Thursday, May 29, 2008

Perils of P&P Lit - (4/3/08 Knowledge Knugget)

What is P&P Lit?

P&P stands for "Pending or Prior". Lit stands for "Litigation".

Almost all claims-made professional liability policies have an exclusion for P&P Lit in them somewhere. It can be found in the insuring agreement, or in the qualification of what constitutes a claim, but is most commonly found in the Exclusions section of the policy.

P&P Lit is any litigation filed against an insured, or any litigation that is going to be filed against an insured. Seems fair, right? A new carrier does not want to be responsible for defending any claims that have already been filed against the insured or that are in progress.

Danger zone 1: A plaintiff can file a suit but not immediately serve the insured. This is known as a "blind lawsuit". The insured cannot report the claim, because he doesn't know about it. The current carrier cannot assume defense, because the claim has not been reported. The new carrier will not assume defense because the litigation was already in progress, even though the insured had not yet been served.

Danger zone 2: The "Interrelated Wrongful Acts" definition can take the general subject matter of existing litigation and tie it to what would otherwise appear to be a new demand. That relationship will subject the new demand to the P&P Lit exclusion. The exclusion itself sometimes casts a wide net and picks up related acts or subject matter.

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