Assumption of defense: Overview, definition, and example
What is assumption of defense?
Assumption of defense refers to the act of taking over the responsibility of defending a party in a legal matter, such as a lawsuit or claim. Typically, one party, often an insurer, a third-party indemnitor, or a co-defendant, agrees to assume the defense on behalf of another party. This means they are not only responsible for providing legal representation but also for bearing the associated costs, such as attorney fees, court costs, and other legal expenses. The assumption of defense often occurs through an agreement or clause in a contract, particularly in indemnity or insurance agreements, where one party agrees to defend the other party in the event of a legal claim.
For example, an insurance company may assume the defense of a policyholder who is sued by a third party, covering legal fees and providing attorneys.
Why is assumption of defense important?
Assumption of defense is important because it helps allocate legal responsibilities and costs between the parties involved. It ensures that the party being defended does not bear the financial burden or the stress of managing the legal defense themselves, particularly in complex or costly lawsuits. For businesses, assuming the defense of another party through indemnification or insurance helps manage risk by transferring the burden of legal costs to the responsible party. It also provides legal expertise and representation, which may be especially valuable when dealing with complicated legal issues.
For the party assuming the defense, this provision offers the opportunity to control the legal strategy and ensure that the defense aligns with their interests, particularly if they are the ones ultimately responsible for the outcome of the case.
Understanding assumption of defense through an example
Imagine a company that is being sued for a product defect by a consumer. The company’s supplier, who provided the materials used in the product, has agreed to assume the defense of the lawsuit under the terms of their supply agreement. This means that the supplier will cover the costs of the legal defense, hire attorneys, and manage the litigation process, while the company being sued is relieved of the financial and operational burden of defending the case.
In another example, a business enters into a contract with a contractor that includes an indemnity clause. If the contractor is sued for damages caused by their work, the business may assume the contractor’s defense as part of the indemnification agreement, taking on the responsibility for legal fees and the defense strategy.
An example of an assumption of defense clause
Here’s how an assumption of defense clause might appear in a contract:
“The Indemnitor agrees to assume the defense of the Indemnitee in any action, suit, or claim arising from the Indemnitor’s actions or omissions. The Indemnitor shall bear all legal fees, court costs, and expenses associated with such defense, and shall have the right to select legal counsel of its choice. The Indemnitor’s assumption of defense shall include the authority to settle the claim, subject to the Indemnitee’s approval.”
Conclusion
Assumption of defense is a key legal concept that helps distribute the responsibility and financial burden of defending against lawsuits or claims. By allowing one party to take over the defense of another, this provision ensures that both parties can focus on their strengths while managing legal risks effectively. It is commonly used in contracts, indemnity agreements, and insurance policies to clarify who is responsible for legal defense, saving time, money, and resources for the party being defended.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.