These costs include not only the fees paid to lawyers but also all the other expenses associated with defending a liability claim. Such expenses can include investigation expenses, expert witness fees, the premiums for necessary bonds, and other expenses incurred to prepare for and conduct a trial.
The insurer is obligated to defend an insured only when the claimant alleges that injury or damage caused by a covered activity of the insured.
The expenses incurred for the defense, known, as Litigation Expenses are the expenses incurred for legal defense, such as attorneys’ fees, expert witness fees, and the cost of legal research.
Supplementary Payments
In liability policies, supplementary payments are amounts the insurer agrees to pay (in addition to the liability limits) for items such as premiums on bail bonds and appeal bonds, loss of the insured’s earnings because of attendance at trials, and other reasonable expenses incurred by the insured at the insurer’s request.
In other words, these supplementary payments consist of the following: -
· All expenses incurred by the insurer
· The cost (up to a specified limit) of bail bonds or other required bonds
· Expenses incurred by the insured at the insurer’s request
· The insured’s loss of earnings (up to a specified amount per day) because of attendance at hearing or trials at the insurer’s request.
Prejudgment Interest
Prejudgment Interest is interest that might accrue on damages before a judgment has been rendered.
Postjudgment Interest
Postjudgment Interest is interest that might accrue on damages after a judgment has been entered in a court and before the money is paid.
Medical Payments
Medical payments coverage pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of whether the insured was at fault.
What Time Period is Covered?
Personal auto insurance is usually written for a six-month term. Other types of liability insurance are usually written for a one-year period, though other policy terms are also possible.
A liability insurance policy states what must happen during the policy period in order to “trigger” coverage. Depending on the type of policy, coverage is usually triggered by either:
· Events that occur during the policy period (in an occurrence basis policy)
· Claims made (submitted) during the policy period (in a claims – made policy)
Occurrence Basis Coverage
Occurrence basis coverage covers liability claims that occur during the policy period, regardless of when the claim is submitted to the insurer.
Occurrence policies do not limit the time period during which a claim can be submitted. As long as the injury or damage occurs during the policy period, coverage applies even to claims made years later.
Claims-Made Coverage
Claims-made coverage liability claims that made (submitted) during the policy period for covered events that occur on or after the retroactive date and before the end of the policy period.
A retroactive date in a claims-made policy is the date on or after which injury or damage must occur in order to be recovered.
The situation becomes more complicated in practice, however. Claims due to injuries that occur before that retroactive date are not covered even if the claim is made during the policy period. Occurrence policies also do not cover claims arising from occurrences before the policy’s inception date.
Because of period renewals and the possibility that the insured will shift coverage from insurer to another, maintaining continuous coverage without gaps is perhaps the greatest difficulty with claims-made coverage.
Liability Loss Exposures and Policy Provisions
