A Video Explaining the Difference Between a Claim & a Suit

The Claims Made Policy is Different from an Occurrence Policy

Liability policies generally contain language promising “to defend any suit against the insured.” The policies will generally distinguish between a claim and a suit by compelling the insured to give notice of claims as well as suits. Courts usually recognize that there is a difference. A claim can be made without a suit being filed. A mere statement by a claimant to an insured that he or she was injured as a result of the negligence of the insured is sufficient to give notice of a claim. A “suit,” on the other hand, usually requires the filing of allegations in a court of competent jurisdiction responding to the allegations made in the suit.

Most insurance policies require that the insured promptly or “as soon as possible” report a claim to the insurer even if there is no suit. By so requiring the insurer has the ability to investigate and try to resolve claims before expensive litigation begins.

Liability insurers prefer claims made policies to limit their exposure. The person or entity insured must, under such policies, report a claim as long as it is made during the policy period or an extended reporting period or lose coverage.

Claims-made policies differ from traditional “occurrence”-based policies primarily based upon the scope of the risk against which they insure. With claims-made policies, coverage is provided only where the act giving rise to coverage is discovered and brought to the attention of the insurance company during the period of the policy. Insurance companies favor claims-made policies because they allow for a more precise calculation of risks and premiums.
https://zalma.com/blog