Allocation

The term “allocation” refers to the process of determining the amount of defense costs, settlements or judgments which is properly attributable or “allocated” to covered Claims against covered persons, on the one hand, and uninsured claims against uninsured persons, on the other.  In essence, allocation simply refers to the process of determining the amount of insured loss when that loss is commingled with uninsured loss.  The allocation process is one of the most troubling aspects of D&O insurance claims handling and can result in a contentious claims handling environment if the Insureds and Insurer are not adequately forewarned of the allocation issues or reasonable in their allocation expectations.