Insurables — Australian business risk, sourced and dated

Claims-made basis

What it means

A claims-made policy responds to claims first made against the insured during the period of insurance. When the work that caused the claim was performed does not decide whether cover applies; when the claim arrives does.

This is the opposite of an occurrence-based policy, which responds to events happening during the period regardless of when a claim follows. Professional indemnity and management liability are usually claims-made; public liability is usually occurrence-based.

Also called: claims made, claims-made policy, claims made basis

Where you meet it

  • Professional indemnity policies for consultants, designers, engineers and advisers.
  • Management liability and directors-and-officers style covers.
  • Some cyber and statutory liability wordings.

Worked example

A designer completes a project, then lets its professional indemnity policy lapse when the business winds down. A claim about that project arrives afterwards.

Because the policy was claims-made and had ended before the claim arrived, there is no policy to respond, even though cover was in force when the work was done. Run-off cover exists precisely for this situation, and it has to be arranged before the last policy ends. After a claim appears is too late.

What goes wrong with it

  • Continuity matters more than history. A gap between policies can leave past work uninsured even though a policy was in force at the time.
  • The retroactive date sets how far back the policy will reach. A new insurer offering a later retroactive date narrows cover for past work.
  • Claims-made wordings usually require notification as soon as the insured becomes aware of a claim or a circumstance that might become one. Sitting on it is how cover gets lost.
  • Changing insurer is the moment this matters most. A new insurer takes on the future claims, and anything already notified or already known about generally stays with the previous policy, which is why the disclosure at renewal has to be complete.
  • Selling a business does not end the exposure. Claims about work done before the sale still arrive, and who holds cover for them is a question to settle in the sale rather than afterwards.

Covers this clause appears in

  • Professional indemnity insurance — Cover for legal liability arising from professional advice or services, written on a claims-made basis.
  • Management liability insurance — Cover for company and director exposures such as employment practices, statutory liability and defence costs.

Related clauses

Guides that use this

Sources

On any specific policy, the wording and the schedule govern — they are the primary source for what a clause means there. The references below are general guidance to check against, cited at the publisher level.