Claims Expense Allowance
Key Takeaway
A provision that allocates a separate budget for claims-related expenses such as expert witnesses, document production, and travel, distinct from the policy's main defense cost allocation. This can preserve policy limits for indemnity payments while ensuring adequate resources for a thorough defense..
Definition
A provision that allocates a separate budget for claims-related expenses such as expert witnesses, document production, and travel, distinct from the policy's main defense cost allocation. This can preserve policy limits for indemnity payments while ensuring adequate resources for a thorough defense.
Why This Matters for Law Firms
This term defines the boundaries of what your insurance will and will not pay for. Law firms that misunderstand coverage terms risk discovering gaps in protection only after a claim has been filed, when it is too late to remedy the situation. Reviewing these terms with your broker before binding coverage is a critical risk management step.
Example Usage in Context
During a coverage review meeting, the firm administrator might note: "Our policy includes a claims expense allowance provision -- let's make sure we understand exactly what that means for our specific practice areas before we sign off on the renewal."
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