Defense and Settlement in a Professional Liability Policy

Defense and settlement in a professional liability policy for architects/engineers-

Each insurance policy has a clause that describes what will be included for defense and settlement at the time of a claim. Here are a few examples of the policy wording for defense and settlement.

Example one

  1. The Company is not obligated to pay any Damages or Claim Expenses or to defend or continue to defend any Claim after the applicable “Each Claim” or “Policy Aggregate” Limits of Liability has been exhausted by the payment of Damages or Claim Expenses or any combination thereof; or after the Company has deposited the remaining available “Each Claim” or “Policy Aggregate” Limits of Liability into a court of competent jurisdiction or tendered the remaining available “Each Claim” or “Policy Aggregate” Limits of Liability to the Named Insured or, if applicable, to the excess insurer(s) of the Named Insured. In such case, the Company shall have the right to withdraw from the further investigation, defense or settlement of such Claim by tendering control of said investigation, defense and settlement of the Claim to the Insured.
  1. The Company have the right to make, with consent of the Named Insured, any settlement of a Claim under this Policy. However, the Named Insured’s consent shall not be unreasonably withheld.

Example two

  1. The Insurer has the right and duty to defend any claim against the Insured seeking amounts that are payable under the terms of this Policy, even if any of the allegations of the claim are groundless, false or fraudulent. The Insurer will designate or, at its option, approve counsel to defend the claim. The Insurer is not obligated to defend any claim or pay any amounts after the applicable limit of liability has been exhausted.
  2. The Insurer will not settle any claim without the informed consent of the first Named Insured.
  3. If a claim results in a punitive, exemplary, or multiplied damage award, the Insurer will pay such award, up to the applicable limit of liability, to the fullest extent permitted by law. The enforceability of the foregoing shall be governed by such applicable law in the jurisdiction which most favors coverage for punitive, exemplary and multiplied damages; provided that such jurisdiction has a substantial relationship to the Insured or the claim.

There are a few items to be aware of in these clauses. Is consent of your firm required in a claim settlement and defense is typically included in the limits of liability.

If you have any questions about defense and settlement in a professional liability policy, please call or email your Professional Underwriters agent for assistance.defense and settlement

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