrence policy; an insured's claims-made policy is replaced with a claims-made policy and the new claims-made policy's retroactive date is set at a date later than the retroactive date in the previous policy.

 Now, say that a claim is made against each of those insureds, after expiration of the individual policies for injuries that occurred after the retroactive dates and before the expirations. Assuming that no extended reporting period applies to any of the policies, the claims will not be covered under the policies in the examples because they were not made during the respective policy periods.

 Moreover, the insureds in the first and second examples, because they have not obtained new insurance policies, will have no other insurance to which to look. The insured in the third example, even though it has an occurrence policy in effect at the time of the claim, will also be without coverage, because the occurrence policy only covers bodily injury and property damage that occur during the policy period. In this example, the injury occurred before the new policy's inception. It should be noted that the insured in the last example may or may not have coverage for the later claim. Although the claim is made during the policy period of the new claims-made policy, it will not be covered unless the injury or damage occurred after the new retroactive date. If, for example, the new retroactive date is the same as the inception date of the new policy, the insured will not have coverage under the new policy for any claims resulting from injury or damage before that date.

 The extended reporting periods provision in Section V of the coverage form provides an automatic extended reporting period of limited duration for claims made after the policy period, and it enables the insured to buy an optional extended period of unlimited duration for such claims. The automatic extended reporting period is provided without an additional premium charge. The policy refers to the automatic coverage as the “basic extended reporting period.” The optional extended reporting period requires an additional premium, as is explained in more detail later. The CGL coverage form refers to the optional coverage as the “supplemental extended reporting period.”

 The basic tail and the option to purchase the supplemental tail are provided if the policy is cancelled or not renewed—by either the insured or the insurer. They are also provided if the insurer renews or replaces the policy with one that either has a later retroactive date or applies on an other than claims-made basis.

 The basic tail actually provides for two separate periods of different length. One period runs for five years from the end of the policy period, and the other for 60 days from the end of the policy period.

 The five year tail that applies to coverage A claims is for claims resulting from an occurrence of which the insurer is notified not later than 60 days after the end of the policy period. (And, of course, the occurrence must have taken place before the end of the policy period and after the applicable retroactive date.) To illustrate, say that a customer slips and falls on the insured's premises at some time during the policy period. The insured reports the details of the occurrence to the insurer as soon as practicable before the end of the policy period, but no actual claim is made against the insured by the end of the policy period. Any resulting claim will be covered under the expired policy (subject, of course, to policy limits and conditions) if the claim is made before the end of the five year period.

 The tail for coverage B claims mirrors the information written above for the coverage A claims. The coverage B five year tail is for claims because of personal injury and advertising injury arising out of an offense reported to the insurer not later than 60 days after the end of the policy period.

 The 60 day tail applies to all other claims, i.e., claims that arise from occurrences or offenses during the policy period that were not reported to the insurer before 60 days after the end of the policy period. Say, for example, that the same occurrence as above happened without the insured's knowledge, and so the insured did not notify the insurer. The unknown and unreported occurrence will be automatically covered under the expired policy only if the claim is first made within 60 days after the end of the policy period.

 The basic tail does not apply to claims that are covered under subsequent insurance purchased by the named insured. To illustrate, say that the insured obtains a renewal claims-made policy with the same retroactive date as the previous policy. A claim is first made during the policy period of the renewal for an accident that occurred during the previous policy period and was reported to the insurer before the end of that period. The existence of the subsequent insurance for the accident voids any coverage under the previous policy. Of course, the coverage form does state that extended reporting periods are provided if a policy is not renewed or is renewed with a retroactive date later than the date in the previous policy; so, the facts of this example make moot the question of the utilization of the basic extended reporting period, but the point about the basic tail not applying to claims subsequently covered remains valid.

 Another important feature of the basic tail coverage is that it is subject to the aggregate limits found on the coverage form. If those limits have been reduced by previous claims, the basic extended reporting period does not reinstate or increase the limits of insurance.

