Whether Defense Costs Erode the Retention
What this clause says
Claim Expenses incurred in the investigation and defense of any Claim shall be applied against and reduce the Self-Insured Retention.
What this actually means
Separate from whether defense erodes the policy limit, there is the question of whether defense spend counts toward satisfying your retention. If it does, money you spend on lawyers moves you toward the point where the insurer picks up. If it does not, you pay defense costs and still owe the full retention before the insurer participates.
What it means for an operator
This term decides what a defensible claim actually costs you. Senior care produces a steady stream of claims that are ultimately defended successfully and pay nothing. If defense does not erode the retention, every one of those costs you real money with no insurance participation at all, and the program you are paying for never engages. Operators frequently discover this only after a year of small defended claims has quietly cost more than the premium. When comparing two quotes with the same retention, this term can make one materially more expensive than the other, and it will not show up in the premium comparison.
How this evaluates
The Policy Checker applies these rules in order; the first match wins.
sir eroded by defense is set -> Compliant: Defense costs counting toward the retention means successfully defended claims still move you toward insurer participation rather than being a pure operating expense. sir eroded by defense is not set -> Borderline: If defense does not erode the retention, every successfully defended claim is fully out of pocket and the insurance never engages. Price two otherwise identical quotes on this term, not just on premium.
See this in your policy
Check this term against your own program.
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Common questions about this clause
- Do defense costs erode my self-insured retention?
- How do we choose the right retention on a senior care program?
- How does a senior care operator lower its workers compensation experience modifier?
- Should we use a third-party administrator for our senior care claims?
- What is a loss portfolio transfer and would one help us?