Unfortunately, many assisted living business owners don’t discover the weaknesses in their coverage until a claim is denied. This article outlines both: (1) common pitfalls in CGL coverage and (2) the top reasons carriers deny claims, even when a policy appears active and valid.
- Common Pitfalls in Assisted Living CGL Insurance
- Misunderstanding What CGL Covers
CGL policies are designed to cover bodily injury, property damage, and personal/advertising injury to third parties. However, in the assisted living context, owners often assume the policy covers:
- Professional negligence
- Elder abuse or neglect claims
- Employment-related disputes
- Infectious disease outbreaks
In fact, these are typically excluded from basic CGL policies and require separate endorsements or standalone coverage (e.g., professional liability or E&O insurance).
- Exclusions Hidden in Fine Print
CGL policies may contain specific exclusions that are especially problematic for assisted living operations, such as:
- Abuse and molestation exclusions: These can bar coverage for any claim arising from alleged abuse or neglect—even if unfounded.
- Medical services exclusion: Routine resident care that involves medication or nursing support may be excluded under “medical or healthcare services.”
- Expected or intended injury: If a claim alleges that injury was foreseeable or the result of a pattern of neglect, the insurer may deny coverage.
- Short claim reporting periods. Even though policy terms are generally one year and appear to cover any claims made during that year, the policy itself may contain “claims made and reported” language that requires a facility to put the carrier on notice of an incident that might possibly give rise to a claim within 60 or 90 days after the date of the incident or event’s occurrence.
- Elopement or Anti–elopement provisions. Insurance applications may ask if the facility accepts residents who may be at risk of wandering. Residents’ needs change over time, so you’ll want to check coverage around that risk and if there are any provisions that would allow the carrier to deny coverage if anti-elopement measures were not in place or had been modified or disabled in any way.
- CGL may or may not cover transport.
If transportation if provided by the business or a staff member, the facility should be aware if this is covered under the CGL policy. A staff member’s personal vehicle policy will likely exclude any work-related use of that automobile for their employment. CGL policies may be limited to the four corners of the business property and might not provide coverage for any injuries that occur offsite.
- Top Reasons CGL Carriers Deny Claims
Even if the policy is technically in force, here’s why insurers often refuse to pay a claim:
- The Claim Falls Under an Exclusion
It’s no secret that the list of exclusions in most insurance policies seems to overshadow what is actually covered. The most frequent reason for denial is that the alleged incident falls under an exclusion—especially for abuse, professional services, or communicable disease. For instance:
- A resident falls and is injured while staff fail to follow a care plan.
- A family alleges neglect led to a bedsore or medication error.
The insurer may argue this is a professional liability issue; not general liability.
- Late Notice of Claim
CGL policies typically require timely notice of a claim, including potential claims. The insured is often afraid to make a report of an incident that might give rise to a claim for fear of their premiums being raised even higher, or of being dropped by the carrier. An increased premium, however, does not always occur, and is generally a much smaller financial hit than an uninsured lawsuit. Delays in reporting can lead to denial, especially if the insurer believes it was prejudiced by the delay.
- Policy Lapse or Non-Renewal
In some cases, coverage may have lapsed for non-payment or non-renewal, and the business owner is unaware. This is especially problematic with claims involving long-tail injuries—incidents that occurred months earlier, or that the business owner was not even aware of, but the resident or their family present a claim after the coverage was terminated.
- Misrepresentation in the Application
If the insurer discovers that the business owner misrepresented the level of care, staffing ratios, resident capacity, or other information when applying for coverage, it may rescind the policy altogether—effectively voiding coverage as if it never existed. No refund required.
- Claims-Made vs. Occurrence Confusion
Many business owners misunderstand the difference between occurrence-based and claims-made policies, although most assisted living CGL policies fall under the latter category.
III. Understanding Claims-Made Policies and Tail Coverage
A claims-made insurance policy generally provides coverage only if:
- The claim is made during the policy period (or an extended reporting period); and
- The incident occurred after the policy’s effective (or retroactive) date.
This is different from an occurrence-based policy, which covers incidents that happen during the policy period, regardless of when the claim is made.
- Why This Matters
Assisted living facilities often face claims months or even years after an incident takes place. If the policy has expired or been replaced without proper tail coverage, the business may be left exposed—even if the incident occurred during an earlier period of coverage.
For example, if a resident falls in 2024 but the claim isn’t filed until 2025, a claims-made policy that expired in December, 2024 which was not renewed or extended could result in no coverage at all.
- The Importance of Tail (Extended Reporting Period) Coverage
Tail coverage, also known as an Extended Reporting Period (ERP), allows a business to report claims for incidents that happened while the policy was active—even after the policy has ended.
This is essential:
- When switching insurers
- When selling or closing the business
- After terminating a claims-made policy
Failing to purchase tail coverage in these situations can lead to uninsured claims, which can be financially devastating.
- How to Protect Your Business
To avoid these traps, assisted living operators should:
- Review policies annually with a broker who understands healthcare and long-term care operations. Ask if defense coverage is inside or outside of the coverage limits. When defense coverage is “inside,” that leaves less money to settle the claim or pay a judgment, because legal fees and costs are charged against the coverage limit.
- Secure additional coverage as needed, including:
- Professional liability
- Abuse and molestation
- Directors and officers (D&O)
- Employment practices liability (EPLI)
- Cyber liability (especially for medical records)
- Ensure accurate business descriptions and responses in applications and updates.
- Report incidents promptly, even if no third-party claim has yet been received.
- Consider tail coverage whenever ending or changing a claims-made policy. Similarly, ask about retroactive coverage for periods prior to the application date if you fear there may be a gap in prior coverage.
- Document all incident reports internally thoroughly keeping not only regulatory requirements in mind, but also how that report may look as an exhibit in a future lawsuit.
Final Thoughts
Commercial General Liability insurance is required in some states, but not all; and only for those Assisted Living Facilities who are contracted ALTCS providers in Arizona. Even for those with CGL coverage, protection is only as strong as the clarity and scope of the policy and the insured’s actions following a potential insurable event. Many denied claims stem from misunderstanding coverage limits, exclusions, and policy types. By understanding the nuances of claims-made coverage, professional liability coverage endorsements, and consequences of changing carriers or selling the business, assisted living business owners can better safeguard their operations and residents.
This article is provided for general informational purposes only and does not constitute legal, insurance, or professional advice. Reading this article does not create an attorney-client or advisor-client relationship. Business owners should consult with a licensed attorney, insurance broker, or qualified professional familiar with their specific circumstances and jurisdiction before making any decisions based on the content herein. Coverage terms and exclusions vary by policy and insurer. Always refer to your individual insurance policy for actual coverage details and consult your carrier or advisor regarding specific claims or risks