The Perils of Eroding Liability Policies: How to Avoid Getting Burned

Over the years, there has been an upward trend in the offering of defense-within-limits professional liability insurance policies by carriers which commonly provide a more affordable cost of premium. It is attractive to the insurance carrier as it places a ceiling on the amount of defense costs and liability exposure. Under this type of policy, every dollar spent in defending the suit results in a reduction of dollars available on the policy to resolve the suit by settlement. There is pressure on defense counsel to refrain from conducting certain work-up of the file, yet, if the plan is to proceed to trial, the risk of foregoing necessary strategies may result in a poor result. Conversely, one may run the risk of depleting the policy with an aggressive defense which can be devastating to the insured if there is a plaintiff's verdict.

This session will address the risks and consequences of defending an insured with a burning policy, including exposure of the broker for proposing such policies to high-risk professionals to bad faith or legal malpractice actions. We will address consequences of policy limits demands and provide best practices for navigating through defending an insured with a burning policy.