General Liability policy basis examples
In general liability, you specify policy basis on the tab.
The following illustration shows four policy terms of a general liability policy. The insured had an occurrence policy with Company A from 1/1/2010 until 1/1/2012. On 1/1/2012, the insured switched to Company B and changed to a claims made policy. The Claims Made Original Effective Date is set to 1/1/2012, the date that the insured started the claims made policy. The Retroactive Date, the earliest loss date for a claim, is also set to 1/1/2012. From 1/1/2010 to the present, there is no gap in coverage. Losses that occurred prior to the Retroactive Date are covered by Company A, even if the claim is filed after the Retroactive Date. Any losses that occur after the Retroactive Date are covered by Company B.
In the following illustration, the insured had claims made policies with two insurers. The Claims Made Original Effective date is set 1/1/2010, the first date that the insured had a claims made policy (with any insurer). The Retroactive Date is set to 1/1/2012, the first date the insured has a claims made policy with Company B.
If the Retroactive Date is later than the Claims Made Original Effective Date, then there is a gap in coverage. For example, a loss occurred after the Claims Made Original Effective Date but before the Retroactive Date. The claim is filed after the retroactive date. Company A does not cover this loss because claim is filed after that policy has expired. Company B does not cover this policy because the loss occurred before the retroactive date. Tail insurance can cover this gap.
Tail insurance provides coverage for a gap either by:
- Extending the reporting period for the expired policy. Typically this extension requires the customer to pay an additional premium.
- Issuing a specific tail coverage policy. This tail coverage policy covers claims that are reported after the last claims made policy has expired.
In the following illustration, the Retroactive Date is moved back six months to provide some, but not complete, coverage for the gap in insurance. For example, Company B will cover a claim filed on 3/15/2013 for a loss that occurred on 10/15/2011, prior the date that insurance started with Company B.
