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Policy Issues: Consult with clients when arranging coverage limits

Recently the trade press has published several interesting articles that discuss the best way to determine a proper limit for liability insurance. Ideas have ranged from the formulaic (typically referring to the net worth an insured wants to protect

By Chris Amrhein | Updated on May 31, 2004

Recently the trade press has published several interesting articles that discuss the best way to determine a proper limit for liability insurance. Ideas have ranged from the formulaic (typically referring to the net worth an insured wants to protect from being lost to litigation) to the broad brush. (“Insureds should buy all the insurance they can afford.”) Often the dreaded errors-and-omissions phantom raised its ugly head, suggesting that an agent who fails to sell a client the highest limits available invites a malpractice claim.

One possible path to enlightenment in the ongoing search for “adequate” coverage limits may be to simply ask, “How much does the insured want to carry?” Once any minimum requirements arising from contracts, laws, regulations, licensing or other matters are met, doesn’t the insured ultimately choose a limit after weighing the theoretical loss that could result from a claim against the definite loss that results from paying the premium?

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