What triggers duty to defend?

An insurer’s duty to defend is triggered when a claim is filed against an insured which alleges acts or omissions that fall within the coverage set out in the insured’s policy. The mere possibility that a claim covered under the policy may succeed is sufficient to impose the duty to defend.

What is the difference between the duty to defend and the duty to indemnify?

The duty to defend is a term that describes an insurer’s obligation to provide an insured with a defense to claims made under an insurance policy. The duty to indemnify describes an insurer’s obligation to pay a claim for loss or damage against an insured. Both are typically included in a policy’s insuring agreement.

Are defense costs included in general liability?

Most General Liability policies include defense costs outside the limit of liability. This means that any costs incurred by the insurance company while defending a claim against the insured does not reduce the limit maintained.

Why is duty defend important?

The duty to defend acts as an obligation on an insurer for the obvious reason that it is invoked by its insured to shield the insured from the significant costs associated with defending an action.

What is duty to defend on an insurance policy?

The term “duty-to-defend” essentially means that in the event a claim is made against an insured for an alleged wrongful act, the insurance carrier has the right and duty-to-defend the claim—even if the claim is groundless, false, or fraudulent.

How do courts determine if an insurer has a duty to defend?

An insurer has a duty to defend if the face of the complaint alleges something covered and does not allege an exclusion to coverage. Extrinsic facts not alleged in the complaint do not affect the insurer’s duty to defend in these jurisdictions.

What is a duty to defend policy?

Is defend the same as indemnify?

The differences between the duty to indemnify and to defend, while nuanced, are critically important. The obligation to indemnify arises once a judgment has been entered, whereas the obligation to defend is triggered as soon as a claim is filed against the indemnitee.

What is a non duty to defend policy?

A non-duty to defend or “reimbursement” policy form is the other side of the coin. It obligates the insured to provide its own defense, subject to the consent of the insurer. No matter the policy form, counsel must always abide by the insurer’s billing practices.

Are defense costs included in insurance limits?

Fortunately, the majority of insurance policies, such as Commercial General Liability (CGL) policies, provide that defense costs are “in addition” to the policy limits. This means that if you have $1,000,000.00 policy limits, your costs of defense will reduce that limit throughout the course of litigation.

What is a hammer clause?

A hammer clause is an insurance policy clause that allows an insurer to compel the insured to settle a claim. A hammer clause is also known as a blackmail clause, settlement cap provision, or consent to settlement provision.

What does it mean to defend and indemnify?

The duty to defend triggers an obligation to act when a claim, which is covered by the indemnification provision in the contract, is brought by a party against the indemnitee. Most states consider the duty to indemnify and to defend to be distinct obligations. …

What does the term duty to defend mean in insurance?

Definition. Duty To Defend — a term used to describe an insurer’s obligation to provide an insured with defense to claims made under a liability insurance policy. As a general rule, an insured need only establish that there is potential for coverage under a policy to give rise to the insurer’s duty to defend.

What is the insurance company’s duty to defend in the CGL?

The insurance company’s duty to defend in the CGL policy, and the resulting payment of legal expenses, is triggered when covered allegations are contained in a suit brought against an insured.

What is a commercial general liability policy?

The commercial general liability (CGL) policy obligates an insurer to defend an insured against any suit seeking damages because of bodily injury, property damage, or personal and advertising injury.

Should design professionals have a duty to defend clause in contracts?

One of the most crucial risks for design professionals is deciding to agree to a “duty to defend” clause in a professional services contract. Though the clause may not be invoked often, when it is, the ramifications—namely legal fees and insurance denial—can be severe.