Aggregated Defense Outside of the Limits

Provides a separate claims expense limit for firms up to $1,000,000 in annual billings.

Introduction

All insurance policies have per-claim and aggregate limits that are the absolute maximum the insurance policy will pay out on your behalf. Because professional liability insurance claims can be difficult to resolve through litigation, the costs of defending you are usually included within the policy limits.


What is the change?

The CNA professional liability policy now provides firms with less than $1 million in annual revenue the option of purchasing “defense outside of the limits.” Defense outside of the limits means that the costs of defense do not erode the policy limits that are available to settle the claim. With the defense costs borne by CNA, you can protect the limits on your practice policy to meet insurance requirements under your contracts.

Why did we change it?

Typically, defense costs and any indemnity payments made on your behalf for your negligence in providing professional services erode your available policy limits. Defense costs for a specific professional liability claim can quickly erode the available per-claim limit as well as your deductible obligation, unless the per-claim limit increases to accommodate a long defense process.

In addition to your attorney, professional liability claims require an expert to provide a professional opinion about the nature of your services to defend against allegations of your negligence. This is costly, and often puts pressure on your firm to ensure that funds are available to settle the claim within available policy limits before defense costs deplete those funds. For smaller firms, the reserves within the firm may be inadequate to continue the defense if they reach their per-claim limit. There is no “hammer clause” in the CNA policy that forces you to settle a claim. Defense costs can continue rising if you want to keep fighting the claim.

How will it benefit my firm?

If your firm has the availability of defense outside of the limits on your policy, you can educate a client that high limits required by the client are probably unnecessary. Many clients understand that defense costs erode per-claim and aggregate limits so they require much higher levels of coverage. If clients know that underlying funds are available to rectify harm for which your firm is liable, they should reduce their demands for higher limits, thus saving your firm on the costs of maintaining higher limits.


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