How well do you know your coverage? Many risk managers understand their current insurance policies – that is, those in-force today. They tend to focus heavily on the current state of their risk management program to protect their organization from today’s threats.
That practice is completely understandable. But how many risk managers are familiar with the long history of past policies purchased by their organization? Or policies inherited from a recent acquisition? It’s important to understand prior history to be able to tie a claim to the correct coverage or policy.
What Triggers You?
A thorough review and summary of all past and present insurance policies may be worth its weight in gold to a risk manager. Why is this important? Lapsed or expired policies are, in many cases, a company’s most significant risk management asset.
Ask a risk manager for any college university facing sexual misconduct allegations. Consider how municipalities are impacted when law enforcement activity from the 1980s becomes the subject of a new lawsuit. When conducting your historical review of policies, remember to ask the key question, “What triggers you?”
The Coverage Trigger
In the insurance coverage world, the term “coverage trigger” refers to the event that must occur before a loss implicates a particular liability policy. The trigger date becomes the claim date or date of loss for the purpose of claim system setup.
Something Has To “Happen”
Each insurance policy and each coverage grant within that policy provides coverage based on some type of “happening.” The “happening” is the triggering event that must occur within the policy term, but it is not always the day that a loss occurred.
Examples of “happening”:
- An event that leads to wrongdoing such as an unlawful arrest or an unwelcome remark of a sexual nature. Some call this the wrongful conduct date or date of the offense.
- Initial onset of physical or emotional harm often referred to as the date of injury.
- The last event in a set of legally required elements that forms the basis of a claim. An example may be the date of publication of a defamatory statement.
There could be some amount of time between the unlawful conduct and the resulting injury.
Claims-made triggers, often used in professional liability policies, set the trigger date to the day when the claim was first made. In these instances, claims-made coverage rarely coincides with the date of the wrongful conduct or the date of injury. An advantage for insurers who issue these policies is the likely elimination of consecutive policy trigger which can result from injuries caused by frequent exposure to a harmful condition or ongoing harassment.
The point here is that an erroneous determination in this critical area can cause the misapplication of limits and deductibles. In some cases, it can implicate the wrong insurance company. Rather than reviewing the wording of policies after a claim is made, a better practice is to dissect and summarize each coverage part for every policy before a claim is made.
Coverage Forms Chart
The chart below shows various coverage trigger examples that may be found across certain commercial coverage types. Your risk management department would benefit from creating and maintaining a chart like the one below. It should be combined with an annual chart of insurance policies with effective dates, limits, deductibles, and conditions that apply to each policy.
| FORM TYPE | COVERAGE | TRIGGER OF COVERAGE |
| Commercial General Liability | Coverage A. – “Bodily Injury” and “Property Damage” Caused By an “Occurrence” | Date of the Injury or damage |
| Commercial General Liability | Coverage B. – “Personal and Advertising Injury” | Date offense was committed |
| Professional Liability “E&O” | Claims-Made – “Wrongful Acts” Coverage | Date Claim First Made |
| Professional Liability “E&O” | Occurrence – “Wrongful Acts” Coverage | Date of Wrongful Act |
| Medical Malpractice | Claims-Made – “Wrongful Acts” Coverage | Date Claim First Made |
| Medical Malpractice | Occurrence – “Wrongful Acts” Coverage | Date of Wrongful Act |
| Educator’s Legal Liability | Claims-Made – “Wrongful Acts” Coverage | Date Claim First Made |
| Product Liability | Occurrence – “Bodily Injury” or “Property Damage” | Date of Injury or Damage |
| Law Enforcement | Occurrence-Based Law Enforcement “Wrongful Acts” Coverage | Date of Wrongful Act |
| Commercial Auto | Business Auto “bodily injury” and “property damage” coverage caused by an “accident.” | Date of damage, loss or injury |
As shown above, bodily injury or property damage claims for general liability and commercial auto coverage implicate the coverage term in place when the injury or damage occurred. For example, take the case of a retail customer injured from a slip and fall in a car dealership showroom. The negligence claim against the dealership alleges that an unreasonably slippery floor caused the fall. That claim will attach to the policy in-force at the time of the injury and not the policy in-force at the time the flooring was installed. Since the general liability policies for most organizations also include coverage for personal and advertising injury, it is important to break out that coverage portion into a separate row for analysis as shown in the chart.
For professional liability coverage, sometimes referred to as “Errors and Omissions” coverage, the trigger would be the date of the wrongful act if written on an occurrence basis. For example, the date of loss may be called the date of wrongdoing, but most professional lines coverages are written on a claims-made form.
Claims-made coverage alters the analysis. A claim is typically defined as a written demand for damages. For example, a notice of claim or a letter of retention from counsel representing the claimant that mentions the pursuit of damages likely constitutes a claim. A lawsuit is almost certainly going to qualify as a claim. Claims-made coverage analysis asks, “On what day was the claim first made?” This question may involve some degree of investigation and discovery in matters where verbal and written communications dealing with a series of related events have taken place. In ordinary practice, insurers place policyholders on notice that a claim’s “loss date” is being investigated to correctly determine whether coverage applies and if so, which policy.
Trigger Theories
To make things even more complicated, there are a number of trigger theories used by courts to determine when a policy is implicated. These theories are used to determine coverage on occurrence-based coverages under commercial general liability policies. Depending on the type of injury or damage alleged, one of the following theories may be applied.
- Injury-in-fact theory – the date when injury or damage actually takes place
- Exposure theory – the date when exposure to the harmful conditions first occurs
- Manifestation theory – the date when injury or harm is first discovered
- Multiple or continuous trigger theory – multiple dates including actual harm, exposure to harm and discovery of damage
Depending on where your organization’s liability claims are likely to be litigated, any of these theories may be applied. It would be helpful to know the court rulings in this area of the law before you discuss changes to your insurance program.
Conclusion
The practice of summarizing and maintaining a chart of insurance coverage is essential to protecting an organization. The chart will help bring instant knowledge and handling ability to any claim coming through the door. Instead of scrambling to find historical policies and reaching out to brokers and agents of yesteryear, your coverage chart prepares you to immediately notify the correct carriers and coordinate a defense in a timely manner.
