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.