How Does Defense Allocation Coverage Impact Your Risk?

The business climate for attorneys and other professional service firms has undergone unprecedented change over the past number of years. There are more regulations from both a federal and local level. There is an increased competitive environment that fuels more innovation in services and products. Many businesses are delivering nontraditional products in order to attract new clients.  All this combines to create increased risk of litigation.

Now more than ever commercial businesses need comprehensive management liability protection. We recommend a policy that combines Directors and Officers (D&O), Employment Practices Liability, Fiduciary Liability, Professional Liability. It is good to combine these coverages with one market and under one policy. Also, in order to reduce the likelihood of coverage gaps, it is necessary to have 100% Defense Allocation Coverage within these coverages. What happens when there are multiple allegations against the Financial Institution under a management liability policy and only certain allegations trigger coverage under the policy? If your policy has 100% defense allocation, defense costs will be provided for all allegations, as long as one allegation triggers coverage in the policy.

Some insurers state in their policy that they will allocate the proportion of defense costs relative to the amount covered in the policy. Their allocation efforts rely on best efforts or other forms of allocation for covered and uncovered matters. If your policy has 100% defense allocation, the carrier will provide 100% of the    defense costs to defend all claims as long as one allegation triggers coverage in the policy

The complex nature of the banking industry demands comprehensive insurance solutions. A Management Liability policy should form an integral part of your comprehensive risk management program.