A claims-made policy generally responds when a claim is first made against the firm and reported to the insurer within the policy’s required timeframes. The policy wording controls, including how it defines a claim, when a claim is considered made, and what notice is required. A client complaint, demand for correction, or allegation of an error may matter before anyone files a lawsuit. Ask your broker to explain how the policy treats each type of communication your staff might receive.
Check the retroactive date and confirm that proposed coverage preserves the prior acts protection the firm needs. When changing insurers, compare the old and new policies for gaps in dates, limits, exclusions, and reporting terms. Ask how an extended reporting period works if the firm retires, sells, closes, or stops buying coverage. It may allow qualifying claims to be reported after a policy ends, but it generally does not cover new work. Find out its deadline, cost, length, and whether it applies to claims arising from work done before the policy ended.
Owners can make this review practical:
- Keep complete policy documents, applications, endorsements, and renewal records in a location successors can access.
- Ask the broker how notice of circumstances works, including what details the insurer expects and how notice may affect later claims.
- Confirm how former employees, acquired firms, and work performed under a joint venture are treated.
- Train project managers and administrative staff to pass complaints or possible claims to a named firm leader promptly.
Ask whether defense costs reduce the policy limit and whether the limit is per claim, shared across the policy aggregate, or both. Do not assume a policy’s headline limit is available for every claim. If a client raises a possible claim, preserve relevant records and seek broker and legal advice promptly. Do not wait for the annual renewal to raise a potential coverage issue.
This is general education, not insurance or legal advice; review the actual policy with a qualified broker and counsel, and follow licensed PE judgment and local codes.
