§1272. Defense costs; prohibition; waiver

            A. The liability limits contained in a policy or contract of insurance issued by an authorized insurer shall not be reduced by the expenses of defense in a suit under the policy unless waived by the commissioner as provided in Paragraph (B)(2) or (3) of this Section.

            B.(1) The commissioner shall not waive the prohibition in Subsection A of this Section for any of the following types of insurance coverage:

            (a) All personal lines.

            (b) Medical malpractice.

            (2) The prohibition contained in Subsection A of this Section shall be waived by the commissioner for the following types of insurance coverage:

            (a) Professional liability other than medical malpractice.

            (b) Directors' and officers' liability.

            (c) Errors and omissions liability.

            (d) Pollution liability.

            (e) Employment practices liability.

            (f) Cyber risk liability.

            (g) Information security and privacy liability.

            (h) Patent defense or other intellectual property infringement liability.

            (i) Commercial liability coverages sold in combination.

            (3) The commissioner may waive the prohibition contained in Subsection A of this Section for types of insurance coverage not listed in Paragraph (1) of this Subsection upon consideration of the customs of the industry and the interests of the particular insured.

            C. Expenses of defense may include only reasonable attorney fees and expenses directly connected to the insurer's defense of a specific liability claim on behalf of an insured and any other litigation expenses directly arising from the defense of a specific liability claim. Expenses of defense shall not include overhead, unallocated loss adjustment expenses, or other unallocated expenses incurred by the insurer in the ordinary course of business.

            D. Any policy or contract of insurance containing terms that require a waiver pursuant to this Section shall include a separate notice or inclusion on the declaration page stating that the insurance policy or contract includes defense expenses which may be deducted from the liability limits of the policy. This notice shall be prominently printed or stamped in bold on the policy or contract and shall not be less than a ten-point type.

            Acts 2021, No. 225, §1; Acts 2022, No. 675, §1, eff. June 18, 2022.