Insurance Defense and Coverage
Policy Anatomy
Defense within limits is the structural feature that makes a policy erode. Under a costs-inclusive form, defense fees and expenses are paid from the same limit as damages, in contrast to a costs-in-addition policy where defense is paid outside the limit.
The declarations page or the insuring agreement will state which structure applies, and the distinction is often expressed as costs inclusive versus costs in addition.
Alternative Names:
DWL, Costs Inclusive Policy
Why it Matters?
This single provision determines the true value of a policy. A $1 million costs-inclusive policy in a case requiring $400,000 in defense is a $600,000 indemnity policy, and reserve setting, mediation strategy, and excess notice all need to reflect that. It is the first thing to verify when evaluating a policy-limits demand.
Frequently Confused with
Related terms
Frequently asked questions
How can I tell whether a policy is defense within limits?
Do supplementary payments erode the limit?
