Defense Within Policy Limits

NIark Gordon Govemor THE STATE OF WYOMING Department of Insurance i06 E. 6th Ave. . Cheyenne, Wyoming 82002 Jeffrey P. Rude Commissioner BUI,I,ETIN TO: All Property and Casualty Insurers, Producers, and Adiusters FROM: Jeffrey P. Rude, Insurance Commissioner Defense within Limits Policies November 28, 2023 This Bulletin is intended to provide commercial insurers and producers with guidance concerning the Department's position on the type of consumer disclosure needed for Defense within Limits policies. ln general, Defense within Limits provisions provide that legal defense costs incurred by an insurer in defending the insured against a claim will be set off against the policy's liability coverage limit and has traditionally been offered in connection with policies issued on a claims-made basis. However, under a Defense within Limits policy, the cost of legal defense could, in theory, exceed the policy's limit of liability, leaving nothing in the policy to reimburse the claimant for damages should they ultimately prevail on a liability claim (and the insured would be legally responsible for remaining damages not paid under the policy). Given the insured's potential exposure in the event defense costs erode the liability coverage limit, it is the Department's position that Defense within Limits policies should be allowed only for claims-made liability policies. The Department believes that insurers need to provide safeguards to ensure that policyholders are adequately informed of how Defense within Limits policies operate. ln that regard, the Department requlres that insurers provide conspicuous disclosures informing the insured of how Defense within Limits provisions operate to reduce the liability coverage limit. The disclosure must be signed and dated by the insured, acknowledging their understanding of this type of policy. There is a sample disclosure available on the SERFF website or by request, lf there are any questions regarding this Notice, please contact the Staff Attorney, Becky McFarland, at (3071777 -6889 ot Deputy Commissioner Ta na Howard, at (3O7\ 777 -6896. RE Administration(307)77'7-'1401'Fax(30'7\771-2446'http://doi.wyo.gov/'Licensing(307)777-73l9'ConsumerAffans(101\17"1-'1402 DATE: WYOMING DEFENSE WITHIN LIMITS NOTICE AND ACKNOWLEDGEMENT The undersigned, on behalf of all Insureds, acknowledges and understands that the Liability Coverage Sections of this Policy contain defense within limits provisions which means that Defense Expenses will reduce the applicable Limit(s) of Liability and may exhaust them completely. Named Organization Signature: BY (To be signed by Officer of Named Organization) (Printed Name and Title) (Date) EYa,u, )le Named Organization: