CEIL versus CEOL - How Much Coverage Do I Need? Within Limits or Outside Limits?

Written by Instant E&O

When purchasing an errors and omissions policy you have a choice when it comes to how the limit of liability (the amount of coverage) is provided.

The first option is to purchase coverage which includes claims expenses (alternatively known as legal defense costs) as part of the limit of liability.  This is known as Claims Expenses Inside the Limit aka “CEIL”.  In simplest terms this means that the cost to defend a law suit against you is included in the total amount of coverage you purchase.  So if you buy a $1,000,000 CEIL policy, the cost to hire attorneys to defend you and the amount you have to settle any claims made against you is capped at $1,000,000.

Alternatively, you may wish to purchase coverage which offers an additional limit for claims expenses.  This is usually an amount equal to the face limit of liability of the policy.  This type of coverage is known as Claims Expenses Outside the Limit aka “CEOL”.  In this scenario, the cost to defend a law suit against you is separate to the face amount of coverage you purchase.  Consequently, if you buy a $1,000,000 CEOL policy, the cost to hire attorneys to defend you will be $1,000,000.and the amount you have to settle any claims made against you is an additional $1,000,000.

The cost of CEOL coverage is more expensive then CEIL – usually about 10 to 15 percent more than the price of a CEOL policy – however, technically, you have $2,000,000 in total coverage. However, for either coverage option, the total amount of coverage for the settlement cost is capped at the face amount of the policy. In the scenarios described above this would be $1,000,000.

COVERAGE OPTION:Defense costs limit:Settlement costs limit:Total Coverage:
Claims Expenses Inside the Limit of Liability (CEIL):$1,000,000included$1,000,000
Claims Expenses Outside the Limit of Liability (CEOL):$1,000,000$1,000,000$2,000,000