Allocation
Key Takeaway
The process of dividing defense costs and damages between covered and non-covered claims when a lawsuit involves both insured and uninsured allegations. Allocation issues arise frequently in legal malpractice where a single lawsuit may include covered negligence claims alongside uncovered fee dispute or breach of contract claims..
Definition
The process of dividing defense costs and damages between covered and non-covered claims when a lawsuit involves both insured and uninsured allegations. Allocation issues arise frequently in legal malpractice where a single lawsuit may include covered negligence claims alongside uncovered fee dispute or breach of contract claims.
Why This Matters for Law Firms
This term defines the boundaries of what your insurance will and will not pay for. Law firms that misunderstand coverage terms risk discovering gaps in protection only after a claim has been filed, when it is too late to remedy the situation. Reviewing these terms with your broker before binding coverage is a critical risk management step.
Example Usage in Context
During a coverage review meeting, the firm administrator might note: "Our policy includes a allocation provision -- let's make sure we understand exactly what that means for our specific practice areas before we sign off on the renewal."
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