What is First Dollar Defense?

First Dollar Defense (FDD) is probably not a coverage option or term you've heard of before when it comes to Business Insurance, but it's one that you should definitely be aware of. Especially if you are a design professional, such as an Engineer or Architect (see Insurance for Engineers). First Dollar Defense is actually a coverage option that can be added to your Professional Liability (E&O) policy for an additional premium. You might also hear this coverage called Dollar One Defense. 
 
Typically the insured must pay a deductible for the insurance company to start defending them (this is referred to as Straight Deductible). With First Dollar Defense, the insured does not have to pay a deductible unless the insurance company commits to damages/indemnity payout.

So, here's an example of how this coverage option would work:

• Insured selects First Dollar Defense as a coverage option on their policy
• Insured is named in a lawsuit for a structural defect on a building
• Since they have First Dollar Defense, insured does not have to pay a deductible to initiate coverage
• Insurance company defends insured
• Court decision favors insured and there is no indemnity payout
• Insured does not have to pay deductible

Conversely, if the court finds the insured at fault, and damages are paid, the insured would pay a deductible. 

If you have any questions about First Dollar Defense, or any other Business Insurance question, please let me know. We are always happy to help. 

Jason Matison
Commercial Insurance Agent
Austin, Texas