By AIA Contract Documents
March 6, 2023
One of the best ways to manage risk on construction projects is through insurance and bonds. Throughout the next several weeks, the AIA Contract Documents Program is going to release a series of articles pertaining to construction insurance. This is Part 9: “claims made” versus “occurrence” based policies.
What is the Difference Between a “Claims Made” Policy and an “Occurrence” Based Policy?
In general, the difference between these two types of policies is the time period they cover. “Claims made” policies cover events for which the claim is made during the policy period, regardless of when the actual occurrence happened. So, insurance companies for these types of policies will cover all claims (for which there is coverage) that are brought during the policy period, even if the event giving rise to the claim happened before the policy period. Professional liability policies that cover design professionals are typically written on a “claims made” basis.
On the other hand, an “occurrence” based policy covers all occurrences that happen during the policy period, regardless of when the claim is made. So, insurance companies for these types of policies will cover all occurrences (for which there is coverage) that happen during the policy period, even if the claim is made after the policy period. Commercial general liability and property insurance policies are typically written on an “occurrence” basis.
Do AIA Contracts Contain Insurance Requirements Related to “Claims Made” or “Occurrence” Policies?
Yes. For example, Section A.3.2 of Exhibit A to A101-2017, below, sets forth the requirement that the contractor maintain insurance until a certain point in time. Accordingly, the contractor should be aware of what type of insurance they’ve obtained and whether it is on a “claims made” or “occurrence” basis, so that they can be sure they are covered through the required time period.
(If the Contractor is required to maintain insurance for a duration other than the expiration of the period for correction of Work, state the duration.)
Stay tuned for Part 10!
AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.