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Satisfying a Self-Insured Retention or Deductible in a Third Party Claim

By Thomas R. Newman
Spring 2015
FDCC Quarterly

Satisfying a Self-Insured Retention or Deductible in a Third Party Claim

By Thomas R. Newman
Spring 2015
FDCC Quarterly

Read below

Thomas NewmanWhen a commercial policyholder assesses its risks in protecting against third-party claims, it will often determine that it is not financially advantageous or necessary for it to purchase liability insurance in an amount large enough to cover its entire potential exposure. It may elect to retain some portion of the risk and "self-insure" for a fixed dollar amount, purchasing liability insurance that attaches only above that amount. The amount of the exposure retained by the policyholder and not covered by the purchased insurance policy may be a "deductible" or a "self-insured retention" ("SIR"), also referred to as the "retained limit."

This article discusses the differences between a "deductible" and a "SIR" and considers why policyholders may choose one instead of the other, even if the dollar amount may be the same. Next, the article looks at whether an SIR may be satisfied by "other insurance" that provides coverage to the policyholder, either as the named insured as an additional insured. Finally, the articles addresses how a deductible may be satisfied and whether defense costs may erode the SIR.

To read the full text of this article, please visit the FDCC Quarterly website.