The limit gets the attention; the trigger decides the claim
Most liability buyers negotiate hardest over the limit of indemnity. It is the number on the schedule, the figure a board signs off, the headline of the programme. Yet when a liability claim actually fails to respond, the cause is far more often the trigger than the limit. The policy had enough money; it simply was not on risk for the act in question.
The trigger is the rule that decides which policy year answers a claim. For long-tail liability covers, professional indemnity, directors and officers, and product liability, that rule is usually claims-made, and a claims-made policy hinges on two dates working together: when the claim is first made, and the retroactive date that governs how far back the covered acts can reach. Get either wrong and a perfectly large limit pays nothing.
This post works through the trigger from the ground up: how claims-made differs from occurrence cover, what the retroactive date does, the default that catches Indian buyers out, and the discipline a broker needs to keep continuity of cover intact across renewals and insurer switches.
Two ways a policy can be triggered
Liability cover responds on one of two triggers, and the difference decides which policy year is on the hook for a given claim.
An occurrence policy responds to events (the injury or damage) that happen during the policy period, no matter when the claim is eventually made. If the harmful event occurred while the policy was in force, that policy answers, even if the claim arrives years after the policy expired. Occurrence cover suits risks where the event and the harm are close together in time, such as much general and public liability.
A claims-made policy responds instead to claims first made against the insured during the policy period, regardless of when the underlying act occurred. The policy in force when the claim arrives is the one that answers, subject to the retroactive date. Professional indemnity insurance in India is typically written on a claims-made basis, where coverage depends on the claim being first made during the policy period rather than when the act occurred. Directors and officers and much product liability follow the same model.
Why long-tail risks are written claims-made
The reason is the long tail. A professional negligence, management or product claim can surface years after the work was done or the product was sold. Under occurrence cover an insurer would have to reserve for unknown claims for decades against a single year's premium. Claims-made lets the insurer underwrite to claims reported in the year, which is more predictable, in exchange for the buyer carrying the responsibility of keeping cover continuous so that there is always a policy in force to receive a claim.
What the retroactive date actually does
Because a claims-made policy responds to the claim rather than the act, it needs a separate control on how far back the covered acts can reach. That control is the retroactive date.
The retroactive date is the cut-off in a claims-made policy that eliminates cover for wrongful acts committed before that date, even if the claim is first made during the current period. A claim arriving today is covered only if the act that gave rise to it occurred on or after the retroactive date. An act before that date is outside cover, however current the claim.
This is what makes continuity matter so much. A professional who has been insured continuously for years, with a retroactive date set far in the past, has prior-acts cover stretching back to that date. The same professional with a recent retroactive date has cover only for recent work, and is exposed on everything done before it, exactly the older work most likely to generate a late claim.
The silent retro reset, the default that catches Indian buyers
The most damaging failure in claims-made cover is not a decision anyone makes deliberately; it is a default that operates quietly. In the Indian market, if the retroactive date is not specified in the policy schedule, the inception date is treated as the retroactive date by default, which can silently strip prior-acts cover.
Follow the consequence. A buyer who has held professional indemnity for several years, building up prior-acts cover, switches insurer or renews on a schedule that omits the retroactive date. The new policy defaults its retroactive date to inception. Overnight, every wrongful act before this renewal falls outside cover. Nothing in the limit changed, the premium may look similar, and the buyer believes they are covered as before. They are not, and they usually discover it only when a claim relating to older work is declined.
How the reset happens in practice
The reset rarely announces itself. It hides in routine moments:
- An insurer switch where the new policy is issued without carrying the prior retroactive date across.
- A schedule that simply omits the retroactive date field, letting the default apply.
- A gap in cover that breaks continuity, so the new policy starts fresh rather than continuing the prior date.
In each case the buyer has the same limit and a different, much smaller, set of covered years, and the difference is invisible until tested.
Preserving continuity: the broker's defensive discipline
Protecting a claims-made client comes down to keeping the trigger intact across the life of the relationship, which is a discipline rather than a single transaction. The good news is that the buyer has a real lever. Policyholders can negotiate to carry forward the original retroactive date when renewing or switching insurers, preserving continuity of prior-acts cover. The broker's job is to make sure that lever is pulled every time.
The practical checks at each renewal and each move between insurers are:
- Read the retroactive date on the new schedule and confirm it matches the original date, not the new inception. This is the single most important check on the whole renewal.
- Carry the date forward on an insurer switch. When moving to a new insurer, negotiate that the prior retroactive date is honoured, so the new policy continues prior-acts cover rather than starting fresh.
- Avoid breaks in cover. A gap between policies can break continuity and reset the position, so renewals should run without a gap and any lapse treated as a serious exposure.
- Consider run-off where cover ends. When a claims-made policy is not being renewed, for example on a business sale or wind-down, an extended reporting period preserves the ability to notify claims for past acts after the policy ends, which a simple lapse does not.
For directors and officers and product liability the same logic applies: the retroactive date and the continuity of cover decide whether yesterday's decision or yesterday's product is protected when a claim arrives tomorrow. A broker who treats the date with the same seriousness as the limit removes the most common reason a well-bought liability policy still fails to pay.
Doing this consistently means reading the trigger and retroactive-date provisions precisely as each insurer words them, because the defaults and wordings differ across the market. Sarvada gives commercial insurance brokers structured, searchable access to insurer policy wordings and the intelligence around them, so the trigger and retroactive date on a claims-made cover are checked against real wording rather than assumed. Request Access to make trigger discipline part of every liability renewal.
