Generally, an insurer's duty to defend flows from the facts alleged in the lawsuit. When the pleadings alleged damage or injury that is covered by the policy, the insurance carrier has a duty to defend, regardless of whether the insured is ultimately liable and/or the insurer has a duty to indemnify. Conversely, when the pleadings allege facts or events not covered by the policy, and the insurer has no knowledge of facts to the contrary, the carrier is not obligated to defend – but this is a question of law.
Courts generally apply the “eight corners" test to decide if the carrier has a duty to defend, which may also be called the “comparison test." The policy and the complaint are compared side-by-side to determine whether the allegations or events in the complaint are covered by or excluded in the policy.
Insurance policy language is a question of law, and if the courts decide the policy language is clear and unambiguous, the court must enforce the policy as written – whether for or against the insured. However, ambiguous policy language is typically found in favor of the insured. Ambiguity can create a duty to defend.
Court finding are consistent regarding the insurance carrier's duty to defend – every state holds that the insurer's duty to defend is greater than its duty to indemnify. Following are common examples from around the country of court rulings regarding an insurer's duty to defend:
- It is well established that the insurer's duty to defend is more extensive than its duty to pay.
- An insurer's duty to defend and its duty to indemnify are separate and independent obligations.
- An insurer's duty to defend and its obligation to indemnify are separate and distinct contractual elements.
- The duty to defend arises when the original complaint alleges a state of facts within the coverage of the policy.
- The presence of other allegations in the complaint which are not within policy coverage does not relieve [the insurance carrier] of its duty to defend.
- [T]he insurer would have the duty to defend a suit alleging facts that, if true, would give rise to coverage, even though there would ultimately be no obligation to indemnify if the facts giving rise to coverage were not established. Thus, pursuant to such policy language, the obligation to defend a suit may be broader than the obligation to indemnify.
- [W]hen an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the allegations of the underlying complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation
- [T]he insurer must defend even if the allegations in the complaint are factually incorrect or meritless. In fact, when the actual facts are inconsistent with the allegations in the complaint, the allegations in the complaint control in determining the insurer's duty to defend.
Click here to review example “duty to defend" rulings in each state. This may be beneficial if one of the agency's carriers refuse to defend a case where there is any chance the policy may provide coverage.
Last Updated: January 19, 2018