Current through Register Vol. 56, No. 18, September 16, 2024
(a) No
commercial insurance policy shall be issued or renewed on a form required to be
filed pursuant to N.J.S.A. 17:29AA-1 et seq. which contains a provision that
includes defense costs within policy limits, except as provided in this
section.
1. Regardless of whether the policy
form provides defense costs within or outside of policy limits, no defense
costs shall be charged against any deductible amount.
(b) Lawyers and medical malpractice
professional liability insurance policies may contain a provision that includes
defense costs within policy limits provided it conforms to the standards set
forth in (c) below or, in the case of medical malpractice liability insurance,
to the standards set forth in (d) below.
(c) Lawyers and medical malpractice
professional liability insurance policy forms that include defense costs within
policy limits shall contain policy provisions, which may be in the form of a
mandatory endorsement, so as to incorporate the standards set forth below into
the terms of each policy.
1. The policy form
shall provide a minimum limit of liability of $ 1,000,000.
2. Defense costs shall not reduce the portion
of the limit of liability that remains available to pay claims until defense
costs have been incurred in an amount that equals or exceeds 50 percent of the
policy limit of liability. The portion of the limit of liability that remains
available to pay claims may be reduced only by the portion of incurred defense
costs greater than 50 percent of the policy limit of liability.
3. The portion of the limit of liability
available to pay claims shall not be reduced to an amount less than 50 percent
of the policy limit of liability, regardless of the amount of defense costs
incurred.
(d)
Notwithstanding that they do not conform with (c) above, medical malpractice
professional liability insurance policy forms that include defense costs within
policy limits may be offered if:
1. The
policy form provides a minimum limit of liability of $ 1,000,000;
2. The insurer at a minimum also offers the
applicant a policy with identical limits providing defense costs outside the
limit of liability;
3. The insurer
secures a certification on a policyholder notice signed by the applicant
confirming that a policy providing defense costs outside the limit of liability
was offered to the applicant and the applicant declined such coverage, and
further confirming that the applicant is aware that the amount of coverage
available for payment of a liability claim will be commensurately reduced based
on defense costs. The notice shall be required with respect to initial
applications. It shall not be required on renewals of existing policies unless
a change is made upon renewal to include defense costs within limits. The form
of the policyholder notice shall be filed with the Department with the filing
of the policy form providing defense costs within limits, and the signed
certifications shall be maintained by the insurer for a period of five years
from the expiration of the policy; and
4. The insurer shall file rates for medical
malpractice liability insurance policies that contain a provision that includes
defense costs within policy limits which shall be commensurately reduced to
reflect the coverage provided.
(e) Regardless of whether they include
defense costs within policy limits, all medical malpractice professional
liability insurance policies covering physicians issued by carriers authorized
to write such policies in this State shall comply with the provisions of
45:9-19.1 7.1.a and any applicable
rules of the State Board of Medical Examiners at N.J.A.C. 13:35.
