What are Defense Costs?
Defense Costs, as it applies to Directors and Officers (D&O) insurance, may refer to the expenses incurred by an insured (e.g. a director or officer of a company) in order to defend against allegations of wrong-doing or negligence. This could include legal fees, expert witness fees, court costs, and any other related costs.
Defense Costs in More Detail
Defense Costs are an essential element of D&O insurance, as they provide protection to directors and officers against the financial burden of defending themselves against claims made against them. Such costs can quickly accumulate and become highly expensive, which is why they are often excluded from other types of insurance coverage.
The definition of Defense Costs is relatively straightforward, but it is important to note that the specifics of the coverage can vary from one D&O policy to another. For example, some policies may exclude certain types of defense costs, such as those arising from criminal proceedings, while others may not.
In addition, some policies may provide coverage for defense costs only after the policyholder has exhausted their own financial resources in defending themselves. This is known as a “self-insured retention” or SIR. It is important to be aware of these details when selecting a D&O policy, as they can have a significant impact on the level of protection offered.
In summary, Defense Costs, as it applies to D&O insurance, refers to the expenses incurred by an insured in order to defend against allegations of wrong-doing or negligence. This could include legal fees, expert witness fees, court costs, and any other related costs. The specifics of the coverage can vary from one policy to another, so it is important to read the policy wording carefully and understand the details of the coverage offered.
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