First Dollar Defense
Key Takeaway
A policy feature where the insurer begins paying defense costs immediately when a covered claim is reported, without requiring the insured to first satisfy a deductible or retention for defense expenses. The deductible applies only to indemnity payments such as settlements or judgments.
Definition
A policy feature where the insurer begins paying defense costs immediately when a covered claim is reported, without requiring the insured to first satisfy a deductible or retention for defense expenses. The deductible applies only to indemnity payments such as settlements or judgments. This feature provides significant cash flow protection for firms facing complex claims.
Why This Matters for Law Firms
This term defines the boundaries of what your insurance will and will not pay for. Law firms that misunderstand coverage terms risk discovering gaps in protection only after a claim has been filed, when it is too late to remedy the situation. Reviewing these terms with your broker before binding coverage is a critical risk management step.
Example Usage in Context
During a coverage review meeting, the firm administrator might note: "Our policy includes a first dollar defense provision -- let's make sure we understand exactly what that means for our specific practice areas before we sign off on the renewal."
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