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.
Summary
H5812 amends Rhode Island’s liability insurance law to prohibit so-called “wasting policies” in certain liability coverage. The bill requires policies insuring against property damage or personal injury liability, or policies providing indemnification for that liability, to state a policy limit that is fully available to pay claims. It also bars any part of that policy limit from being used to pay defense fees or defense costs. The bill excludes workers’ compensation-related payments under chapters 29 through 38 of title 28.
In practical terms, the measure would ensure that the full stated liability limit remains available for claimants rather than being reduced by the insurer’s defense expenses. The act would take effect immediately upon passage and would apply to the covered liability insurance policies written in Rhode Island. It would not alter workers’ compensation benefits or the statutory compensation system referenced in the exclusion.
Impact
The bill would add a new section to chapter 27-7 of the Rhode Island General Laws governing liability insurance. It would change how certain liability policies must be structured by requiring that policy limits be preserved for claim payments and not eroded by defense costs, affecting insurers, policyholders, and claimants in property damage and personal injury cases. The statute would not apply to workers’ compensation compensation payments under title 28.
Sentiment
No committee transcripts or recorded votes were provided, so there is no documented debate or voting pattern to gauge sentiment. Based on the bill text alone, the measure appears to be a consumer- or claimant-protective insurance reform aimed at preserving coverage limits for injured parties.
Contention
The main policy issue is whether insurers should be allowed to use policy limits to pay defense costs, which the bill would prohibit. Supporters would likely favor the bill because it preserves the full liability limit for claimants, while opponents—most likely insurers and possibly some insureds purchasing defense-inclusive coverage—may argue it could increase premium costs or reduce flexibility in managing claims defense. The workers’ compensation exclusion suggests the bill is narrowly targeted and avoids changing that separate system.