Indemnity
Key Takeaway
The payment made by an insurer to satisfy a covered claim, typically through a settlement or judgment. Indemnity payments are distinguished from defense costs, which are the expenses of defending the claim.
Definition
The payment made by an insurer to satisfy a covered claim, typically through a settlement or judgment. Indemnity payments are distinguished from defense costs, which are the expenses of defending the claim. In policies with defense within limits, both indemnity and defense share the same pool of available coverage.
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 indemnity 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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