Criminal Defence Costs Extension

Purpose

Where criminal proceedings are brought against the policyholder over an event that may also give rise to a liability claim falling within cover, there is a close link between the outcome of the criminal proceedings and the underlying civil liability question. The criminal defence costs extension under AHB clause 5.3 therefore provides that the insurer bears the statutory or specially agreed higher fees of a criminal defence lawyer, provided the appointment of the lawyer was requested or approved by the insurer.

Effect and limits

Cover is limited to the cost of criminal defence connected with the insured event; it does not extend to any fines, penalties or other sanctions imposed, which are in any event legally uninsurable. Cost cover generally requires the insurer to approve, or itself request, the appointment of defence counsel, reflecting its own interest in a coordinated defence strategy that takes account of the impact on the civil claim.

Negotiation and practice

The clause is particularly significant for directors and officers under D&O cover, for example where a workplace accident triggers both civil claims and a criminal investigation for negligent bodily harm. Policyholders in regulated or accident-prone industries should clarify how quickly the insurer’s approval for appointing defence counsel can be obtained in practice, to avoid delays in the investigation.