Do your clients fully understand the need for First Dollar Defense?
Below we have outlined the importance of First Dollar Defense to aid you in educating your clients about FDD, also commonly referred to as Dollar One Defense (DOD), is considered an asset to any insured with an Errors and Omissions Professional Liability Policy. First Dollar Defense is an additional coverage added to an E&O policy typically for an additional cost.
Here’s how FDD works:
We all know what a deductible is; it’s the amount the insured must pay before the insurance carrier will pay any expenses. Expenses for an insurance carrier are defined as defense and indemnity costs incurred in the event of a claim. Without FDD coverage added to a policy the insured would have to pay their deductible regardless of the expense to the carrier (indemnity and/or defense costs). With FDD added to an insured’s policy, the insured would only be required to pay their deductible in the even the carrier commits to an indemnity payout.
For example, insured submits a claim to their insurance carrier expecting to pay most, if not all, of their $25K deductible. The suit is complex and lengthy resulting in $250K of defense costs for the carrier before the court dismisses the case ruling the insured was not at fault. The insured has FDD added to their policy along with the $25K deductible. How much of the deductible should the insured pay? NOTHING! With FDD coverage the insured will not have to remit payment of their deductible in this case because there was no indemnity/damage payment made by the insurance carrier. The only costs incurred by the insurance carrier were the costs to defend the insured against allegations.
While carriers do charge more for FDD – It may be worth your while to condsider the difference in price. Keep in mind the fact that even frivolous claims need to be defended.
To find out more about FDD and if your policy offers coverage, please contact Stuckey & Co.
Stuckey & Company
28 Hawk Ridge Circle, Suite 200
Lake St. Louis, MO 63367