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loss mitigation underwriting (LMU)

The process of providing insurance coverage for existing litigation or for litigation that is imminent. Loss mitigation underwriting originated in the early 1980s when, after a massive fire suffered by the MGM Grand Hotel in Las Vegas, policy limits were insufficient to cover the huge losses sustained. In response, insurers offered a form of insurance designed to cover losses that had already occurred but whose magnitude had yet to be determined. In most instances, loss mitigation underwriting provides policies containing fixed limits of liability. However, in some situations, insurers offer LMU coverage arrangements in which the insurer's liability is unlimited. See also Back-dated liability insurance; Retroactive insurance.


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