North Dakota Insurance Department Schedules November 20 Hearing on Proposed Restrictions on Legal Defense Expenses Within the Limit of Liability

Oct 10, 2014


The North Dakota Insurance Department (“Department”) advised on October 8, 2014 that a November 20 public hearing is scheduled on the proposed creation of rules aimed to protect consumers from misleading policy provisions which could transform liability policies into defense expense-only policies.

Proposed Rule Chapter 45-05-09 would prohibit insurers from issuing or renewing liability insurance policies that include defense expenses within the limit of liability unless the policy’s minimum limit per occurrence or the aggregate liability for all liability risks and coverages under the policy is at least $1 million for primary coverages and $100,000 for secondary coverages.

In addition, the proposed Chapter would require that defense expenses within the limit of liability provisions are allowed only within the following types of liability policies:  cyber, directors and officers, errors and omissions, employer practices, medical malpractice, pollution, liquor, nuclear, fidelity bond, umbrella policies and other policies permitted within the discretion of the North Dakota insurance commissioner. 

Insurers would be required to include the wording “defense expenses within the limit of liability” on the policy declaration page in at least 12-point bold print.  The application must also contain a conspicuous acknowledgment initialed by the applicant that the subject policy has limits of liability which may be reduced or completely eliminated by payments for legal defense costs and claims expenses.

According to the Department, the economic impact of the proposed Rules on insurers is “expected to be minimal.”  There might be a slight cost for insurers to include required provisions and bring policies into compliance. 

The hearing will be held at 9:00 a.m. CT in Room AV 210 of the State Health Department, 2nd floor, Judicial Wing, State Capitol in Bismarck, North Dakota.

Written or oral comments on the proposed Rules sent to the North Dakota Insurance Department, 600 East Boulevard Avenue, Dept. 401, Bismarck, North Dakota, 58505 and received by December 1, 2014 will be considered.


Should you have any questions or comments, please contact Colodny Fass& Webb.



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