Understanding ‘claims expenses’ on a Professional Liability policy for architects/engineers-
Claims expenses are the costs involved in defending your architecture/engineering firm’s claim or circumstance.
First it is important to understand what a claims expense is on a professional liability policy. Here is an example of the policy language of how ‘claims expenses’ are defined.
- Claim expenses means:
- Fees charged by attorneys designated by the Company;
- All other reasonable and necessary fees, costs and expenses resulting from the investigation, adjustment, negotiation, arbitration, mediation, defense or appeal of a claim if incurred by the Company or by the Insured with the Company’s prior written consent; and
- Premiums on appeal bonds, attachment bonds or similar bonds; provided, however, the Company is not obligated to apply for, secure or furnish any such bond.
Claim expenses do not include fees, costs or expenses of independent adjusters or employees or officers of the Company, or salaries, loss of earnings or other remuneration by or to any Insured.
Claims expenses are within the limits of liability on a professional liability policy. This will reduce the total amount of liability that can be paid out on a claim. Below is an example of the policy language that may be in your firms policy.
Exhaustion of Limits
The Company is not obligated to pay any damages or claim expenses or to defend or continue to defend any claim after the applicable limit of liability has been exhausted by the payment of damages or claim expenses, or any combination thereof; or after the Company has deposited the applicable limit of liability into a court of competent jurisdiction or tendered the applicable limit 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.
As always, review your firm’s policy to understand what is and is not included as claims expenses and how it can affect the limits of liability. If you have any questions with regards claims expenses please call or email your Professional Underwriters agent for assistance.