Professional Liability: Claims-Made or Occurrence? Which is Better?

Choosing a Professional Liability insurance policy is a crucial step for anyone who is self-employed. But the world of policies is a labyrinth of clauses and technical terms. Among these, two fundamental concepts determine the effectiveness of our coverage: Claims-Made and Occurrence. Understanding the difference is not just a theoretical exercise, but a strategic decision that can protect or expose our assets and professional peace of mind. In a constantly evolving market, like the one in Italy and Europe, the choice between tradition and innovation becomes central.

Imagine you’re an architect. Years after completing a building, a structural crack leads to a claim for damages. Which policy will respond? The one active at the time of construction or the one in effect when the client files the claim? The answer to this question defines the boundary between the two formulas. This article will explore both systems in detail, analyzing the regulatory context, practical implications, and providing the tools for an informed choice, suitable for every professional, from the novice to the veteran.

The “Occurrence” Policy: The Tradition That Looks to the Past

The Occurrence model, or “damage occurrence” policy, represents the traditional approach to liability insurance, based on Article 1917 of the Italian Civil Code. Under this formula, the insurance company covers damages caused by a professional error committed during the policy’s validity period, regardless of when the claim is filed. In practice, the event that triggers coverage is the “incident that occurred” during the insurance period. This means a professional could receive a claim years after the contract has expired but will still be protected by the policy that was active at the time of the error.

Think of an Occurrence policy like a photograph: it captures the moment the error was made. If you were insured at that instant, coverage for that event is guaranteed forever, even years later.

This system offers rock-solid certainty: once the insurance period is over, the professional knows they have “locked in” coverage for all acts performed during that time. However, this very feature has made Occurrence policies increasingly rare and expensive in the Professional Liability market. Insurance companies found themselves exposed to “long-tail” risks—that is, damages that manifest long after the wrongful act—making it difficult to calculate premiums and reserves. Today, this model has almost disappeared for professional liability, although it survives in other areas, such as Legal Protection.

The “Claims-Made” Policy: The Innovation Defining the Present

The Claims-Made policy, or “claim-filed” policy, has revolutionized the professional liability insurance market, effectively becoming the standard in Italy and Europe. Unlike the traditional model, the event that triggers coverage here is not the professional error, but the claim for damages received by the professional. In simple terms, the policy that pays is the one in effect when the client (or a third party) comes knocking to claim damages, provided the error occurred within a specific time frame.

This model, imported from the Anglo-Saxon world, was created to offer greater cost predictability for insurance companies, especially for long-term risks like those in healthcare or construction. For the professional, the main advantage lies in generally more affordable premiums and greater flexibility. For example, a freelancer starting their career can get a “pure” Claims-Made policy and obtain coverage even for errors made before the policy was signed, as long as they were unaware of them. However, this system introduces two crucial concepts: retroactive coverage and an extended reporting period, which are essential to avoid dangerous coverage “gaps.”

A Claims-Made clause works like an umbrella: it only protects you as long as you keep it open (the policy is active). If you stop paying and a claim for a past error comes in, you’re left uncovered, unless you’ve negotiated additional protection.

The validity of these clauses has long been debated in court. Today, thanks to several rulings by the Court of Cassation, the Claims-Made model is considered fully legitimate, provided it does not create an excessive imbalance to the detriment of the insured. The key, therefore, is to understand and properly negotiate the supplementary conditions.

The Italian Context: Between Law and Supreme Court Rulings

In Italy, the shift from the Occurrence to the Claims-Made system was not just a commercial choice by insurance companies, but an evolution influenced by laws and important court rulings. The introduction of mandatory insurance for many professions in 2012 accelerated the spread of Claims-Made policies, which now dominate the market. This dominance raised doubts about their validity, as they seemed to deviate from the principle of Article 1917 of the Civil Code, which links coverage to the “incident that occurred” during the insurance period.

The debate reached the Court of Cassation (the Italian Supreme Court), which clarified the matter with several rulings, particularly those by the United Sections (such as No. 9140/2016 and No. 22437/2018). The judges established that the Claims-Made clause is not inherently unfair or void. It does not limit the insurer’s liability but rather defines the very object of the contract, i.e., it delineates the insured risk. In practice, the parties are free to choose a model based on the claim rather than the damaging event.

