Webp headshots 16
Gary LaBranche, CEO of RIMS, the Risk Management Society | LinkedIn.com

RIMS: Nevada restricts defense coverage in liability insurance

RIMS, the Risk Management Society, has announced that Nevada's new legislation limits the use of "defense within limits" in professional liability insurance. This change is expected to reshape coverage options and costs for organizations across the state. The announcement was made on their website on January 15.

According to RIMS's website, Nevada's recent legislation targets the use of "defense within limits" in professional liability insurance, a provision where defense costs reduce the policy's total limits. While revised regulations have softened the law's initial scope, its implementation still influences the availability and structure of coverage in the state. This change aligns Nevada with other states that restrict such policies, posing challenges for risk managers.

The prohibition of "defense within limits" provisions in liability insurance policies mandates that defense costs no longer erode policy limits. This could potentially lead to higher premiums as insurers adjust to increased exposure. According to Kennedys, this legislative change does not affect traditional defense outside of policy limits products like commercial general liability or auto policies, leaving the auto industry largely unaffected.

As reported by CRC Group, Nevada's new law may increase costs and tighten insurance capacity, with unclear implications for umbrella and excess policies as well as sub-limited coverages like sexual abuse and molestation (SAM). The Non-Admitted and Reinsurance Reform Act ensures that the insured's home state laws govern surplus lines policy transactions. Quebec's similar law, Article 2503, caused insurers to exit the market and raise premiums, prompting government intervention to ease provisions.

According to their website, RIMS was founded in 1950 and supports over 200,000 risk professionals worldwide through networking, education, and advocacy. They host the annual RISKWORLD conference and publish Risk Management Magazine.