Liability policies are designed to help the insured in defending itself against third-party insurance claims. Liability policies usually cover defense costs as part of the overall limit of indemnity. Defense costs are the costs incurred by the insured party while defending a lawsuit. The defense costs are the costs incurred for things such as hiring a legal professional, fees due to the court, collecting facts, expenses related to paperwork and other expenses for court cases. When a claim is made under a liability policy, it is the duty and sometimes the right of the insurer to defend the insured. In such a scenario, the legal expenses incurred also impacts the policy limits, unless expressly specified otherwise. The rule of defense costs not affecting the policy limits is helpful because the defense costs tend to be high when there are legal proceedings in multiple judicial forums and especially in overseas jurisdictions. Sometimes the defense costs can be more than the award
An important feature of liability policies such as D&O or E & O insurances is the prior acts exclusion. Prior acts exclusion in these policies mean that the policy will not cover any claim arising out of an event that occurred before the inception of the policy. The prior acts exclusion feature takes on different implications in each of these insurance policies. It is important to know about the implications before purchasing any liability policy. Let us know more about prior acts exclusion in insurance. This article will cover the meaning, application and implication of the prior acts exclusion in relevant insurance policies. Prior acts exclusion definition in insurance policies Prior acts are defined in insurance policies as the prior claims or circumstances that have resulted from alleged or wrongful acts contained in any claim that has been reported or any circumstances for which notice has been given under a policy which is being purchased. The prior acts exclusion appli