Your E&O policy is designed to protect you from risk, and in many cases, that means ensuring you have the proper legal assistance to defend against claims and mitigate the potential for claims filed against you. As you think about your E&O policy, it’s important to understand who exactly provides you with legal assistance and the instances in which you may be entitled to legal defense.
Duty to Defend
When you invest in an E&O policy to help protect your career and business from risks, the E&O policy is likely to include a “duty to defend” clause. This clause obligates the insurer to defend the insured in a lawsuit, regardless of the lawsuit’s merit. In other words, even if claims are unfounded, your E&O policy helps by providing you with legal assistance to navigate the claims against you.
The duty to defend clause comes into place only if there is a covered event; this means you must look through your policy language for coverage definitions, endorsements, and limits to ensure that a claim might be eligible for defense covered by your E&O policy.
You should note that once policy limits have been used up to pay judgments and settlements, there is no further duty to defend; defense will no longer be available through the insurance company once this has occurred.
Does My Insurance Company Provide Legal Assistance?
For most E&O insurance policies, the insurance company has something called a panel counsel. These are attorneys appointed by the insurance company to defend the insureds in the event of a covered event leading to a claim or lawsuit. The attorneys are selected based on their area of expertise, their state and jurisdiction of licensing, and their reputation within the industry. A reputable and specialized insurance company will usually seek out the best panel counsel possible to ensure the most favorable outcomes for claims.
It is important to note that even though the attorneys on the panel counsel are appointed by the insurance company, their role is to represent the insured, and not the insurance company. This means that their duty to defend the insured is not diminished or impacted in any way by their relationship with the appointing insurance company.
Additionally, in some cases, an insurance company will include an endorsement where you, as the insured, can choose your own legal counsel. However, the insurance company will typically review the selection to ensure that your chosen legal counsel is appropriate for the jurisdiction and the type of claim; doing this helps protect you from unqualified representation.
Do I Have to Pay for Legal Assistance Through My E&O Policy?
Many E&O policies will cover defense costs as long as the claim is covered under your policy’s duty to defend clause. However, you might need to pay applicable legal fees that are within the deductible of your policy, unless you have an endorsement that excludes you from this, such as a First Dollar Defense endorsement.1
Defense costs will usually erode the limits of your E&O policy, meaning that the money used for the defense costs is taken from your policy limits, something that leaves you with less coverage for a potential claims payout.
If you have an Expense Outside of the Limits endorsement2 on your E&O policy, your defense costs are not subtracted from the total policy limit. You will need to check your E&O policy and any coverage limits or endorsements to understand exactly how much you might be required to pay in a claim defense situation.
Pearl Insurance is committed to helping you manage your risk. Our carrier, AXA XL, rated A+ (Superior) on AM Best, has been partnering with Pearl for more than 20 years, providing you with the best E&O protection. If you have questions about E&O insurance or the claims process, schedule a time to talk to our experts.
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1“First Dollar Defense Coverage.” International Risk Management Institute, INC, 2026.
2“Understanding Defense Outside the Limits vs Within Limits.” Insurance Training Center, 2025.
