01 / The meaning
What it means.
These expenses are distinct from compensation payable to another party. A business may dispute an allegation successfully and still incur substantial legal bills. Liability policies can address defence in different ways, including who appoints the lawyers, whether consent is required and whether costs reduce the amount available for settlement. The policy’s wording determines the arrangement.
Also distinguish the business’s own defence expenses from costs awarded to an opponent, an internal investigation and the cost of bringing an unrelated lawsuit. An allegation can involve insured and uninsured issues together, requiring an allocation of expenses. Keep the claim letter and response deadline intact, notify promptly and discuss legal appointments before committing to a substantial engagement.
02 / Put it in context
A practical example.
Hypothetical example: An engineer receives a demand alleging that an error in a report delayed a project. Legal advice is needed before the allegations can be assessed. The policy might address approved defence expenses, but the demand itself does not establish liability or insurance cover.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Check whether defence expenses sit inside or outside the liability limit.
- Confirm who selects advisers and approves their fees.
- Ask how mixed insured and uninsured allegations are handled.
04 / Start a useful conversation
A question for your broker.
Would defence spending reduce the funds available to settle this claim?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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