Insurance Coverage Disputes
Generally speaking, most personal and commercial insurance policies obligate the insurance company to both “indemnify” and “defend” the policyholder in the event a covered loss occurs. The duty to indemnify means that the insurance company is required to compensate the policyholder for a covered loss, in whole or in part, by payment, repair or replacement. Disputes frequently arise between policyholders and insurance companies over indemnity, i.e., whether, and to what extent, a loss is covered under the policy.
The duty to defend arises when a party other than the policyholder brings a legal claim against the policyholder. If the event that triggered the third party’s legal claim is covered under the policy, the insurance company must defend the policyholder. While the duty to defend is considered to be very broad, insurance companies will often dispute whether the underlying lawsuit sets forth the facts or legal claims necessary to bring the lawsuit within the terms of the policy.
These obligations often arise from the same set of circumstances. For example, if you are involved in a car accident and are sued by another driver, your insurance company may be required to both defend you in the lawsuit and indemnify you for any damages owed to the other party. Of course, even in the best circumstances, an insurance company will only indemnify you up to the policy limits. However, because the duty to indemnify and the duty to defend are separate obligations, the amount paid by the insurance company for defense of the lawsuit, e.g., in legal fees, will not be subtracted from the amount available to compensate the other party should they succeed in their lawsuit against you.
The dual obligations of indemnity and defense can lead to significant expenses for the insurance company and thus coverage disputes are very common. If you believe that your insurance company has failed to live up to the terms of your policy, contact the Brady Law Group for assistance. We have decades of experience handling insurance coverage and bad faith disputes, and we can help you too.