Occurrence vs. Claims-Made: Why the Distinction Matters

A renewal proposal arrived at the offices of a mid-sized structural engineering consultancy in Calgary, and the coverage terms it contained differed substantially from anything the firm had carried in its 18-year operating history. The firm's professional liability insurer had indicated that occurrence-based coverage would no longer be available at renewal and that the firm would need to transition to a claims-made policy structure beginning in the upcoming policy year. The consultancy's managing partner, a professional engineer with 24 years of practice experience, understood that this shift represented more than an administrative change in policy language.

The firm employed 14 licensed engineers and 8 technical staff, providing structural design and building envelope consulting services to commercial developers, institutional clients, and residential builders across Alberta and British Columbia. Over nearly 2 decades of practice, the consultancy had completed engineering work on hundreds of projects, ranging from single-family residential foundations to multi-storey commercial developments and public infrastructure. Some of these projects dated back to the firm's earliest years, and the managing partner recognized that latent defects in structural work could surface many years after project completion—sometimes 10 or 15 years after the original design work was delivered.

The firm's current occurrence-based policy had provided coverage for claims arising from work performed during each policy period, regardless of when those claims were actually reported. This structure had allowed the consultancy to maintain continuous protection for its historical project portfolio without active management of prior policy periods. The proposed claims-made structure would tie coverage to the date a claim was first reported, introducing questions about retroactive dates, the treatment of prior acts, and the firm's exposure during any future transitions between insurers or upon the eventual retirement of the founding partners.

The managing partner had begun consulting with the firm's insurance broker about the implications of the transition, including the treatment of the firm's 18-year project history under the new policy structure, the potential need for extended reporting period coverage when partners retired, and the long-term cost implications of maintaining claims-made coverage through successive policy periods. Several of the firm's senior engineers were approaching retirement within the next 5 to 7 years, and the managing partner needed to understand how coverage would respond to claims that might emerge after those professionals had left active practice. The broker had outlined several coverage options and policy features that could address these concerns, but the managing partner sought a clearer understanding of how the fundamental differences between occurrence and claims-made structures would affect the firm's risk profile over time.