Which statement best describes a claims-made liability policy with a retroactive date?

Which statement best describes a claims-made liability policy with a retroactive date?

• A. It covers events that occur during the policy period, regardless of when the claim is filed.
• B. It covers claims that are filed during the policy period and may have a retroactive date covering incidents after that date.
• C. It covers all incidents regardless of date if the claim is filed within the policy year.
• D. It covers only events that occur within the last year of the policy term.

Answer: (B)

A claims-made policy with a retroactive date responds to claims that are made during the policy period, but the underlying incident must have occurred on or after the retroactive date to be covered. This means a claim filed within the policy period is covered only if the event that caused the claim happened after the retroactive date. If the incident happened before that date, it won’t be covered, even if the claim is filed during the period. That’s why this option is best: it correctly ties coverage to the timing of the claim and the retroactive date that filters which past events are eligible. The other descriptions mix in ideas from an occurrence form or ignore the retroactive date. An occurrence policy covers events that happen during the policy period regardless of when the claim is filed. Saying all incidents are covered if filed within the year ignores the retroactive date, and stating coverage is limited to the last year of the term doesn’t reflect how a retroactive date functions.

A claims-made policy with a retroactive date responds to claims that are made during the policy period, but the underlying incident must have occurred on or after the retroactive date to be covered. This means a claim filed within the policy period is covered only if the event that caused the claim happened after the retroactive date. If the incident happened before that date, it won’t be covered, even if the claim is filed during the period. That’s why this option is best: it correctly ties coverage to the timing of the claim and the retroactive date that filters which past events are eligible.

The other descriptions mix in ideas from an occurrence form or ignore the retroactive date. An occurrence policy covers events that happen during the policy period regardless of when the claim is filed. Saying all incidents are covered if filed within the year ignores the retroactive date, and stating coverage is limited to the last year of the term doesn’t reflect how a retroactive date functions.