Defence Costs Inside The Limit vs. Defence Costs Outside The Limit
Knowing if your defence costs are inside the limit or outside the limit is very important in the event of a claim. It can determine the number of available funds within a policy and in turn, affect your defence strategy, and financial outcome when a claim is made.
Inside the limit means that all defence costs are deducted first from the policy limit, which cuts into the overall limit available to pay for monetary damages.
Outside the limit means there are separate limits or unlimited funds available for defence costs. When defence costs are outside the limit the cost of defending your case does not erode your policy limits available to pay settlements resulting.
These defence expenses make up a large sum of an insurance claim, whether it be in errors and omissions liability, commercial general liability or a directors & officers insurance claim.
Defence costs are typically made up of the following:
- Lawyer fees
- Court costs
- Costs of filing legal papers
- Costs of expert witnesses
- Costs associated with an investigation
Defence expenses add up quickly and could erode your limit of liability leaving you vulnerable to cover costs out of your own pocket. Below is a quick snapshot of a typical claim and how defence costs inside the limit vs. defence costs outside the limit are handled:
|Expense||Defence Costs Inside the Limit||Defence Costs Outside the Limit|
|Total Paid by Insurance Company||$1,000,000||$1,225,000|
If you’re not sure if your organization’s insurance policy has defence costs inside the limit vs. outside the limit, talk to an ALIGNED Advocate today.
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