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insurance policiesWhen companies and individuals purchase insurance they are typically concerned not only with protecting themselves from any liabilities, but in assuring that they are afforded a vigorous defense should a claim be brought against them. This right to be provided a defense is called “advancement” and requires that insurers (or other parties such as employers) fund the defense of the insured through the life of the litigation. That is in contrast to “indemnification,” which only requires payment upon the resolution of the underlying dispute.

Advancement is available under a wider range of circumstances and is considered a far broader right than indemnification, as it often requires that an insurer provide a defense in situations where an unfavorable result at trial would negate a claim for indemnification. Accordingly, the quality of the defense for the underlying claim will influence both the findings on liability for the claim and whether the insured can qualify for indemnification. Therefore, advancement is often the nail that will determine whether the kingdom is lost.

While an insured may ultimately have an obligation to reimburse defense costs if they are not entitled to indemnification, often if the underlying matter has gone poorly the insured may not have the funds available to cover the underlying judgment and reimbursement of defense costs. Insurance is intended to shift the risk of collection to the insurer in these circumstances. In light of this, at times insurers may be incentivized to deny advancement claims in the hope that a decision in the underlying matter will obviate their need to pay at all.

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