What does the term Claims-made version of a CGL policy indicate?

The term "claims-made" in reference to a Commercial General Liability (CGL) policy indicates that coverage is triggered by the filing of the claim rather than by the occurrence of the event that caused the loss. This means that in order for a claim to be covered under a claims-made policy, the claim must be reported to the insurer during the policy period.

This is a critical aspect of claims-made policies since they only provide coverage for claims that arise and are reported within the specified active policy period. In other words, if a claim is made after the policy period has ended, and it does not have an extended reporting period, then the insurance company is not liable to pay for that claim.

This structure encourages policyholders to promptly report incidents while insured, as any claims discovered after the expiration of the policy might not be covered. Understanding this distinction helps policyholders recognize the importance of having the right type of insurance coverage to protect against potential liabilities that may arise from past actions or decisions made during the policy's active term.