Hunton Insurance Recovery Blog

We recently posted about Nevada becoming the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what is called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. 

Nevada recently became the first state to prohibit defense-within-limits provisions in liability insurance policies. Defense-within-limits provisions—resulting in what’s called “eroding” or “wasting” policies—reduce the policy’s applicable limit of insurance by amounts the insurer pays to defend the policyholder against a claim or suit. These provisions are commonly included in errors and omissions (E&O), directors and officers (D&O) and other management liability policies. This is in contrast to other policies, most commonly commercial general liability policies, which provide defense “outside of limits” where defense costs do not reduce the policy’s limit. 

A group of Las Vegas-based restaurants recently filed a class action lawsuit to recover business interruption damages against their insurer. The Egg Works chain alleged that U.S. Specialty wrongly denied their claims for financial losses stemming from the Nevada governor’s closure of non-essential businesses during the COVID-19 pandemic. The governor’s orders limited the restaurants to takeout and delivery service only.