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What is FDD: First Dollar Defense on Professional Liability / Errors and Omissions Insurance

First Dollar Defense (FDD), is an additional insurance coverage option that may be purchased onto a company’s professional liability insurance policy. You may also hear First Dollar Defense called a Loss Only Deductible or Indemnity Only Deductible.

When a company or individual carries first-dollar defense coverage if a claim arises the insurance carrier pays the “first dollar” to defend the company, and in turn, the company only pays their deductible if indemnity is paid on the claim.

First Dollar Defense speaks to a specific coverage option offered as additional support if a claim arises. With first dollar defense, if a claim arises where only defense costs are incurred and no indemnity is paid, the insured will not be responsible for their deductible amount, as the carrier covers the costs to defend. In turn, if a claim results in a loss payout, the insured will be responsible for their deductible amount.  

First Dollar Defense coverage means the deductible only applies to the damages that occurred within a claim and no deductible is required for defense expenses.

For example, let’s say your company is named in a claim but it is found that your company is not at fault and the claim was nothing of merit. In this case, only defense costs have been incurred, therefore, your company would not be responsible for the payment of your deductible while your insurance carrier paid to defend you.