When you look at the Commercial General Liability section of an ACORD 25, you will see two checkboxes: one labeled “Claims-Made” and one labeled “Occurrence.” Most certificates you receive will have the occurrence box checked. When you see claims-made instead, the implications for your compliance review are meaningfully different.
Understanding this distinction is not just theoretical. It affects whether a vendor’s coverage will respond to a claim filed after their policy expires, whether you need to track something called a retroactive date, and what questions to ask when a vendor switches carriers or lets a policy lapse. Getting it wrong can mean a vendor appears compliant on paper while you are carrying risk you did not intend to accept.
The Core Difference
The distinction comes down to a single question: what event triggers coverage?
An occurrence policy responds based on when the incident happened. If a vendor’s employee causes property damage at your facility in March, and the claim is not filed until the following January after the policy has expired, the occurrence policy still responds because the triggering event fell within the policy period. The policy is permanently available for incidents that occurred while it was active, regardless of when the claim is eventually made.
A claims-made policy responds based on when the claim is filed. For coverage to apply, two conditions must be met: the incident must have occurred on or after the policy’s retroactive date, and the claim must be filed while the policy is still active. If either condition is not met, there is no coverage.
The practical consequence is significant. An occurrence policy provides permanent protection for events that happened during the policy period, even long after the policy itself has ended. A claims-made policy provides no protection for incidents that occurred during the policy period once the policy lapses, unless the vendor purchases an extension of coverage.
Which Coverage Types Use Each Form
Knowing which form to expect for a given coverage type helps you spot anomalies quickly.
Typically occurrence-based:
Commercial General Liability (CGL) is almost always written on an occurrence form. This is the standard for bodily injury and property damage liability in commercial relationships. Automobile Liability and Umbrella or Excess Liability policies also follow the occurrence form in most cases.
Typically claims-made:
Professional Liability, also called Errors and Omissions, is nearly always claims-made. This coverage protects against claims arising from professional services, advice, or design work, and because the harm from a professional error may not surface for months or years after the work is delivered, the claims-made form allows insurers to manage that long-tail exposure more predictably.
Directors and Officers Liability, Employment Practices Liability, and Cyber Liability are also typically claims-made. If you require any of these coverages from vendors, you are almost certainly working with claims-made policies.
Environmental or Pollution Liability can go either way depending on the insurer and the specific exposure, but is increasingly claims-made.
What to Look For on a Claims-Made COI
When a vendor carries a claims-made policy, two additional data points matter beyond the standard limit and expiration date review.
The retroactive date. This is the earliest date from which incidents are covered under the current policy. Any incident that occurred before the retroactive date is excluded, even if the claim is filed while the policy is active. The retroactive date should go back at least to the start of the vendor’s engagement with your organization. If it does not, there is a coverage gap for work already performed.
On a COI, the retroactive date is usually shown in the coverage section next to the policy period. If it is blank or missing, request clarification from the vendor before accepting the certificate.
Policy continuity. The retroactive date is only meaningful if the vendor has maintained continuous coverage with the same or an equivalent retroactive date. When a vendor switches insurers, the new carrier may reset the retroactive date to the new policy’s inception, erasing coverage for prior work. A vendor who appears to have current professional liability coverage may have no effective coverage for services performed under a previous policy if their retroactive date moved forward at renewal.
The Tail Coverage Problem
When a claims-made policy expires or is cancelled, the coverage it provided for past work does not continue unless the vendor purchases what is called tail coverage, formally known as an Extended Reporting Period (ERP). Tail coverage extends the window during which a claim can be filed, while still requiring that the underlying incident occurred during the original policy period.
This matters for compliance teams in a specific and underappreciated way: a vendor can be fully compliant today and then create a retroactive coverage gap by letting a claims-made policy lapse without purchasing a tail.
Consider the scenario. A vendor provides consulting services to your organization over a two-year engagement. They carry professional liability on a claims-made form throughout the engagement. The engagement ends, the vendor moves on, and their professional liability policy lapses because they no longer need it for current work. Six months later, a problem surfaces from work performed during the engagement and a claim is filed. The policy that was active during the engagement has no obligation to respond because the claim was not filed during the policy period. Without tail coverage, the vendor has no professional liability coverage for that incident.
Your contract can require tail coverage as a condition of engagement. Standard language requires the vendor to maintain tail coverage for a specified period, typically two to three years, following the end of services. If your contracts do not currently include this requirement, it is worth reviewing, particularly for vendors providing professional, technical, or advisory services.
Practical Considerations by Scenario
Onboarding a new vendor with professional liability. In addition to confirming that limits and coverage are in place, verify the retroactive date. It should predate the start of your engagement. If the vendor is newly insured, confirm whether prior acts coverage is available and whether it covers any relevant work performed before the current policy inception.
A vendor renews their policy with a new carrier. Request the renewal certificate before the prior policy expires and confirm that the retroactive date has been preserved. A retroactive date that moved forward at renewal is a material change that may leave your organization exposed for prior work performed under the engagement.
A vendor terminates their engagement with your organization. If they carried claims-made coverage for services performed on your behalf, your contract should require them to maintain tail coverage for a defined period. Request confirmation of tail coverage purchase as part of your offboarding process.
