In the context of a CGL policy, how are defense costs typically handled?

Defense costs under a Commercial General Liability (CGL) policy are typically paid as soon as a lawsuit is filed against the insured. This is a crucial aspect of liability insurance, as it helps to ensure that the insured has immediate support to navigate the legal process without a delay that could adversely affect their case.

When a claim is made, the insurer has an obligation to provide a defense for the insured against allegations covered by the policy, even if those allegations turn out to be groundless or false. By covering defense costs immediately, the insurer supports the insured in managing legal challenges effectively and helps mitigate potential damages that could escalate if defense resources are not mobilized promptly.

This immediate response contrasts with options that suggest defense costs are managed after a court ruling or at the end of a lawsuit, which would not provide timely legal assistance necessary for navigating the legal system. The option regarding defense costs being deducted from policy limits is also incorrect concerning standard CGL coverage, as many policies provide for defense costs to be covered in addition to the policy limits, allowing for more comprehensive protection for the insured.