#6 An Insurer’s Duty to Defend is Incredibly Broad

In today’s video, Managing Partner Brian Friel continues his series on the Ten Biggest Mistakes Made By Corporate Insurance Policyholders with number six, not understanding that an insurer’s duty to defend is incredibly broad.  In practice, it is highly unusual for an insurance carrier to acknowledge the broad and all-encompassing nature of this duty. The duty to defend requires an insurance companies to defend the entirety of a lawsuit for the duration of the lawsuit.  What is more, an insurance company is required to defend the entire lawsuit even if only some of the claims are potentially covered.  Just one count that may be potentially covered triggers defense of the entire lawsuit.  Allocation between so called covered and non-covered claims is not permitted.  Moreover, insurance carriers are not permitted to claw back defense costs paid if it is later determined that the claim was not in fact covered.  Insurance coverage for defense costs is often times the most important insurance asset in a corporation’s insurance program.

Duty To Defend Case Examples

Several examples of how insurance carriers try to improperly limit their duty to defend illustrates the problem and the solution.  Here, Brian addresses cases in which insurance companies, despite their initial denials of coverage, had a duty to defend, and, as a result, were responsible for paying one hundred percent of defense costs associated with the claim.  Unfortunately, insurance carriers seldom reach this conclusion on their own.  Knowing the law is a corporate policyholder’s best defense to improper claim denials. 

Watch the video to learn more about the duty to defend and why misunderstanding that duty is one of the Ten Biggest Mistakes Made by Corporate Insurance Policyholders.