What Is a Claims-Made Policy?
A claims-made policy provides coverage when the claim is made (reported) during the active policy period, regardless of when the alleged wrongful act took place — provided the act occurred after the policy's retroactive date. This is the standard structure for Employment Practices Liability Insurance. Nearly all EPLI policies sold today are written on a claims-made basis.
Why Claims-Made Matters for EPLI
Most liability lines — auto, general liability, workers compensation — are written on an occurrence basis. An occurrence policy covers incidents that happen during the policy year, even if the resulting claim isn't filed until years after the policy expires. Claims-made flips this logic: coverage exists only if (a) the policy is active when the claim is made, and (b) the alleged act occurred on or after the policy's retroactive date. For EPLI this structure makes practical sense, because employment disputes often surface months or even years after the underlying events. An employee who was harassed throughout 2023 may not file an EEOC charge until 2025.
The practical implication is that you cannot let your EPLI lapse between carriers without addressing prior acts continuity. If an employee files a charge in March 2025 for harassment that occurred in late 2024, and your policy lapsed in January 2025, there may be no EPLI coverage for that charge — even though the events themselves happened while you had an active policy. Always renew before the expiration date, and confirm your retroactive date in writing whenever you switch carriers.
At non-renewal or cancellation, employers typically have the option to purchase an Extended Reporting Period (ERP), commonly called "tail coverage." Tail coverage allows claims to be reported for a defined period — typically one, three, or five years — after the policy ends. The cost of tail coverage varies by carrier and form, but typically runs 100–200% of the final year's premium. Some policies include a mini-tail of 60–90 days at no additional cost; this is generally not sufficient for employment claims, which can take years to surface.
Occurrence vs. Claims-Made: Side by Side
Occurrence Policy
- Covers incidents that happen during the policy year
- Claim can be filed years after the policy expires
- Common for: GL, auto, workers comp
- Less relevant for EPLI
Claims-Made Policy
- Covers claims filed during the active policy period
- Act must occur on or after the retroactive date
- Standard for: EPLI, D&O, E&O, Cyber
- Requires continuous coverage or tail
Example: The March 2025 EEOC Charge
An employee is terminated in December 2024. In March 2025, she files an EEOC charge alleging wrongful termination and age discrimination. The employer's 2024 EPLI policy ran January 1 – December 31, 2024. The 2025 policy ran January 1 – December 31, 2025.
Which policy responds? The 2025 policy — because the claim (the EEOC charge) was made in March 2025, during the 2025 policy year. The 2024 policy does not respond, even though the termination occurred in 2024, because no claim was made in 2024.
Key takeaway: If the employer had let the policy lapse after December 2024 and not renewed, there would be no EPLI coverage for this charge — even though the termination itself occurred while a policy was active.
Common Mistakes Employers Make
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Letting the policy lapse between renewals
Even a one-day gap can create a coverage question for claims that surface after the lapse. Renew before the expiration date, not after. If a new carrier's inception date does not match your old carrier's expiration date exactly, there is a potential gap.
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Switching carriers without confirming the retroactive date
New carrier B should honor carrier A's retroactive date — but this is a negotiated point, not an automatic one. Get the agreed retroactive date confirmed in writing on the new policy's declarations page before binding. Do not assume it has been addressed.
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Not considering tail coverage at cancellation
If you close a business, sell the company, or switch to a policy with a new retroactive date, tail coverage preserves your prior-acts protection for claims that surface after the policy ends. The cost — typically 100–200% of the annual premium — is worth comparing against the exposure of going without it.
Related Terms
Frequently Asked Questions
Does a claims-made EPLI policy cover incidents that happened before I bought the policy?
Generally yes, if the policy includes a retroactive date that predates the incident. Many insurers offer "full prior acts" coverage, meaning the retroactive date goes back to your company's founding. However, if your policy has a specific retroactive date — such as the policy inception date — incidents before that date are typically excluded. Always confirm the retroactive date when binding coverage. It should appear on the declarations page.
What happens to my EPLI coverage if I close my business?
When a claims-made policy ends, you lose the ability to report new claims — even for incidents that occurred while the policy was active. If you close your business, you should purchase an Extended Reporting Period (tail coverage) to preserve your ability to report claims that may surface after closure. Tail periods typically range from one to five years, and cost varies by carrier and form. This is an important step that is often overlooked in the process of winding down a company.
Can I switch EPLI carriers without losing prior-acts coverage?
Yes, generally — if the new carrier agrees to honor your prior acts by matching or backdating the retroactive date. This is common practice when there is a clean loss history and documented continuous coverage. You will typically need to provide documentation of your prior coverage, including loss runs. Some carriers may apply a short retroactive date limitation as part of their underwriting, so it is important to address this before binding with a new carrier rather than after.