Victorian Opposition Leader John Pesutto will ask the Liberal Party to cover his legal costs through a plan to provide indemnity insurance to MPs.
In a special meeting on Thursday night, Liberal MPs thrashed out how Mr Pesutto and his senior leadership team would finance their legal bills following a new defamation threat.
UK anti-trans rights activist Kellie-Jay Keen this week issued defamation concerns notices to Mr Pesutto, deputy leader David Southwick, upper house leader Georgie Crozier and deputy upper house leader Matt Bach.
The notices are the first step in potentially launching defamation proceedings.
Mr Pesutto said the parliamentary party agreed for state Liberal administrators to explore ways to financially cover himself and his colleagues against the costly threats.
"We will work with the secretary of the organisational side of the party to look at how the cover that exists for office holders within the senior echelons can be expanded in some way," he told reporters.
He stressed the party would not be asking taxpayers to foot the bill.
Some Liberal MPs privately expressed angst about the prospect of the party coming to the aid of leaders amid simmering internal tension, with Mr Pesutto admitting discussions were "robust".
Mr Pesutto said the request would be put to the party's administrative committee.
Ms Keen, who also goes by the pseudonym Posie Parker, headlined a Melbourne anti-trans rights rally in March that was gatecrashed by a group of masked men who performed Nazi salutes.
She was joined at the rally by Victorian MP Moira Deeming, whose involvement led to her suspension and later expulsion from the parliamentary Liberal Party.
Ms Deeming has since issued a string of defamation concerns notices to Mr Pesutto, who moved the initial motion to expel her.
Ms Keen's notice claims the entire Liberal leadership team defamed her in the motion by alleging she was "publicly associated with far right-wing extremist groups including neo-Nazi activists", which she denies.
She gave the group 28 days to apologise and pay compensation for making "grossly misconceived, wilfully vexatious and wretchedly false" claims, or face court action.
In a statement on Thursday night, Ms Keen said it was not the intention of her notice for rank-and-file party members to foot their leaders' legal bills.
It comes as Mr Bach, a factional ally of Mr Pesutto, stepped down from shadow cabinet during the meeting after accepting a job in the UK as an assistant headmaster and teacher.
The former opposition education and child protection spokesman said he would quit parliament at the end of the year or in early 2024.
He has been replaced as the party's upper house deputy leader by first-term MP Evan Mulholland.
Mr Mulholland said it was a great honour to step into the role and represent millennial voters.
"If you're an outer-suburban, mid-30s Victorian with a mortgage and a couple of kids, I'm in your corner and and you've got a seat at the table," he told reporters.
