(a) Subject to the provisions of subdivision (b) of this section, legal services insurance may provide coverage for the insured's costs of legal representation:

1. (1) in an administrative proceeding or other non-judicial dispute resolution forum; or

2. (2) in litigation where the remedies or relief sought are non-pecuniary in nature.

   (b)

3. (1) The coverage shall not apply to claims involving entitlement to non-employment related benefits, provided either directly or indirectly, from any government, governmental agency or political subdivision pursuant to any entitlement program.

4. (2) The policy shall not provide coverage for an insured that institutes or initiates the proceeding or litigation where the insured is:

   1. (i) a public entity, as that term is defined in section 107(a)(51) of the Insurance Law;
   2. (ii) a quasi-public entity specifically created by statute; or
   3. (iii) a large commercial insured, as that term is defined in section 71.1 of this Title (Regulation 107), except that, in regard to a large commercial insured, the policy may provide coverage for an appellate proceeding.
5. (3) The policy shall not provide for the indemnification of any penalty or other similar monetary amount that the insured may become obligated for as the result of such proceeding.