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US exposure
Discovery is the pre-trial stage of a US civil case in which each side can compel the other to hand over documents, data and sworn testimony. It matters for insurance because, under the American rule, each side usually pays its own lawyers win or lose, so defence costs can absorb much of a policy limit.
Part of: PI insurance for US exposure
In short
In US federal courts, discovery is governed by Rules 26 to 37 of the Federal Rules of Civil Procedure. Parties can obtain any non-privileged material relevant to a claim or defence and proportional to the needs of the case, including emails and other electronically stored information, depositions of staff and written questions. Sanctions for failures can be severe. The American rule means each litigant pays its own lawyers unless a statute or contract says otherwise, unlike the English rule that the loser usually pays. For UK firms, check whether your PI or liability policy pays defence costs on top of the limit or within it for US claims.
Last reviewed 7 October 2026 by the Apex professional indemnity team.
The Federal Rules of Civil Procedure (FRCP) govern civil actions in the US district courts. State courts have their own rules, and Cornell’s Legal Information Institute (LII) notes that discovery rules vary by jurisdiction. LII also describes discovery under the Federal Rules as “very broad”.
The starting point is Rule 26(b)(1): parties may obtain discovery of “any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case”. Proportionality takes into account the importance of the issues, the amount in controversy, the parties’ relative access to information, their resources, and whether the burden or expense outweighs the likely benefit. Material does not have to be admissible in evidence to be discoverable.
| Rule | What it allows | Default limits |
|---|---|---|
| Rule 26(a)(1) | Initial disclosures, including any insurance agreement that may pay all or part of a judgment | Made without waiting for a request |
| Rule 30 | Depositions: oral questioning of witnesses under oath. Under Rule 30(b)(6) a company can be named and must put forward people to testify for it | Leave of court needed beyond 10 depositions per side; each limited to 1 day of 7 hours unless agreed or ordered |
| Rule 33 | Written interrogatories to another party | No more than 25, including discrete subparts, unless agreed or ordered |
| Rule 34 | Production of documents and electronically stored information (ESI) in a party’s possession, custody or control, and inspection of things and premises | Requests must describe items with reasonable particularity |
| Rule 26(c) | Protective orders against annoyance, embarrassment, oppression, or undue burden or expense | The party asking must show good cause |
Under Rule 26(b)(2)(B), a party need not produce ESI from sources that are not reasonably accessible because of undue burden or cost, but must prove that, and the court can still order it for good cause.
Discovery failures cost money and can decide the case. Rule 37(a)(5) says that if a motion to compel is granted, the court must generally order the party whose conduct made it necessary, its lawyer, or both, to pay the other side’s reasonable expenses, including attorney’s fees.
If a party disobeys a discovery order, Rule 37(b)(2)(A) lets the court treat facts as established, bar the party from supporting claims or defences, strike pleadings, dismiss the action or enter a default judgment.
Rule 37(e) deals with lost electronic data. If ESI that should have been preserved is lost because a party failed to take reasonable steps, and it cannot be restored or replaced, the court may order measures to cure prejudice. Only if it finds intent to deprive the other side of the information can it presume the data was unfavourable, instruct the jury to do so, or dismiss or enter judgment.
For a UK business, that makes document preservation an early task. Once a US claim is threatened, routine deletion of emails and chat logs can become a serious problem.
In Baker Botts LLP v ASARCO LLC (decided 15 June 2015), the US Supreme Court called the American rule the “basic point of reference” for attorney’s fees: “Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” Departures need specific and explicit provisions.
The winner can usually recover some costs, but these are narrow. 28 U.S.C. § 1920 lists what a federal court may tax as costs, such as clerk and marshal fees, transcripts, printing and witness fees, copying and docket fees, and court-appointed experts and interpreters. Lawyers’ fees are not on the list.
| US federal courts | England and Wales | |
|---|---|---|
| Lawyers’ fees | Each side pays its own, unless a statute or contract shifts them | CPR 44.2(2)(a): the general rule is that the unsuccessful party pays the successful party’s costs, though the court may order otherwise |
| If you win | You recover taxable costs under 28 U.S.C. § 1920, not your legal fees | The court may order the loser to pay your costs, subject to its discretion and assessment |
| Effect on claimants | Less downside to suing; LII notes contingency fees are tolerated in the US | A losing claimant usually faces the defendant’s costs |
LII puts it plainly: complying with discovery “is particularly difficult and expensive for institutional defendants because it takes time and incurs legal fees”, and depositions “are particularly expensive”. Put that together with the American rule and a UK firm can spend heavily defending a US claim it goes on to win, and recover little of it.
