Glossary of Terms: First Dollar Defense

What Is First Dollar Defense?

For many professionals, like engineers and architects, liability insurance is a must if they want to continue in their respective businesses. These policies include many new terms that are not found in general liability insurance policies. One of these terms is first dollar defense. This type of coverage is important for a professional liability insurance policy, especially if the insured is stuck with a the trial lasts for a long period of time.

This is a part of the policy which states that the insurance company will cover the cost of defense if there is an indemnity payment. If there is a payout, then there is no deductible that needs to be paid by the insured. The insurance company takes on the indemnity payment and defense costs.

For example is there is a settlement of $100,000 in damages, the person who has this attached to their professional liability insurance policy will not have to pay any of their deductible. The insurance company takes care of all defense expenses.

In the event that the policy holder has decided to waive the rights to first dollar defense, then they will be required to pay their deductible and it will be applied to both the claim and the defense of the claim. This deductible payment is for the amount set in the liability policy.

Having this is an extra cost that is added to the premium of the insurance policy. However, it is added protection against any type of claim that can be levied against an engineer, architect, or design firm. It does not matter whether or not the claim is real or frivolous. All these claims must be defended. With the first dollar defense policy, the professional is not going to need to pay their deductible in the event of a payout, which may turn out to be very handy.