 Although the basic tail provides potentially valuable coverage, it does not meet all insured's needs in all cases. The insured needs only to consider the possibility that a reported occurrence might not result in a claim until five years and one day after policy expiration, or an unreported occurrence might result in a claim 61 days after policy expiration. In either case, the basic tail will provide no coverage whatsoever. Unless the insured's current policy is a claims-made policy with a retroactive date going back to that of the expired policy, there will be the possibility of uninsured claims unless the insured purchases the supplemental tail, which provides for an extended reporting period of unlimited duration.

 While the basic tail is provided automatically and for no additional premium, the supplemental tail is provided by endorsement ( CG 27 10 04 13) for an additional premium, and only if requested by the insured in writing within 60 days after the end of the policy period. If the insured does not exercise its option within 60 days after the end of the policy period, the insurer will have no obligation to sell the insured the supplemental tail endorsement. Thus, any insured that might need the supplemental tail should make a final determination before the 60 day period expires.

 A notable feature of the supplemental extended reporting period is that it provides general aggregate limits and products-completed operations aggregate limits equaling the coverage form's original aggregate limits. (The basic tail, recall, is subject to the regular policy aggregate limits, even if reduced by previous claims.) However, neither the endorsement nor its limits take effect until the end of the basic five year tail (for claims resulting from occurrences reported to the insurer within 60 days after the end of the policy period) or the 60 day tail (for claims resulting from occurrences that were not previously reported to the insurer). Once it takes effect, the endorsement provides an extended reporting period of unlimited duration.

 The extended reporting periods provision in the coverage form allows the insurer to determine the premium for the supplemental tail endorsement in accordance with the insurer's rules and rates. The insurer may take into account the exposures insured, the previous types and amounts of insurance, the limits of insurance available for future payment of damages, and other related factors. Note also that the supplemental extended reporting period will not go into effect unless the premium is paid promptly when due.

 The premium for the endorsement may not exceed 200% of the annual premium for the coverage part to which the endorsement would be attached. (The “coverage part” is the combination of CGL coverage forms and allied endorsements, whether they constitute a monoline policy or merely part of a commercial multi-peril policy.) The premium for the extended reporting period endorsement is fully earned upon the endorsement's effective date and the endorsement cannot be cancelled by the insurer if the premium has been paid.

 The supplemental extended reporting period provisions amend the coverage form so that the insurance afforded for claims first received during the supplemental period will be excess over any other valid and collectible insurance available to the insured, whether primary, excess, contingent or on any other basis, whose policy period begins or continues after the supplemental extended reporting period starts.

 To illustrate, say that an insured's claims-made coverage form is cancelled and the insured, unable to find replacement coverage within 60 days after cancellation, purchases the supplemental tail to protect against claims for earlier occurrences. Some time later the insured succeeds in obtaining claims-made coverage with a retroactive date that encompasses the earlier policy period. After the new coverage form takes effect, claim is made against the insured for injury that occurred during the previous policy period. The claim is covered under both the supplemental tail endorsement and the new claims-made form. Because of the other insurance provision under discussion, the new form will be primary insurance and the supplemental tail coverage will be excess. Recall that if a claim can be covered under the insured's subsequent policy and the basic tail, the insured can not collect anything—not even excess cover—under the basic tail coverage.

 Considerations in Issuing Claims-Made Policies

 Now that the claims-made trigger provisions, including the retroactive date and extended reporting periods, have been described, it is possible to consider the various choices that can be made in arranging claims-made coverage, as well as the ramifications of those choices.

 For every claims-made coverage form issued, the insurance company must decide on a retroactive date, subject to the ISO rule imposing limitations on when the insurer can advance the retroactive date. Similarly, the insured must be able to decide what retroactive date it will be willing to accept. There are three possibilities: the retroactive date may be the same as the newly issued policy's inception date; the retroactive date may be some date earlier than the newly issued policy's inception date; or no retroactive date may be imposed.

 When the retroactive date indicated is the same as the newly issued policy's inception date, the insured will have no coverage under that policy for prior occurrences. If a claim made during the policy period is to be covered, the bodily injury or property damage from which the claim arose must also have occurred during the policy period. This kind of retroactive date should be acceptable to most insureds if they have been insured exclusively under occurrence liability policies prior to the inception of the claims-made policy. Prior occurrences, in that case, are potentially within the coverage of the occurrence policy or policies in effect at the time the injury or damage occurred.

