The extent of the insurer’s payment depends on the following types of policy provisions:
· Policy limits
· Defense Cost provisions
· “Other insurance” provisions
Policy limits
Limits are expressed in different ways, as follows:
· An each person limit is the maximum amount an insurer will pay for injury to any one person for a covered loss.
· An each occurrence limit is the maximum amount an insurer will pay for all covered losses from a single occurrence, regardless of the number of persons injured or the number of parties claiming property damage.
· An aggregate limit is the maximum amount an insurer will pay for all covered losses during the covered policy period.
A single limit of liability is the maximum amount an insurer will pay for the insured’s liability for both bodily injury and property damage that arise from a single occurrence.
Defense Cost Provisions
Most liability policies do not place any limit as to Defense Cost. The only limitation is that insurer is not obligated to pay once the entire policy limit has been paid in settlement.
On the other hand, defense costs are usually payable in addition to the policy limits and policy limits include only payment for damages.
There are certain policies which states that defense costs should be within the overall policy limit.
“Other Insurance” Provisions
In cases, where more than one insurance policy exists covering the same property, “Other Insurance” provision in a policy will prevent insured from profiting out of a claim from all the policies covering the property.
Liability Loss Exposures and Policy Provisions
