1. Forms
2. CG
3. CG-00-02

Commercial General Liability Coverage Form (Claims-Made) - CG 00 02

The CG 00 02, Commercial General Liability Coverage Form (Claims-Made), is a standard insurance policy form developed by the Insurance Services Office (ISO) that provides liability coverage for bodily injury and property damage. Unlike an "occurrence" form (like the CG 00 01) which covers losses that happen during the policy period regardless of when the claim is reported, the CG 00 02 is a "claims-made" form. This means it covers claims first made against the insured during the policy period or, if applicable, during an Extended Reporting Period (ERP), often called "tail coverage". A crucial element of this form is the retroactive date. Generally, the policy will only respond to claims for incidents that occurred on or after this specified date. The coverages for bodily injury and property damage liability (Coverage A), personal and advertising injury liability (Coverage B), and medical payments (Coverage C) are substantively similar to those in the occurrence form, with the primary difference being the claims-made trigger.

Classes of Business It Applies To

The claims-made CGL form is often utilized for businesses or professional services where the discovery of an injury or damage and the subsequent claim may be significantly delayed from the actual occurrence of the act that caused it. Examples include:

• Professional Services: Such as architects, engineers, and consultants, where an error or omission made today might not result in a claim for months or even years. While these professions typically carry Professional Liability (Errors & Omissions) insurance, which is almost always claims-made, the CGL for their general liability exposures might also be on a claims-made basis, particularly for larger or more complex risks.
• Product Manufacturers (High-Hazard): Companies producing products with a long "tail" exposure, meaning the product could cause harm long after it's sold (e.g., certain chemicals, building materials, or pharmaceuticals). If there's a concern about latent defects that may not surface for years, a claims-made CGL might be considered.
• Environmental Risks: Businesses with potential pollution exposures, where contamination might occur over time and not be discovered until much later. Specialized pollution liability policies are often claims-made, and a CGL for a business with significant environmental exposures might follow suit.
• Contractors (Certain Types): While many contractors are covered under occurrence forms, some involved in specific types of projects with long-term defect liability (e.g., large-scale construction or certain types of specialized work) might encounter claims-made CGLs, especially if there's a history of claims or a unique risk profile.
• Businesses with Discontinued Operations or Products: A company that has ceased a particular operation or stopped manufacturing a specific product might use a claims-made policy with tail coverage to address potential future claims arising from those past activities.

Special Considerations

Several critical aspects differentiate the CG 00 02 from an occurrence form and require careful attention:

• Retroactive Date: This is a date shown in the Declarations. The policy will not cover bodily injury or property damage that occurred before this date, even if the claim is made during the policy period. Maintaining the earliest possible retroactive date is crucial for continuous coverage. Advancing the retroactive date (moving it to a later date) can create significant coverage gaps for prior acts unless an extended reporting period is purchased from the previous carrier. ISO rules permit advancing the retroactive date only with the first named insured's written consent and under specific circumstances, such as a change in carrier, a substantial change in the insured's operations increasing exposure, or failure by the insured to provide material risk information.
• Extended Reporting Periods (ERPs or "Tail Coverage"): Since the policy only covers claims made during the policy period (or ERP), a "tail" is essential if the policy is canceled, non-renewed, or if the insured switches to an occurrence form or a claims-made form with a later retroactive date. The CG 00 02 includes provisions for a Basic Extended Reporting Period (BERP) automatically under certain conditions, which typically provides a short window (e.g., 60 days) to report claims arising from occurrences reported to the insurer within 60 days after policy end, and a longer period (e.g., five years) for claims from occurrences reported during the policy period or within 60 days after its end. A Supplemental Extended Reporting Period (SERP) can usually be purchased for an additional premium, offering a much longer, sometimes unlimited, duration to report claims for incidents that happened after the retroactive date and before the policy ended. The option for the SERP must typically be exercised within a specific timeframe (e.g., 60 days) after policy termination.
• "Claim" Definition and Timing: A claim is generally deemed made when notice is received and recorded by any insured or the insurer, whichever comes first, or when the insurer settles the claim. All claims for bodily injury to the same person, or property damage to the same person/organization, are considered made at the time the first of those claims is made.
• Prior Acts Coverage: If no retroactive date is listed, the policy effectively covers claims made during the policy period regardless of when the injury or damage occurred (though it must still be caused by an "occurrence"). However, this is less common. More typically, a specific retroactive date is established.
• Switching Carriers or Coverage Forms: Moving from a claims-made policy to an occurrence policy, or to another claims-made policy with a different retroactive date, requires careful management to avoid coverage gaps. Purchasing tail coverage from the expiring claims-made policy is often necessary.

For instance, if a consulting firm has been insured on a CG 00 02 form for five years with a retroactive date matching their first claims-made policy's inception and decides to switch to an occurrence CGL, they would need to purchase tail coverage for their prior five years of potential liabilities. Without it, any claim made after the switch, related to an error made during those five years, would likely not be covered by either policy.

Key Information for Agents and Underwriters

• Pricing: Claims-made policies are often less expensive in the initial years compared to occurrence policies because they only cover claims made during that year (and for incidents after the retroactive date). Premiums typically "step up" over several years as the insurer's potential exposure to past events increases, eventually reaching a "mature" claims-made premium. Understanding the step-factor pricing and communicating it clearly to the insured is essential.
• Risk Assessment: Underwriters will scrutinize the nature of the insured's operations, the potential for latent injuries or damages (long-tail exposures), and the insured's history of claims. The choice of retroactive date is a critical underwriting decision. Insurers may be hesitant to offer coverage with a retroactive date that precedes their involvement or for risks with known, unreported incidents.
• Coverage Gaps: The most significant risk with claims-made coverage is the potential for gaps if there's a change in coverage (e.g., policy cancellation, non-renewal, switch to occurrence form, or advancement of the retroactive date) without adequate ERP ("tail") purchase. Agents must diligently counsel clients on the importance of tail coverage in these situations.
• Underwriting Guidelines & Retroactive Date Integrity: Underwriters will typically require continuity of the retroactive date when renewing claims-made policies or when an insured moves from one claims-made policy to another. Advancing the retroactive date is a significant underwriting action that reduces coverage for the insured and should only be done with full disclosure and understanding by the insured. Insurers may advance the retroactive date if there's a substantial change in the insured's operations that increases the risk, or if the insured failed to disclose material information about the risk.
• Related Forms:
  • CG DS 01 (Commercial General Liability Declarations): This form is used with the CG 00 02 and will specify the retroactive date, limits of insurance, and other key policy details.
  • IL 00 17 (Common Policy Conditions): This form contains conditions applicable to many commercial insurance policies, including the CGL. However, some conditions specific to the claims-made nature are within the CG 00 02 itself.
  • CG 27 01 (Supplemental Extended Reporting Period Endorsement - now generally superseded by endorsements like CG 27 10 or CG 27 11): This endorsement (or its modern equivalents) would be used to provide the Supplemental Extended Reporting Period (SERP or "tail coverage").

Agents should always ensure that when an insured is placed on a CG 00 02, they fully understand the implications of the claims-made trigger, the importance of the retroactive date, and the necessity and function of extended reporting periods. Underwriters need to carefully assess the risk's history and the appropriateness of the claims-made form for the specific class of business, ensuring the retroactive date reflects the true exposure history they are willing to cover.