AN ACT RELATING TO INSURANCE -- LIABILITY INSURANCE

2026 Regular Session Introduced by Pete Appollonio and 5 co-sponsors

Liability policies must keep the full policy limit available to pay claims for property damage or personal injuries, and cannot use part of that limit to cover defense costs or att

04/16/2026 Committee recommended measure be held for further study

Basic Information

Title: AN ACT RELATING TO INSURANCE — LIABILITY INSURANCE

Jurisdiction: Rhode Island

Session: 2026

Introduced: April 3, 2026

Sponsors: Senators Dimitri, Patalano, LaMountain, Famiglietti, Appollonio, Thompson (Co-sponsors: Brian Thompson, Matt LaMountain, Pete Appollonio, Andrew Dimitri, Todd Patalano, Stefano Famiglietti)

Committee: Senate Judiciary

Status: Committee recommended measure be held for further study (as of April 16, 2026)

Purpose and Intent

The bill aims to restrict how policy limits in liability insurance policies can be used.

Specifically, it requires that policy limits designated to cover liability for property damage, personal injuries, or related indemnification must be held in full for paying such claims and cannot be diverted to pay attorney fees or defense costs.

Key Provisions

New Requirement (27-7-1.1):

All liability insurance policies covering property damage, personal injuries, or other indemnification (excluding workers’ compensation payments under chapters 29–38 of title 28) must:
State a clear policy limit available in full to pay such claims.
Prohibit using any portion of the policy limit to cover defense costs or attorney fees for defending the claim.

Effect on Existing Policies: The act establishes the requirement for policies written to comply with the stated rule. It does not specify transition rules for existing policies beyond the general effective date (the act takes effect upon passage).

Who/What Is Affected

Policy Types Affected: Liability insurance policies that insure against property damage or personal injuries, or indemnification related to those liabilities (excluding workers’ compensation).

Stakeholders Impacted:

Insurance carriers issuing liability policies.
Policyholders and claimants who rely on those policies to cover damages or injuries (as the policy limits must be available for claims).
Defense counsel and insured parties, since defense costs cannot be paid from the policy limit.

Procedural and Timeline Details

Effective Date: The act takes effect upon passage (no separate future date specified).

Legislative Track: Referred to Senate Judiciary; subsequently scheduled for hearing and/or consideration; then "held for further study" by committee as of the latest action.

Implementation Considerations: The bill does not provide explicit guidance on how insurers should label or enforce the new limits beyond the prohibition on using limits for defense costs.

Potential Impacts and Considerations

Financial Impact on Insurers: Insurers must ensure policy declarations clearly show full limits available for claims and segregate defense costs from the claim limit.

Impact on Claim Dynamics: Policyholders and claimants may experience changes in how defense costs are funded and the perception of available coverage.

Legal Interpretations: Clarifies the boundary between coverage for damages and defense expenses, potentially affecting dispute resolution over coverage adequacy.

If you’d like, I can provide a brief comparison to current Rhode Island liability policy drafting practices or draft a plain-language explainer for policyholders.

Bill