What is unique about lawyer's professional liability insurance?

• A. It covers claims that existed before the policy was effective.
• B. It deducts claims expenses first and the balance is payable for the claim.
• C. It covers lawyers for fraudulent activities.
• D. It covers only lawyers in group practice.

Answer: (B)

In lawyers’ professional liability insurance, defense costs are typically paid out of the policy’s limit. That means the expenses for defending the claim—court costs, attorney fees, expert fees—are deducted from the policy limit first, and only the remaining limit is available to pay any settlement or damages. This is important because big defense bills can quickly use up the limit, leaving less (or none) left to indemnify the plaintiff.

So the correct concept is that claims expenses reduce the amount available to pay the claim. The other options don’t reflect a standard, defining feature: coverage for pre-existing claims depends on the policy’s retroactive date, fraud is generally excluded, and coverage isn’t limited to lawyers in group practice.