Have you ever been sued? If you’re in most any business long enough the odds are you will face some kind of litigation sooner or later. Maybe you already have. If so, your general liability insurance company probably paid to defend you. These defense costs did not reduce the limit of insurance in your policy. That’s how most general liability policies work, including those sold by the RWC Insurance Advantage. But, this is not a universal truth. Most, but not all general liability policies say that we, the insurance company, have a “right and duty” to defend you against any suit seeking damages. The fact we have a “duty” to defend is why defense costs are over and above whatever we pay to settle the claim. A story might help to illustrate:
A home you built and sold more than a year ago is hit by a severe thunder storm that dumps nearly three inches of rain on the area in just over an hour. The sump pump your plumber installed in the finished basement fails under the onslaught resulting in severe water damage. The homeowner gets an attorney and files suit against the plumber and you even before they report the claim. During our investigation it is discovered the sump pump failed because of a manufacturing defect. The plumber’s general liability company pays the claim and seeks reimbursement against the manufacturer of the pump. Its called subrogation, in case you wondered, which I don’t blame you if you didn’t. In the meantime, we paid over $10,000 in legal bills and fees to experts to prove the pump was defective. This is in addition to what the plumber’s insurance company paid in similar costs. We may, or may not be able to get this back from the company that insures the pump’s manufacturer. That’s a problem for us to worry about. But, even if we don’t, it will not reduce your $1,000,000 liability limit by even one cent.
That’s a big deal. If your policy didn’t cover defense costs, your $1,000,000 limit would now be $990,000. Imagine you are sued again and this time we pay $100,000 to defend you. Your limit would be reduced to $890,000. Suppose that this time you are judged at fault and the injured party is awarded $1,000,000. If defense costs had not been paid in addition to your liability limit, you would owe the difference of $110,000! Keep in mind defense costs can easily exceed the settlement value of a claim. That makes the payment of defense costs over and above settlement one of the best values the RWC Insurance advantage offers.
If you aren’t sure your current general liability policy pays for defense costs in addition to settlement, call us today at 866-454-2155 and we’ll be happy to review your policy with you. Looking for a free, no obligation quote for your next renewal? Click here to get started.