The example below is illustrative, not a real case. A UK engineering consultancy is sued in a US federal court by a US client after a project overruns. Discovery requests cover five years of email and shared drive files, held on UK systems. The client asks to depose the project director and the consultancy itself under Rule 30(b)(6). US lawyers, e-discovery vendors and travel all run before any argument about who was at fault. If the claim settles, the settlement figure may be driven as much by the cost of carrying on as by the merits.
That is why underwriters treat US exposure differently, and why the way your policy handles defence costs matters more than the headline limit.
UK policies pay defence costs in one of two broad ways, and some switch between them for US claims. Subject to the policy terms:
| Wording | How it works | Effect on a US claim |
|---|---|---|
| Costs in addition to the limit | Defence costs are paid on top of the indemnity limit | The full limit stays available for damages or settlement |
| Costs inclusive | Defence costs count towards the limit | Long discovery can use up a large part of the limit before any settlement |
| Split basis | Costs in addition for most claims, but inclusive for claims brought in the USA or Canada | Often seen where US cover is given at all; check the endorsement |
Also check whether defence costs need the insurer’s consent, whether the excess applies to costs, and whether the limit is aggregate or each and every claim. None of this helps unless the policy’s jurisdiction clause covers US proceedings: see professional indemnity with US jurisdiction and territorial and jurisdiction limits.
A contract clause choosing the English courts is not the same as a policy’s jurisdiction clause. The first is about where your client agrees to sue you; in English proceedings, CPR 44.2 would then apply to costs. The second is about which courts’ claims your insurer will respond to. A third party who hasn’t signed your contract may not be bound by it, and a US court decides for itself whether it can hear a claim. Take US legal advice on your contracts; this page is not legal advice.
If this affects your business, these are the points a broker will ask about:
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Apex Insurance Brokers is an independent insurance broker based in Bristol, established in 2009 and authorised and regulated by the Financial Conduct Authority. We are not tied to one insurer: we work with over 30 markets, including Lloyd’s syndicates through wholesale brokers, and every client has a named broker who handles the placement, mid-term changes, certificates for clients and the renewal.
It is the pre-trial process in which each side gathers evidence from the other. In federal courts, Rules 26 to 37 of the Federal Rules of Civil Procedure let a party obtain non-privileged material relevant to a claim or defence and proportional to the needs of the case, through document and data requests, written interrogatories and depositions of witnesses.
It is the US principle that each litigant pays its own lawyers, win or lose, unless a statute or contract provides otherwise. The Supreme Court restated it in Baker Botts v ASARCO (2015). A winner can usually recover only limited court costs, such as filing fees and transcripts, not legal fees. England and Wales generally make the loser pay.
Only if the policy covers US claims at all, which depends on its jurisdiction clause. If it does, defence costs are usually paid with the insurer’s consent, but many wordings count them inside the limit for US and Canadian claims. Check the endorsement, the excess and whether the limit is aggregate.
A deposition is oral questioning of a witness under oath before trial, recorded for use in the case. Under FRCP Rule 30, each side can take up to 10 without the court’s permission, each lasting up to one day of seven hours unless agreed or ordered. A company can be required to put forward people to testify on its behalf.
If you are a party to US proceedings, Rule 34 reaches documents and electronically stored information in your possession, custody or control, which can include material held on UK systems. How that interacts with UK data protection law needs legal advice. Losing relevant data after a claim is expected can lead to sanctions under Rule 37(e).
Apex arranges professional indemnity for UK firms with US clients. Send us your current wording and we’ll show you how it treats US defence costs. Or call 0117 325 0027.
Start your PI proposal Call 0117 325 0027Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances. Cover is always subject to the insurer’s acceptance and the policy terms, and this page does not guarantee that cover will be available or on what terms.
