Ask the Underwriter: What is the separate optional quote for “Outside” coverage?

“I received my professional liability insurance quote from AIM. What is the separate optional quote for 'Outside' coverage?”

The optional “Outside” coverage, offered to qualifying insureds, is a cost-effective way to preserve the limit of liability in the event of a claim. It prevents the defense costs from eroding the limit of liability.

Historically, the AIM policy has only been “Inside,” meaning the costs of defending claims are inside, or come out of, the limit of liability and thus erode the limit of liability.

For example, if the policy provides a limit of $1,000,000 per claim/$1,000,000 aggregate, there is a claim, and there are $100,000 in defense costs, then there is only $900,000 left in coverage when the case goes to the jury.

“Outside” means the defense costs are outside the limit of liability. This coverage is a new, optional feature we are offering. We call it Supplemental Defense Coverage, and it is done by endorsement. 

The Supplemental Defense Coverage endorsement provides an additional amount of coverage for defense costs outside the limit. That additional amount is the lesser of 50% of the per claim limit or $500,000.

For example,with the Supplemental Defense Coverage endorsement, AIM would pay up to an additional $500,000 in claims expense for a policy with a $2,000,000 per claim/$2,000,000 aggregate limit during the policy period.  This additional claims expense allowance would be used first before tapping into limit of liability for claims expenses. 

The Supplemental Defense Coverage endorsement can help an attorney or law firm avoid dipping into their limit of liability for defense costs, leaving more coverage available for a settlement or judgment.

If you’re unsure whether to accept the Supplemental Defense Coverage endorsement, if offered, on your next AIM policy, please contact me at ben@attorneysinsurancemutual.com. We’ll discuss situations where it could be valuable to have.