However, the Supreme Court has set some boundaries. A Claims-Made clause can be declared void if, in a specific case, it creates a significant contractual imbalance to the detriment of the insured, effectively leaving them without real coverage. This happens, for example, if the policy offers a retroactive period that is too short or non-existent, rendering the protection ineffective. The case law has thus transitioned these clauses from “atypical” to “typical,” but subject to an adequacy check to protect the professional and, by extension, their clients.

The Keystone: Retroactive Coverage and Extended Reporting Period

When choosing a Claims-Made policy, two terms become your best allies: retroactive coverage and extended reporting period. Ignoring them means exposing yourself to enormous risks. Retroactive coverage extends protection to professional errors committed before the policy’s start date, provided the claim is made while the contract is active. It is crucial for those changing insurance providers or getting insured for the first time after having already started working. Unlimited retroactive coverage offers the greatest peace of mind, covering your entire past professional history.

The extended reporting period (or ‘tail coverage’) is the exact opposite and just as vital. It extends coverage for claims that arrive after you cease your professional activity and the policy expires, but which relate to errors committed while you were insured. Since Italian law provides for a statute of limitations for professional liability that can be up to ten years, closing your VAT registration for retirement without a ten-year extended reporting period is equivalent to leaving your assets exposed to future claims.

Retroactive coverage and the extended reporting period are the wings of a Claims-Made policy. Without them, your coverage might fail to take off or crash just when you need it most: at the beginning and end of your career.

The law (like the ‘Gelli Law’ for healthcare professions) has begun to impose minimum requirements for these guarantees, recognizing their crucial importance. When signing up, it’s essential to check the scope of the retroactive coverage offered and plan for the purchase of an adequate extended reporting period, the cost of which is usually a multiple of the last annual premium paid. It’s not enough to be insured today; you also have to protect your yesterday and your tomorrow.

Which Clause to Choose? Advice for Professionals

The choice between Occurrence and Claims-Made is more theoretical than practical today, as the Professional Liability market almost exclusively offers policies of the second type. The real question becomes: how do you choose the right Claims-Made policy? The answer depends on various factors, including professional seniority, industry, and risk appetite. A young professional starting their career should aim for a policy with unlimited retroactive coverage or at least a period equal to the years they have already been working, to cover any initial errors.

For an established professional changing insurance companies, it is vital to ensure continuity of coverage by making sure the new policy covers previously performed work without any gaps. In this scenario, the proper management of any past claims and transparency in pre-contractual declarations are fundamental. Regardless of experience, it is crucial to carefully evaluate the coverage limit, which must be adequate for the volume of business and the specific risks of one’s profession, such as for an accountant who issues compliance certifications.

Finally, thinking about the future is a must. As you approach retirement, the absolute priority must be to negotiate or purchase a ten-year extended reporting period. This clause is the only shield that will protect the assets accumulated over a lifetime of work from late-filed claims. The advice of an expert insurance broker can make all the difference, helping you decipher policy language and build tailored protection that intelligently balances costs and benefits with foresight.

Conclusion

The debate between Claims-Made and Occurrence in the Italian Professional Liability landscape has effectively been settled by the predominance of the former model. The traditional Occurrence formula, despite offering long-term certainty, has become a rarity due to its economic unsustainability for insurers. The more flexible and modern Claims-Made system has established itself as the market standard, also validated by the case law of the Supreme Court, which has recognized its legitimacy while emphasizing the need for contractual balance.

For today’s professional, the real challenge is no longer choosing between the two systems, but skillfully navigating the Claims-Made offerings. Awareness becomes the most valuable asset. Thoroughly understanding the meaning and importance of clauses like retroactive coverage and extended reporting period is the only way to build effective protection that safeguards your past, present, and future work. A policy is not just a cost or a legal obligation, but a strategic investment in your peace of mind and the security of your assets. Choosing carefully, staying informed, and relying on expert advisors is the first step to working better and sleeping soundly.

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