Defense cost is primarily all the expenses and fee charges incurred defending against a court case. The cost or expenses include court fees, hiring a lawyer, filing legal paperwork charges, gathering facts expenses and all the other related costs. In insurance many liability insurance coverage policies include these expenses in the coverage.
The liability insurance policy may offer coverage for defence cost in any one of two ways. It may include defence cost as part of liability or as a separate limit.
For instance, imagine that policy X and Y offer liability limit of INR 25 lakhs but policy Y has extra provision that includes defence coverage separately. Following a court case the court orders the policyholder to pay INR 25 lakhs in damages and INR 5 lakhs in defence cost. In such a scenario, the policy X will only cover INR 25 lakhs and will leave the defense cost payment responsibility to the policyholder. On the other hand policy Y will cover INR 25 lakhs in damages and also compensate for the court case cost of the opposite party up to the coverage limits mentioned in the policy schedule.