Discovery cover is coverage structured to respond to losses discovered during the policy or treaty period, even if the underlying wrongful act occurred earlier, subject to the contract’s terms. In plain language, the trigger is based more on when the loss is discovered than on when the act actually happened.
Why the concept matters
Discovery-based structures are important where wrongful acts or losses can stay hidden for a long time. That is common in fidelity, crime, and some reinsurance settings. The discovery trigger changes how insurers think about:
- claim reporting
- attachment timing
- overlap between old and new policy periods
- reserving for losses that may already exist but have not yet been identified
What the contract still controls
Discovery cover is not open-ended. Key questions usually include:
- what counts as discovery
- whether the wrongful act had to occur after a retroactive date
- whether notice was given on time
- whether the contract contains special sunset or extended-reporting rules
So the concept is broader than simple occurrence timing, but it is still tightly governed by contract wording.
Practical example
Suppose employee dishonesty began before the current policy period but the insured did not uncover the loss until the current period. Under a discovery-based form, the claim may still be covered if the contract is written on a discovery basis and its terms are satisfied.
Related Terms
- Discovery Period
- Claim
- Expected Claims
- Incurred But Not Reported
- Forgery or Alteration Coverage Form
- Dishonesty, Disappearance, and Destruction Policy