There are several definitions of defense costs in professional liability policies. The key to the defense costs, in most cases, is that they are within the limits of liability on a professional liability policy. Here are a few examples of what defenses costs are included.
Example one:
“Defense Costs” means:
(1) reasonable legal fees and expenses, including, but not limited to, e-discovery expenses, incurred in the defense or appeal of a Claim; and
(2) the costs of appeal, attachment or similar bonds, provided that the Insurer shall have no obligation to furnish such bonds.
However, Defense Costs shall not include:
(a) salaries, wages, remuneration, overhead or benefit expenses associated with any Insureds;
(b) any fees, expenses or costs which are incurred by or on behalf of a party which is not a covered Insured; or
(c) any fees, expenses or costs which were incurred prior to the date on which the Insurer received written notice of Claim from the Insured.
Example two:
“Claim Expenses” means:
- reasonable and necessary fees, costs and expenses incurred in connection with the defense of a Claim for a Wrongful Act or a Pollution Incident if incurred by the Insurer, or by the Insured with the prior written consent of the Insurer; and
- all other reasonable and necessary costs and expenses resulting from the investigation, adjustment, defense and appeal of a Claim, suit or proceeding arising in connection therewith, if incurred by the Insurer or by the Insured with the prior written consent of the Insurer; and
- premiums for appeal bonds for covered judgments or bonds to release property used to secure a legal obligation, if required for a Claim for a Wrongful Act or a Pollution Incident against any Insured but only for bond amounts within the remaining Policy limit, provided, however, that the Insurer shall have no obligation to appeal or to obtain such bonds.
Claim Expenses do not include any salary, overhead or other charges of or by the Insured for any time spent in cooperating in the defense and investigation of any Claim noticed under this insurance. Claim Expenses do not include costs or expenses incurred by the Insurer for Loss Prevention Assistance. Claim Expenses do not include any fees and expenses incurred prior to the date the Named Insured first provided notice of a Claim to the Insurer.
As always, read your firms policy to have an understanding of the defenses costs or claims expenses included in your policy. If your firm has questions about defense costs for architects/engineers please call, or email, your Professional Underwriter agent for assistance.