We defend the company from issues using our software, arising from a 3rd party's IP claims. We wouldn't defend them if they used our software as part of an effort to hack into the Facebook's user database and stage a massive identity theft scheme.

as in, problems that occur from actually using the software. As opposed to IP claims which is typically over the source code, not the software itself.

For example, if you write a realtime scheduling component that Toyota ends up using in their vehicle software, and someone dies due to a problem with the realtime scheduling, you do not protect Toyota from the resulting lawsuit.