Liability Triggers: Claims-Made vs. Occurrence
A sophisticated understanding of liability insurance requires distinguishing between the two primary coverage triggers: "Occurrence" and "Claims-Made." This distinction is particularly relevant for Professional Liability, Directors & Officers, and some specialized General Liability lines.
Occurrence Policies
Covers any incident that happens during the policy period, regardless of when the claim is actually filed. It provides "forever" protection for that time block. Standard for General Liability and Auto.
Claims-Made Policies
Covers incidents only if the claim is filed while the policy is active. If you cancel without "tail coverage," you lose protection for past acts. Standard for Professional Liability and D&O.
Professional Liability (Errors & Omissions)
Professional Liability, often called Errors & Omissions (E&O), covers defense costs and settlements resulting from allegations of inadequate work, negligence, or failure to deliver services as promised.
- Target Demographics: Critical for consultants, accountants, lawyers, real estate agents, architects, and technology providers.
- Coverage Scope: It fills the gap left by CGL policies, which exclude liability for professional advice.
- Market Dynamics: Premiums are highly sensitive to industry risk. The policy typically covers legal defense costs within the limits of liability (eroding limits).
Directors and Officers (D&O) Insurance
D&O insurance protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, or other parties for actual or alleged wrongful acts in managing a company.
Employment Practices Liability Insurance (EPLI)
With the rise of social inflation and increased awareness of workers' rights, EPLI has become essential. It covers claims related to wrongful termination, sexual harassment, discrimination (age, race, gender), and retaliation. These acts are typically excluded from both GL and Workers' Comp.
The Cyber Liability Frontier
As of 2024-2025, Cyber Liability insurance has transitioned from a niche, discretionary product to a fundamental requirement for small businesses. The misconception that hackers only target large corporations has been dismantled by data showing high attack frequencies against SMEs.
The Scope of Cyber Coverage
Cyber policies include both First-Party and Third-Party coverages:
1. First-Party Coverage
- Forensic Investigation: Hiring experts to determine the cause and scope.
- Data Recovery: Costs to restore data from backups.
- Business Interruption: Replaces revenue lost during downtime.
- Ransom Payments: Reimbursement for monies paid to extortionists.
2. Third-Party Liability
Covers legal fees, settlements, and judgments if the business is sued by customers, partners, or regulators for failing to protect sensitive data.
Underwriting Rigor: Insurers now demand "technological hygiene" as a prerequisite for coverage. Multi-Factor Authentication (MFA), encrypted backups, and patch management protocols are often mandatory. A business without these controls may be uninsurable or face premiums up to 50-100% higher.