What is the definition of Claims Made Policy?
A Claims Made Policy is a policy that protects the insured by asserting that any claims made must be made within the policy period or within the extended reporting period (whichever is applicable). This limits the exposure of liability insurers to liabilities in the future.
For Claims Made Policy, the insurer who covers the period when you first knew or was given notice about a lawsuit filed against you is the insurer who will defend and settle the claim.
For example, you are notified of a lawsuit for negligence by a customer whom you treated five years ago. You realize that you have switched insurance companies several times in the last five years. The question would be who would pay for the claims - the insurer who covered the period when the alleged negligence happened? According to the Claims Made Policy, the insurer who covers your risk at the time that you were notified about the lawsuit is the one responsible if there are any claims to be settled.
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