Understanding Claims Made vs. Occurrence-Based Coverage for Martial Arts Schools

John Graden recently discussed a seminar where an instructor was sued by a student fifteen years after an incident occurred. The lawsuit cost the instructor $15,000 to resolve. This situation underscores the importance of understanding the differences between Claims Made and Occurrence-Based insurance policies for martial arts schools.

Claims Made vs. Occurrence-Based Coverage

Claims Made Coverage:

  • Definition: This type of coverage only protects you for claims made during the active policy period.
  • Limitations: If you do not purchase extended tail coverage, you will not be covered for claims made after the policy expires, even if the incident occurred while the policy was active.
  • Example: If an instructor had a Claims Made policy and an incident occurred in 2015 but the claim was made in 2020, the instructor would only be covered if the policy was still active or if they had purchased tail coverage.

Occurrence-Based Coverage:

  • Definition: This type of coverage protects you for incidents that occur during the policy period, regardless of when the claim is filed.
  • Advantages: It offers long-term protection since the policy will cover incidents that happened during the policy period, even if the claim is made years later.
  • Example: If an incident occurred in 2015 while an Occurrence-Based policy was active, and a claim was made in 2020, the policy would cover the claim because the incident happened during the policy period.

Why Occurrence-Based Coverage is Important

Jennifer Urmston highlights that the Statutes of Limitations for claims vary by state, and claims involving minors can be filed many years later, starting only when the minor reaches adulthood. Therefore, Occurrence-Based coverage is often more suitable for martial arts schools because it provides protection long after the policy period has ended.

Considerations for Martial Arts School Owners

  1. Understand State Laws: Consult with a legal expert to understand the Statutes of Limitations in your state.
  2. Consult Insurance Professionals: Work with an insurance agent experienced in the fitness industry to determine the best coverage for your school.
  3. Evaluate Long-Term Protection: While Claims Made policies might be cheaper initially, Occurrence-Based policies offer better long-term protection against claims filed years after an incident.

Conclusion

Choosing the right insurance policy is crucial for protecting your martial arts school from potential lawsuits. Understanding the differences between Claims Made and Occurrence-Based coverage can help you make an informed decision and ensure your school remains protected, no matter when a claim is filed.