The Risk and Insurance Management Society (RIMS) has announced that Nevada's proposal to eliminate "defense within limits" insurance provisions could disrupt the state's professional liability market. This announcement was made in a press release on January 15.
According to the RIMS report, Nevada’s proposed elimination of these provisions would prevent legal defense costs from being included within the liability limits of commercial insurance policies. These provisions are commonly used in professional liability insurance to manage costs and risk exposure. Their removal could lead to increased financial uncertainty for insurers and policyholders.
The National Law Review reports that Nevada's Assembly Bill 398, effective October 1, 2023, prohibits insurers from issuing or renewing liability policies that reduce policy limits by defense costs. This legislation applies to various policies, including Directors and Officers Liability, Errors and Omissions, and Cyber Liability. The Nevada Division of Insurance has issued guidance to clarify the law's scope and implementation.
Nevada's new law prohibiting defense-within-limits provisions marks a departure from existing practices in other states. According to an article published in The D&O Diary by Kevin LaCroix, while states like Louisiana and New Mexico have similar restrictions, they allow exemptions for certain liability policies.
According to their website, RIMS serves more than 200,000 risk professionals and business leaders from over 75 countries. Founded in 1950, the organization provides networking opportunities, professional development, certification, advocacy, and research. It publishes Risk Management Magazine and organizes RISKWORLD, an annual conference for global risk professionals.