Knowledge of the new Nevada law enables an agent to explain coverage differences and premium increases.
Recently Nevada enacted a law prohibiting insurers from issuing or renewing liability policies that use Defense Inside provision. The law takes effect October 1, 2023. Defense Inside is a provision often used in these types of liability policies:
- Professional
- Cyber
- Product
- Employment Practices
- Directors and Officers
- Environmental
It is a way to reduce premiums, so the new law will almost certainly inflate premiums and reduce availability in the state.
Defense Inside means that the limit of liability is reduced by costs of defense and claims expenses. As an example, if the limit of liability is $1,000,000, and defense costs for a claim are $150,000, there is $850,000 remaining available to settle all claims.
Other types of liability policies, such as General Liability and Auto Liability, almost always use a Defense Outside provision. This means that the payment of defense and claims costs do not affect the limit of liability for settling claims.
Here’s hoping that Nevada’s idea does not spread to other states!
Do your validating producers understand Defense Inside and Defense Outside, or know where to learn about it? Insurance Technical Consulting specializes in one-on-one mentoring of commercial producers so they gain confidence in what they sell and make fewer errors. Save your agency time with potential to increase revenue and reduce E&O costs. Explore the website at InsuranceTechnicalConsulting.com for more information.
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