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Liability Legal Defense Costs

Course: Insurance Planning
Lesson 2: Insurance Planning

Student Question:

Are the defense fees in a liability case charged against the total liability that an 
insured carries? For example, I have a $100,000 liability policy. I have to pay 
$80,000 to the injured party. Legal fees on my behalf are $50,000.  Am I going to be out of pocket for the $30,000 difference?

Mike


Instructor Response:

Great question, Mike.  The beauty of liability insurance is that any legal fees expended by the insurance company do not reduce your liability coverage.  In your question below, the insured still has $100k in liability coverage after the insurance company spends $50k defending the claim, so the $80,000 liability judgment would be fully covered, and you would have no bill for the legal defense.

 

Let me know if you have any other questions here.

Bruce