Attorney at Law

What are Defense Costs?

Defense costs include the costs of legal fees, court filing fees, investigations, legal paperwork, and any other expenses associated with defending against a lawsuit. Some insurance companies cover these expenses under certain liability policies, but the amount of coverage of defense costs depends on the insurance policy type. Liability insurance may protect you financially from legal expenses only, while others may also provide coverage for damages awarded to a plaintiff.

Key Takeaways

  • Defense fees refer to all the expenses associated with defending a lawsuit.
  • Such defense costs can include the expenses of hiring an attorney, various court fees, and the cost of investigations and gathering evidence.
  • It is important to determine whether your insurance policy has defense inside the limits or defense outside the limits.

Common Defense Costs

Defense costs can be defined as any reasonable or necessary fees and expenses incurred as a result of a lawsuit or appeal of a claim. These costs are typically made up of the following:

  • Lawyer fees
  • Costs of filing court documents
  • Costs of expert witnesses
  • Investigation costs
  • Paralegal and administrative expenses

Defense Outside the Limit vs. Defense Inside the Limit

Liability insurance uses two main approaches to determine defense cost coverage: outside the limits and inside the limits. 

Outside the limit means that any costs that the insurance company incurs in defending a claim against the insured do not reduce the liability limit. In other words, there are separate limits available for legal defense costs and court-awarded damages that may need to be paid to an opposing party. Therefore, defense costs outside the limits such as damages or settlements will not affect your liability insurance limits. For example, if you have a $500,000 general liability limit and your insurance company ends up paying $50,000 to file a claim, you will still have your $500,000 liability limit remaining to pay for any other defense costs.

On the other hand, defense costs inside the limit of liability means that any money spent on defense costs will reduce the limit of liability. Considering the same example from above, assume you have a general liability limit of $500,000, but your insurance company has to pay $50,000 for defense costs. In insurance with defense costs inside the limit, you will have $450,000 left to pay for other legal expenses.

Bottom Line

The details of your liability insurance policy must always be carefully reviewed, since doing so can mean the difference between full coverage and spending thousands of dollars out of pocket.

Although outside the limits insurance tends to be pricier than inside the limits, it is usually ideal since it allows the insurance company to protect you from further expenses such as the judgment or settlement. In situations where insurance with defense costs outside the limit is not available, you may want to consider raising your liability limit.

Speak to a professional before making any serious decisions regarding liability insurance. Expert insurance lawyers can advise you about the right type of liability insurance for your needs and circumstances.

Ask a Lawyer

Ask your own question and get advice from expert attorneys
Ask Question

Featured Criminal Defense Lawyers

D&O Law Group, LLC

15 years in practice
Criminal Defense, Divorce & Family Law, DUI Law, Personal Injury
View Profile

Benjamin Levine Law, LLC

11 years in practice
Auto Accidents, Criminal Defense, Personal Injury
View Profile

Montes de Oca Law Group LLC

15 years in practice
Bankruptcy, Criminal Defense, Personal Injury
View Profile

D&O Law Group, LLC

15 years in practice
Criminal Defense, Divorce & Family Law, DUI Law, Personal Injury
View Profile

Law Offices of Ricardo J. Mauro, P.C.

29 years in practice
Auto Accidents, Personal Injury
View Profile

Law Offices of Robert F. Julian

47 years in practice
Auto Accidents, Construction Injury, Personal Injury, Wrongful Death
View Profile


Are you looking for an attorney? Do you have questions about a legal case you are facing? Contact us now and we will put you in touch with a lawyer for free.

Related Posts

Daisy RogozinskyMarch 27, 2022
Lia Kopin-GreenJuly 13, 2022
Daisy RogozinskyJuly 21, 2022
Bankruptcy Fraud
Lia Kopin-GreenDecember 6, 2023
Attorney At Law is changing how clients connect with lawyers. By providing an innovative platform to lawyers who want to expand their practice’s reach, AAL is bringing law practices into the future.
6142 Innovation Way
Carlsbad, California 92009
Some of the content of this website may be considered attorney advertising under the rules of certain jurisdictions. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.
crossmenuchevron-upchevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram