Insurance is my life, my career, my profession. I joined US Risk in November, 2005 and am based in the Nashville, TN branch office.
I'm active in industry associations and work as a wholesaler broker, almost exclusively with professional liability lines. The majority of my clients are main street agents who rely upon me to provide the technical expertise and market knowledge to allow them to easily and efficiently write professional liability accounts of all shapes and sizes.
Critical Coverage Concept - Defense in Addition (6/12/08 Knowledge Knugget)
You may have noticed by now that most professional liability policies lump defense expenses and damages payments into a single policy limit.
This has historically been the case for most lines of professional liability because the vast majority of costs associated with professional liability claims are the defense expenses.
In this soft market, and in some lines, we are now seeing "defense in addition" to the limits being granted.
Here, we must exercise caution.
Unlike GL, when a professional liability carrier talks about "defense in addition", they rarely mean unlimited defense. Many carriers actually limit the defense in addition to the same limit purchased for liability, or a maximum of 1mm.
For example, if your insured purchased a 500,000 limit of liability with a "defense in addition" carrier, the defense is generally limited to 500,000. If the insured purchased a 2mm limit, the defense could well be capped at 1mm.
There are just a few companies that will provide *true* defense outside the limits. They set defense expenses completely outside the limit wording of the policy, and with those companies the defense works very much as it does in GL. Combined with the insured retaining control over settlement, this coverage packs quite a positive punch.
Generally, if an insured must pay for additional capped limits of defense, it is prudent to at least consider increasing the entire limit instead. Doing so tends to cost just a tiny bit more, and it ensures that limits are available for whatever need presents itself.