In the context of insurance policies, defense costs refer to the expenses incurred by the insurer to defend against a claim made by a policyholder. This typically includes legal fees, court costs, and any other related expenses necessary for providing a robust defense against the claim. When an insurer is obligated to defend its insured, it is responsible not only for handling the defense but also for covering the associated costs, which can sometimes accumulate significantly over the course of litigation.
Focusing on the other options helps clarify why they do not represent the primary costs covered in addition to defense costs. Settlement costs refer to funds paid to resolve a claim without going to trial, which, while related, are typically categorized separately from defense costs. Administrative costs cover the overheads related to running the insurance company itself and are not directly linked to claims defense. Lastly, claim filing fees are often minimal and would typically be considered part of the administrative process rather than a direct cost of defense. Therefore, recognizing defense costs as a crucial component of what an insurer pays when handling a claim provides insight into the broader responsibilities insurers bear in protecting their policyholders.