First Dollar Defense (FDD): What is it?
Suppose your law firm faces a malpractice claim. Under some professional liability insurance policies for law firms, in the event of a covered claim, you could be financially responsible up to your insurance policy’s deductible amount for defense costs.
However, if your professional liability insurance coverage includes First Dollar Defense (FDD), your firm may pay less up-front expenses. Let’s explore how FDD works and why it’s worth considering for your firm.
What is First Dollar Defense?
First Dollar Defense (also known as a “Loss Only Deductible”) is a specific professional liability coverage feature that is either in a policy form or added by endorsement and may be subject to certain qualifications. FDD occurs when an insurer pays the “first dollar” to defend a firm in a claim. If no indemnity is paid on a claim, an insured does not pay a deductible.
- If an insurer spends $100K defending a claim and wins at trial, no deductible is owed.
- If a claim is made but ultimately dismissed with no indemnity payment, no deductible is owed.
- If a claim is made and a settlement is paid, a deductible is owed
- If a claim goes to trial and a judgment is entered against an insured a deductible is owed.
What is a Loss and Defense Deductible?
This is a lawyers professional liability policy (LPL) without FDD or loss only deductible. Most of the LPL policies in the marketplace are typically written this way (with the exception of NY and a few other states).
With a Loss and Defense Deductible an insured is responsible for paying a deductible when a claim is reported to an insurer to cover the initial expenses. Once a deductible is paid, an insurer will pay for defense and indemnity up to the policy limit.
For example...if a firm has:
- Policy Limits: $1M per claim / $1M aggregate
- Deductible: $5,000 per claim (loss and defense)
If a claim is reported, the insured is responsible for the first $5K while the insurer is responsible for costs that exceed $5K up to $1M (policy limit).
Contact Aon Attorneys Advantage For A Free Quote Today
Regardless of your practice area, the jurisdiction you practice law, or legal experience, malpractice defense costs add up. With an FDD endorsement, your firm can not only save money, but you’ll be provided with peace of mind.
In addition to FDD coverage options, our professional liability program for solo practitioners and small law firms offers the following benefits:
- Robust risk management to help reduce claim exposures.
- Broad professional liability coverage.
- 24-hour, responsive claim support.
- Easy online quote process.
Contact us today to speak with an Aon Attorneys Advantage advisor about your insurance needs.
This information is provided for general informational purposes only and is not intended to provide individualized advice. All descriptions, summaries, or highlights of coverage are for general informational purposes only and do not amend, alter, or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.
Aon Affinity is the brand name for the brokerage and program administration operations of Affinity Insurance Services, Inc. a licensed producer in all states (TX 13695); (AR 100106022); in CA & MN, AIS Affinity Insurance Agency, Inc. (CA 0795465); in OK, AIS Affinity Insurance Services Inc.; in CA, Aon Affinity Insurance Services, Inc., (CA 0G94493), Aon Direct Insurance Administrators and Berkely Insurance Agency and in NY, AIS Affinity Insurance Agency.