Does your insurer have a duty to defend?

posted by Michael Fortney  |  Jan 17, 2012 12:22 PM in Insurance Law

There are two types of duties that an insurance company may have to its policy holder when a claim is made against the policy holder by a person or company that claims damage or injury (a claimant).  The insurer may have a duty to defend the claim, thereby providing a defense to the policy holder through the payment of attorneys fees and costs incurred in the defense of the claim.  This is often referred to as the duty to defend.  The insurer also may have a duty to pay for the damages awarded to the claimant.  This is referred to as the duty to indemnify.

Your insurance carrier has a duty to defend your company if a claim is made against your company that may be covered by your insurance policy.  Under Ohio law, the duty of an insurer to defend its insured is distinct from, and broader than, the duty to indemnify.  Ohio Gov’t. Risk Mgmt. Plan v. Harrison.  Whether an insurer has a duty to defend an action against an insured is initially determined by the scope of the pleadings.  City of Willoughby Hills v. Cincinnati Ins. Co.  By contrast, the duty to indemnify is based on whether there is, in fact, coverage under the policy.  M/G Transp. Servs. v. Water Quality Ins. Syndicate.  Because the duties to defend and to indemnify are separate, an insurer has an obligation to defend even though it may later be determined that coverage for a claim does not exist.

The duty of the insurer to accept the defense of a claim attaches whenever the complaint states a covered claim, or potentially or arguably does so.  Where the complaint brings the action within the coverage of the policy, the insurer is required to defend the insured regardless of the  ultimate outcome of the action or its liability to the insured.  Motorists Mutual v. Trainor.  When a complaint alleges more than one claim against an insured based on the same occurrence, one of which is within the coverage of the policy, the insurer cannot divide the defense of the claims and is obligated to defend its insured against all claims.  Chemstress Consultant Co. v. Cincinnati Ins. Co.

Pleadings alone may not provide sufficient factual information to determine whether the insurer has an obligation to defend the insured.  City of Willoughby Hills, supra.  Where the insurer’s duty to defend is not apparent from the pleadings in the case against the insured, but the allegations do state a claim which is potentially or arguably within the policy coverage, or there is some doubt as to whether a theory of recovery within the policy coverage had been pleaded, the insurer must accept the defense of the claim.  Id.  Thus, the “scope of the allegations” may encompass matters well outside the four corners of the pleadings.  Id.  In other words, where the insurer’s duty to defend is not apparent from the pleadings, no duty to defend exists unless the complaint is “vague, ambiguous, nebulous or incomplete” so that a “potential for coverage” exists.  M/G Transp. Servs.,supra; Zanco, Inc. v. Michigan Mut. Ins. Co.

Where an insurer wrongfully refuses to defend its insured, it subjects itself to an action for bad faith.  An insurer’s good faith obligations are discussed separately in the article “Ohio law requires insurers to act in good faith.


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