A liability claim involves at least three dates: when the faulty work happened (the loss-causing act), when the loss actually occurred, and when the injured party notified the claim. These three can be years apart – and policies differ in which date they use as the measure for cover. This article sets out the possible logics.
- The question is the same for every policy: which date has to fall within the policy period?
- Main logics: act-committed, loss-occurring, and claims-made (based on when the claim is asserted) – the policy terms state which one applies.
- Knowing which logic applies becomes critical when switching insurer or closing an activity.
The Three Logics
An act-committed policy responds if the loss-causing conduct – the faulty work – happened during the policy period; the loss and the claim can both come later. A loss-occurring policy looks at when the loss itself actually arose: it responds to losses that occurred during the period. A claims-made (based on when the claim is asserted) policy ties cover to when the claim is asserted against the insured, combined with a retroactive date – this is the typical logic for professional indemnity insurance, with its own key article: claims-made and the retroactive date.
Why Does This Matter So Much?
Because the same claims history is covered under one logic and not under another. Take a faulty installation from 2023 that causes a leak and a claim in 2026. Under act-committed logic, the policy in force in 2023 is responsible – even if it has since ended. Under loss-occurring logic, it's the 2026 policy. Under claims-made, it's again the policy in force when the claim is asserted – but only if its retroactive date precedes 2023. Anyone who doesn't know which logic they're under finds out at claim time – which is the worst possible moment.
Switching Insurer: Where the Logics Collide
Most hidden gaps arise when switching between policies that use two different logics: for example, between an old act-committed policy and a new claims-made one, it needs clarifying how “old work, new claim” cases are handled. The good news: with a properly managed switch, these gaps can be closed – by carrying over the retroactive date, arranging run-off cover, or a combination of both. The practical steps are set out in the switching-insurer article and the run-off cover article.
What Should You Check in Your Own Policy?
Three lines: the start of cover (when your cover actually begins), the definition of temporal scope (which logic applies), and – for claims-made policies – the retroactive date. If any of the three isn't clear, that's not your fault: policy wording is genuinely difficult. All three can be identified at a free consultation – and the policy-check checklist shows in advance what is worth looking for.
A Practical Trick: Draw the Timeline
If you're unsure in a specific case, a simple diagram helps: draw a line, and mark the three points on it – when the work happened, when the loss occurred or came to light, and when the claim arrived. Then add the policy period(s) alongside it: which policy ran from when to when, under which logic, with which retroactive date. Most “does it pay or not” questions answer themselves on this diagram – and if they don't, it shows exactly what needs clarifying with the insurer. The same diagram works when planning a switch: draw the old and new policy periods side by side, and the gaps become literally visible.
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