PlumBot: Bot: Creating new article from JSON

2026-03-11T16:29:35Z

Bot: Creating new article from JSON

New page

📋 '''Allocation provision''' is a clause found in [[Definition:Insurance policy | insurance policies]] — particularly [[Definition:Liability insurance | liability]] and [[Definition:Directors and officers insurance (D&O) | directors and officers (D&O)]] coverages — that establishes how defense costs, settlements, or judgments are divided between covered and non-covered parties, claims, or time periods. When a single loss event or legal action involves both insured and uninsured elements, the allocation provision dictates the proportion that falls within the policy's scope versus the portion the [[Definition:Policyholder | policyholder]] must bear independently. Without such a provision, disputes over how to split costs can stall claims resolution and generate costly litigation between insurers and their insureds.

⚙️ In practice, an allocation provision is triggered when a [[Definition:Claim | claim]] spans multiple defendants (some of whom are not insured under the policy), multiple allegations (some falling outside the policy's [[Definition:Coverage grant | coverage grant]]), or multiple policy periods. For example, in a D&O suit alleging both covered wrongful acts and uninsured fraud, the provision may require allocation based on relative exposure, the number of claims, or another negotiated formula. Some policies adopt a "largest settlement" or "relative legal exposure" methodology, while others leave the mechanism to negotiation at the time of loss. [[Definition:Underwriter | Underwriters]] drafting these clauses must balance clarity with flexibility, since rigid formulas can disadvantage either party depending on the facts of a given claim.

💡 For [[Definition:Risk manager | risk managers]] and brokers, the allocation provision is one of the most consequential yet frequently overlooked policy terms. A poorly worded or absent provision can shift millions of dollars in liability to the insured, particularly in complex [[Definition:Professional liability insurance | professional liability]] or [[Definition:Errors and omissions insurance (E&O) | errors and omissions]] scenarios where covered and uncovered conduct are deeply intertwined. Negotiating favorable allocation language during the [[Definition:Policy placement | placement]] process — rather than after a loss occurs — gives the policyholder significantly more leverage and predictability.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Directors and officers insurance (D&O)]]
* [[Definition:Defense cost]]
* [[Definition:Coverage allocation]]
* [[Definition:Policy wording]]
* [[Definition:Professional liability insurance]]
* [[Definition:Loss adjustment]]
{{Div col end}}

Definition:Allocation provision - Revision history

PlumBot: Bot: Creating new article from JSON