with commercial insurance I need to know what it means when the defense costs are outside the policy limits?

Question

I need to know with commercial insurance what does it mean when you are asked; Are the defense cost outside the policy limits.

Answer 1

Will it be cheaper to Defend against the lawsuit or pay off the claim?

If the Defense Costs are outside of the policy limits then it would be cheaper to just try and pay off the person filing the lawsuit.

Answer 2

Your commercial general liability policy will pay to defend you if you get sued. If you are found to be guilty of the allegations against you, you will owe damages to the claimant. The liability limit you have on that policy is there to pay those damages. The defense costs, if outside the limit, means that the insurance company will pay to defend you and the cost for doing so will not come out of the liability limit. Typically, when defense costs are "outside the limit" they are also unlimited. Most commercial liability policies work this way (with the exception of professional liability which is another story!).

Commercial Insurance Broker 25 years

Answer 3

Defense costs "outside the policy limit" means that the insurance carrier's legal expenses in defending the insured do not reduce the available policy limit for paying actual claims or judgments. This generally means that no matter how much the carrier spends to defend you, the total policy limit is still available to pay legal judgments or other successful claims. The reverse is also true, i.e. when claims expenses are included in the policy limit, each dollar spent by the insurer in defending you reduces the amount of money available under the policy to pay claims.

Answer 4

You have a policy limit - $1,000,000. When defense costs are INSIDE the limit, the attorney fees REDUCE the amount of coverage. So you have a big lawsuit, it takes two years to defend, the legal fees are $500,000, you only have $500,000 left to pay the judgement. Which can be a problem, if you have a massive judgement, and a high retention on an umbrella.

So defense costs outside the policy limits means, unlimited defense costs, AND it doesn't reduce the policy limits. MUCH better.

Answer 5

Outside the policy limits could mean that in ADDITION to the cost to pay a covered claim, the company will pay to defend you in a lawsuit.

Hard to know how to interpret this out of context and with such limited information.

Answer 6

The policy has a maximum amount it will pay to defend the client. Look at your policy to see what those limits are. If the cost is outside the limit (more than the amount stated in the policy), you would be responsible for the excess amount.