Requires that insurance policies for property damage, personal injuries, and indemnification other than payment of compensation for workers compensation, state policy limits and no amount of the policy may be used to pay costs to defend a claim.

Rhode Island Bill Summary: Liability Insurance Policy Limits

This bill would change the rules for how liability insurance policies work in Rhode Island. Specifically, it would require that when someone has insurance covering property damage, personal injuries, or other liability (excluding workers' compensation), the full dollar amount stated on the policy must be available to pay out claims. Under this bill, insurance companies would not be allowed to use any portion of that policy money to pay their own legal costs for defending a claim.

Currently, many insurance policies allow the costs of hiring lawyers and mounting a legal defense to be drawn from the same pool of money as the coverage limit itself. This means that if a policy has a $100,000 limit and the insurance company spends $30,000 defending the case, only $70,000 remains to compensate the injured person or cover the damage. This bill would end that practice, requiring defense costs to be paid separately — so the full policy limit stays intact for actual compensation.

This bill would primarily affect insurance companies, policyholders (such as homeowners, business owners, and drivers), and people who file injury or property damage claims. Claimants could potentially receive more compensation since policy funds wouldn't be depleted by legal fees. Policyholders and insurers, however, could see changes in how policies are structured and priced, as insurers may adjust premiums to account for the added cost of covering legal defense separately.

The bill was referred to the House Corporations Committee, which has recommended holding it for further study, meaning it has not yet moved forward in the legislative process.