 If, however, the insured had been previously covered under a claims-made policy, a retroactive date concurrent with the inception date of the current policy will leave a coverage gap. The claims-made policy will not cover any claims, even if made during the current policy period, for bodily injury or property damage occurring before that policy's inception date. The insured's only automatic coverage for such claims will come by way of the basic tail in the expired policy. Thus, if the insured is unable to obtain a retroactive date that coincides with the inception date of the insured's first (or expiring) claims-made policy, the insured should purchase the supplemental tail endorsement under the expiring claims-made policy, unless it wishes to self-insure the prior acts exposure that lies beyond the basic tail coverage.

 There are consequences for the insurer to consider in making the retroactive date the same as the inception date of the newly issued policy. First, if that policy is a renewal of a claims-made policy issued by the same insurer, the insured may very well request a supplemental extended reporting period endorsement from the insurer. The insurer will then be obliged to issue the endorsement, which will, in effect, turn the expiring claims-made policy into an occurrence liability policy, re-creating the uncertainty about future claims that led ISO to introduce claims-made insurance in the first place.

 Second, the manual premium for the newly issued claims-made coverage form will be less than what it would have been had the insurer used the same retroactive date that applied to the expiring policy. This is because claims-made rates are modified by factors that increase with the number of years (up to five) the insured has been in the claims-made program. The number of years in the claims-made program is measured from the applicable retroactive date. So, when the insurer makes the retroactive date coincide with the inception date of a renewal, it “starts over” with the first-year claims-made multiplier and receives less premium than if it could apply the “mature” claims-made modifier. Insureds should also, by the way, understand this rating aspect of claims-made coverage. If the choice of coverage is guided solely by cost, the insured will, year after year, probably choose “first year” claims-made coverage—that is, a claims-made coverage form whose retroactive date is concurrent with that policy's inception date. The problem with this, of course, is that, as noted previously, unless supplemental tail coverage is purchased, the insured will have only basic tail coverage for claims made during the current policy period that result from injury or damage that occurred before inception of the current policy. Thus, the prospective “savings” from buying first-year claims-made coverage needs to be weighed against the cost—and inconvenience—of buying supplemental tail coverage under every expiring policy.

 When an insurer is issuing a claims-made policy to an insured for the first time—that is, the policy is not a renewal—the insurer may still wish to consider the possibility of using a retroactive date earlier than the new policy's inception date. Say, for example, the insured had four years of claims-made coverage before making application to the new insurer. If the new insurer proposes a retroactive date concurrent with the new policy's inception date, it will be able to quote a first-year claims-made premium as well as avoid liability for earlier occurrences. However, the insured will for all practical purposes be forced to purchase an extended reporting period endorsement from the previous insurer. If the premium for that endorsement plus the premium for the new policy is considerably more than the premium for renewing the existing policy, the insured may decide not to switch insurers after all.

 If the retroactive date on the newly issued coverage form is earlier than the inception date of that policy, for example, the same date as the inception date of the insured's first or expiring claims-made policy, the retroactive date should not create any coverage gaps or require the insured to buy supplemental tail coverage. In some cases the insurer may be willing to set a retroactive date earlier than the inception date of the newly issued coverage form but not all the way back to the inception of the insured's first claims-made policy. That could be the case if the insurer felt that reported or unreported occurrences from that prior period could pose an unacceptable risk. Here again, because the new retroactive date does not extend all the way back to the retroactive date of the first claims-made policy, the insured will need to buy the supplemental tail endorsement under the expiring policy.

 The third possibility for retroactive dates—not imposing any retroactive date whatsoever—has the effect of providing coverage for bodily injury or property damage for which claim is first made during the current policy period, regardless of when the injury or damage occurred. Although attractive to insureds, this option probably will see limited use, if any, particularly for insureds whose products or work have been on the market for some time or whose products or work have a potential for causing latent disease. If, however, the insured had continuous occurrence-type coverage in effect for all years leading up to the claims-made policy being issued, the insurer may be amenable to imposing no retroactive date, in view of the fact that the other insurance clause of the claims-made form indicates that earlier occurrences would be covered on a primary basis under the earlier occurrence-type policies and only on an excess basis under the claims-made policy in effect at the time claim was made.