What Does Defense of Suit Against Insured Mean?
Defense of suit against insured refers to a provision in liability insurance policies promising that the insurer would pay for the costs of a legal defense for the insured, even if a lawsuit does not have a legal foundation. Defense costs coverage generally include lawyer fees and preparation of the defense, such as hiring experts, launching an investigation, and court costs.
Insuranceopedia Explains Defense of Suit Against Insured
In general, liability insurance contracts indicate the insurer has a duty to indemnify and defend. In simpler terms, the former refers to covering damages upon judgement against the insured, and the latter refers to paying for defense costs. Once a third party files a lawsuit against the insured, it would trigger the duty to defend; however, in cases wherein the insurer determines that the liability in the lawsuit would not be covered by the policy, they could refuse to fulfill their duty to defend. In such a case, a policyholder would have to pay for defense costs, which can become very expensive, out of pocket. This is where a defense of suit against insured clause would benefit a policyholder as this provision fortifies the insurer's duty to defend across a larger range of lawsuits. Even if the policy might not cover the liability in question or the lawsuit seems to be without foundation, the insurer would pay for the defense costs.