Occurrence Basis

Overview

Occurrence Basis is one of two fundamental policy trigger mechanisms in liability insurance (the other being claims-made). Under an occurrence-based policy, coverage applies to any incident that takes place during the policy period, regardless of when the claim is actually reported or filed. This means an occurrence policy can respond to claims made years — even decades — after the policy expires, as long as the incident happened while the policy was in force.

How It Works

An occurrence-based policy establishes coverage based on when the event causing harm took place, not when the injured party decides to file a claim. The policy in effect at the time of the occurrence is the policy that responds.

For example, if a contractor's CGL policy is occurrence-based and runs from January 1 to December 31, 2025, any bodily injury or property damage that occurs during that period is covered. If a person is injured on June 15, 2025, but does not file a claim until March 2028, the 2025 policy responds.

Key characteristics of occurrence-based coverage:

• Perpetual tail: Once the policy period ends, coverage for incidents that occurred during the period remains available indefinitely. There is no need to purchase extended reporting periods or tail coverage.
• Date of occurrence determines coverage: The critical date is when the damage or injury happened, not when it was discovered or claimed.
• No retroactive date: Unlike claims-made policies, occurrence policies do not have a retroactive date that limits coverage for prior acts.
• Standard for CGL: Most Commercial General Liability policies are written on an occurrence basis using the ISO CG 00 01 form.
• Standard for auto and workers' comp: Commercial auto liability and workers' compensation are virtually always occurrence-based.

The concept of "occurrence" itself is defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." This definition matters for determining how many occurrences are involved in a single event, which affects limit application.

Compliance Relevance

Occurrence-based coverage is the standard expectation in most commercial contracts, and its presence simplifies compliance:

• Preferred trigger: Most contracts require occurrence-based CGL coverage. If a vendor submits a claims-made CGL policy, this is typically flagged as non-compliant unless the contract specifically allows it.
• Certificate verification: The ACORD 25 has checkboxes for "Occur" and "Claims-Made" in the General Liability section. Compliance teams verify that "Occur" is selected.
• Long-tail protection: Occurrence-based coverage protects against long-tail claims (e.g., construction defects discovered years after completion) without requiring continuous policy renewal or tail coverage purchases.
• Simplicity: There is no retroactive date or extended reporting period to manage, reducing administrative complexity in compliance tracking.

Example

A painting contractor completes work on a commercial building in 2024 under an occurrence-based CGL policy. In 2027, lead paint contamination is discovered in the work area, and building occupants file bodily injury claims. The contractor's 2024 occurrence-based policy responds to the claims because the occurrence (the painting work that caused contamination) took place during the 2024 policy period — even though the claims were not filed until three years later.