What is the Duty to Defend Under an Insurance Policy?

When you get insurance, that insurance is sometimes there to insulate or protect or indemnify you from liability or lawsuits. Everything from liability insurance for your property, to errors and omissions to insurance protecting you from things you do in your official capacity in your business are all there to protect you in the event your business is sued by an outside third party.

But “protection from being sued” isn’t just paying what you might end up owing to someone else. It also includes providing an attorney to defend you at no cost to you.

Is it Covered?

But sometimes you are sued for something that the insurance company doesn’t think is covered and you do feel it should be covered. This is a threshold question; the insurance company has to know when the case starts, whether or not they have to provide an attorney for you and defend you or they don’t.

An insurance company can refuse to defend you but only under certain circumstances.

To see if a lawsuit against you is or is not covered, and thus, whether or not there actually is or is not a duty to defend you, the insurance company must look to the allegations of the complaint filed against you. To put it another way, if, potentially, the lawsuit against you is covered, based on the language and allegations in the lawsuit, the insurance company has to defend you — they don’t have to know with 100% certainty that the claim is covered.

Note that it is what the complaint filed against you says that matters, not what the insurance company’s own beliefs may be or what the insurance company’s own investigations may reveal.

Defending is Not Indemnifying You

Note that the duty to hire an attorney for you and to defend you is broader than the duty to actually pay you (or the party suing you) under the policy.

In other words, it can happen that an insurance company hires a lawyer, defends you in court, but then refuses to pay what you now owe to the other side under a settlement or judgment because the claim is excluded under the policy. So, just because the insurance company is defending you, doesn’t mean it has agreed to pay the claim against you if that claim is successful.

If You’re the One Suing

The duty to defend is also important to the party suing.

If you are suing a business or person, and you want to ensure that the person being sued has insurance coverage so that you get paid if you win or settle, you need to be mindful of the policy and craft your lawsuit with language that makes it more likely that the claim is covered.

In that way, you’re helping yourself, as you are helping ensure you can collect on any judgement, but you’re also helping the party or business you’re suing by helping it ensure that it gets the benefit of its own insurance policy.

Is there a lawsuit against your business that you need help with? Call our West Palm Beach commercial litigation attorneys at Pike & Lustig to help you.

Source:

totalcsr.com/insurance-agency-blog/what-is-the-duty-to-defend-in-insurance/