A vendor’s claims-made policy lapses mid-engagement. This is a more serious gap than a lapsed occurrence policy. With an occurrence policy, incidents that occurred while the policy was active remain covered. With a claims-made policy, a lapse during an active engagement means there is no coverage for claims filed after the lapse date, even for incidents that happened while the policy was in force. This should be treated as a high-priority deficiency requiring immediate remediation.
What to Specify in Your Contracts
If you require claims-made coverage from vendors, your contract language should address three things the standard insurance clause often leaves out.
First, the retroactive date requirement. Specify that the retroactive date must be no later than the commencement date of services under the agreement. This prevents a vendor from presenting a policy with a recent retroactive date that leaves your engagement period uncovered.
Second, continuity at renewal. Require the vendor to preserve the retroactive date when renewing or replacing coverage and to notify you if it changes.
Third, tail coverage following termination. Specify the period for which the vendor must maintain an extended reporting period after the engagement ends. Two to three years is a common standard for professional services; longer periods may be warranted depending on the nature of the engagement and applicable statutes of limitation.
Draft Contract Language for Tail Coverage
Most vendor contracts either omit tail coverage requirements entirely or address them in language that is too vague to be enforceable. The following shows the gap between weak and strong language, followed by a consolidated clause you can bring to your legal team as a starting point.
Weak language:
Upon termination of this Agreement, Vendor shall use reasonable efforts to maintain insurance coverage for services performed hereunder.
“Reasonable efforts” is not an obligation. It gives the vendor complete discretion over whether to purchase tail coverage, how long to maintain it, and what limits to carry. A vendor can satisfy this clause by doing nothing and arguing that given the cost of tail coverage, not purchasing it was reasonable under the circumstances.
Stronger language:
Upon expiration or termination of this Agreement for any reason, Vendor shall purchase and maintain an Extended Reporting Period endorsement (tail coverage) on any claims-made policy required under this Agreement for a period of not less than three (3) years following the effective date of expiration or termination. Such tail coverage shall provide limits no less than those required during the term of this Agreement. Vendor shall provide Client with evidence of such tail coverage within thirty (30) days of policy expiration or termination of this Agreement.
This version specifies the trigger (any expiration or termination), the minimum duration (three years), the required limits (matching the in-force requirements), and the delivery obligation (evidence within thirty days). Each element is independently verifiable and enforceable.
Consolidated tail coverage clause:
Extended Reporting Period (Tail Coverage)
Obligation to Maintain. If any insurance required under this Agreement is written on a claims-made form, Vendor shall, upon the expiration, cancellation, or non-renewal of such policy for any reason, purchase and maintain an Extended Reporting Period endorsement providing coverage for claims first made after the policy period for incidents that occurred during the term of this Agreement. Such tail coverage shall remain in effect for a period of not less than three (3) years following the later of: (a) the expiration or termination of this Agreement; or (b) the date on which Vendor last performed services for Client under this Agreement.
Limits. Tail coverage shall be maintained with limits no less than those required under this Agreement during the policy period to which the tail attaches.
Evidence of Coverage. Within thirty (30) days of purchasing tail coverage, Vendor shall provide Client with a certificate of insurance and a copy of the Extended Reporting Period endorsement confirming the coverage is in place. Vendor’s failure to provide such evidence shall constitute a material breach of this Agreement.
Retroactive Date. Throughout the term of this Agreement, Vendor shall ensure that the retroactive date on any claims-made policy is no later than the commencement date of services under this Agreement, and that such retroactive date is preserved upon any renewal or replacement of coverage. Vendor shall provide prompt written notice to Client if the retroactive date changes for any reason.
Survival. The obligations set forth in this Section shall survive the expiration or termination of this Agreement for the full duration of the required tail coverage period.
A few notes on applying this language. The three-year tail period is a common standard for professional services but may warrant adjustment depending on the applicable statutes of limitation in your jurisdiction and the nature of the engagement. Long-tail exposures such as design work, engineering, or healthcare-adjacent services may justify a longer period. The survival clause is essential: without it, a vendor could argue that their insurance obligations ended when the contract did, which would defeat the entire purpose of the tail coverage requirement. As with all contract language, this should be reviewed and tailored by legal counsel before use.
The Bottom Line for Compliance Reviews
Occurrence policies are simpler to manage from a compliance perspective. Once you confirm the policy was active at the time of an engagement, the coverage exists for incidents that occurred during that period regardless of what happens to the policy afterward.
Claims-made policies require ongoing attention to three things: whether the retroactive date covers the full engagement period, whether the policy remains continuously active, and whether tail coverage is in place when the policy ends. Missing any one of these creates a coverage gap that may not surface until a claim is filed, at which point it is too late to remedy.
When you see claims-made on a COI, slow down. The standard expiration date check is necessary but not sufficient. The retroactive date and continuity history tell you whether the coverage actually protects your organization, not just whether the policy exists today.
Clarita extracts and tracks claims-made policy details alongside standard coverage data, flagging retroactive date gaps and lapses that manual reviews routinely miss. If your team manages vendor certificates at scale, request early access to get early access.