What is “Duty to Defend”?

Did you know that your insurance carrier is typically required to defend you if someone makes a claim that is covered by the insurance policy? It is important to understand what the insurance carrier’s “duty to defend” actually is. Here, we want to define what this means and examine how this would apply in various situations.

Understanding the Insurance Carrier’s Duty to Defend

When you have an insurance policy, it typically means that the insurance carrier is required to defend you so long as a valid claim is made against the policy. When there is a duty to defend in place, this means that any report made against you requires:

• The insurance carrier to appoint and pay for legal defense for the claim against you, unless you choose to use your own counsel.
• Reimburse your private defense attorney if you have chosen not to use the insurance carrier’s legal team (it is important to note that the right to choose your own counsel is wholly dependent on the language of the policy and state law).

This duty to defend typically arises as soon as a legitimate claim is made against the policyholder and will continue until the claim has been resolved.

The insurance carrier will not have a duty to defend unless the contract specifically requires a defense, but the reality is that courts have generally held that so long as the claim is in any way within the scope of protection afforded by the insurance policy, the insurance carrier has a duty to defend the policyholder.

Don’t Confuse This With Indemnity

Individuals often confuse a duty to defend with “indemnity,” but these two are not the same. The term “indemnify” typically means that the insurance carrier has an obligation to pay for certain liabilities or losses, but this obligation does not occur until the end of a claim where a judgment has been entered.

For example, suppose an individual pays monthly premiums to an auto insurance carrier. Now let us suppose that this individual causes a vehicle accident, and a claim is filed against their insurance carrier by the crash victim for injuries and other damages. At this point, indemnity does not apply, but a duty to defend will apply. So long as the claim is legitimate, the insurance carrier has a duty to defend their policyholder.

If the claim is valid and successful, indemnity will apply. This means that the insurance carrier will have to compensate the crash victim for their legal liabilities or losses. During the course of defending the claim, the insurance carrier could dispute how much compensation they have to pay or even deny the claim altogether if they do not think it is valid. The other party could file a civil personal injury lawsuit against the driver and the insurance carrier, in which case the insurance carrier still has a duty to defend the valid claim. If a personal injury jury rules in favor of the crash victim, indemnity will apply, and the insurance carrier will have to pay the claim.