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Shrinking Limits Defense Provision

Shrinking Limits Defense Provision

Definition

A provision found in most professional liability insurance policies providing that the expenditure of defense costs associated with a claim reduces policy limits. This approach contrasts with that used in commercial general liability (CGL) policies, in which defense costs are paid in addition to policy limits. (Shrinking limits provisions are also known as defense within limits provisions.) Accordingly, limits under professional liability policies must be selected so that they will be adequate to cover not only projected settlement/indemnity costs but expected defense expenses as well.

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