Whether you have customized or underinsured coverage, it is crucial to understand that your insurer cannot defend you in case of an accident. Before purchasing an insurance policy, you must read and understand it. You need to buy a policy with a clause of the insurer’s duty to defend you in any claim, including a personal injury claim. In some claims, the insurance context cannot work in your favor. For example, the duty to defend varies between personal and commercial vehicles.
Duty To Defend Explained
When a third party brings a claim against an insured person, a liability insurance company's duty to defend comes in handy. Every liability insurance company has its claims adjusters. Typically, the claim against you goes to one of the adjusters who attempt to resolve it while considering the insurer's best interests. If the insurer and the claimant fail to resolve the claim, the adjusters often file a lawsuit in court. Still, the insurance company has a duty to defend the insured individual in that case. Insurance companies usually keep their litigation divisions with in-house salaried attorneys to defend claims. However, some companies prefer seeking the services of outside counsel to defend their insured individuals in similar lawsuits.
The ISO liability policy has two coverage categories. The coverage imposes the duty to defend insurance companies. Coverage A, Property Damage Liability, and Bodily Injury give your insurance company the duty and the right to defend you against any lawsuit seeking compensation for property damage or bodily injury caused by accident. Coverage B, Advertising and Personal Injury Liability, give the insurance company the duty and the right to defend you against any lawsuit seeking compensation for advertising and personal injury.
Coverages A and B relieve your insurance company of any duty to defend claims seeking compensation for damages or injury not covered by the policy. For example, two companies could start producing and supplying the same products. After some time, one of the companies holds a patent on the products it manufactures and files a lawsuit against the other company for patent infringement. If the company being sued takes the lawsuit to its general liability insurer, the insurance company will refuse to provide a defense. Under Nevada law, patent infringement does not meet the meaning of property damage, bodily injury, or advertising and personal injury in the policy.
The Point Where Duty To Defend Applies In A Personal Injury Case
The following are the steps that help to determine the duty to defend in a personal injury case:
- The slightest possibility of a claim (within the bounds of the policy) against you succeeding triggers a duty to defend. Under the pleadings rule expressed by Nevada Supreme Court, your insurance company must defend you even if there is a slight chance of a third party winning the claim.
- Your insurance company must defend you depending on whether the claim is derivative.
- Your insurance policy must mention the duty to defend against claims.
If the policy has ambiguous language, this could favor your insurer.
Duty To Indemnify and Duty To Defend
Most people confuse the duty to indemnify and the duty to defend. Often, the duty to indemnify and the duty to defend are linked. However, the duty to indemnify comes in when the lawsuit ends in court and the liability is established. Generally, the duty to indemnify is the responsibility of your insurer to settle claims. The duty to indemnify also arises after examining all the formations and proofs throughout the case.
On the other hand, the duty to defend comes out of the policy. Some jurisdictions claim that even if the duty to defend does not exist, your insurer cannot overlook their duty to indemnify. Other jurisdictions allege that if there is no duty to defend, there is no duty to indemnify.
Liability Coverage And The Duty To Defend
The standard general liability policy covers your insurer's costs to defend you under supplementary costs. Therefore, these costs do not lower your policy limits. However, some insurance companies sell proprietary liability policies that cover defense expenses within the policy limits. Therefore, ensure the policy covers defense outside the limits when buying general liability insurance.
‘’Duty To Defend’’ Policy Form
When a policy is written on a duty-to-defend basis, the insurance company must defend the whole claim, even if it is only partially covered. For example, in circumstances where there are allegations, covered or uncovered issues, the insurance company has a duty to defend the whole claim, as long as the covered matters remain open.
However, some common misconceptions and hurdles exist regarding a duty to defend policy form. First, most insured individuals claim that since the insurer chooses the defense counsel, the client-attorney privilege could be destroyed with the three-party relationship. Second, many insured individuals claim that the insurer chooses the legal team only when there is a conflict of interest, mainly when the manner of defense determines how coverage applies under the policy. Additionally, other insured individuals allege that the defense counsel’s stronger loyalty is more to the insurer than to the insured involved in the litigation.
The duty to defend provision under Nevada law has been interpreted widely. However, judges will uphold it even if there is only a potential for coverage and the claim does not have merit.
Duty To Defend And The Right To Defend
Most people in Nevada think the ''duty to defend'' is the same as the ''right to defend''. However, there is a big difference between a duty to defend and a right to defend. A duty to defend policy means your insurer is responsible for defending you in any claim. A right to defend means your insurer has the option of whether to provide a defense against any claim or refuse to defend you. Excess insurance policies like commercial umbrella insurance do not give your insurer a duty to defend you, but it grants your insurer a right to defend you. These policies allow your insurer to decide whether to manage your defense on a case-by-case basis or avoid doing so.
The Terms Of Your Liability Could Constitute ‘’Duty To Defend’’
Read the fine print in your insurance contract to understand your company's role during a personal injury lawsuit. Your insurer must defend you against a case involving a potential claim on your policy if there is a duty to defend clause. Therefore, your insurer should seek the services of attorneys and enhance a legal defense when you face any lawsuit. Your insurer can also decide whether to take your case to court or settle it outside court. This relieves pressure because you will not contact an attorney, negotiate the terms, or meet the legal expenses upfront.
If unsure whether your insurance company would defend you in a personal injury case, take some time and look at your policy. You could see a clause of ''duty to defend'' in the following insurance coverage:
- Directors and officers insurance (D&O)
- Commercial general liability insurance
- Employment practices liability insurance (EPLI)
- Errors and Omissions insurance (E&O), also known as professional liability insurance
Together, the above liability policies cover the most common lawsuits, including property damage and third-party bodily injury, harassment, discrimination, wrongful termination, and claims on situations where you made a mistake or gave poor advice.
Why Seek Your Insurer’s Defense In A Personal Injury Case
Lawsuits could cost you money and time. You could also be grounded emotionally and psychologically when a third party files a lawsuit against you after an accident. Therefore, dedicating the work to your insurer is always the best option for better results. The following are the benefits you will get from your insurer's duty to defend:
No Out-of-Pocket Legal Expenses
Your insurance carrier meets all legal costs beyond your deductible with a duty-to-defend policy. You will only meet the legal expenses if the expenses are more than your liability insurance policy limit. The duty to defend is a huge relief if you do not have enough cash. Additionally, liability insurers also offer low rates for legal defense because they consistently work with the same attorneys. These attorneys already understand your insurance company's expectations and billing practices. Therefore, your insurer can assist you in keeping your legal defense expenses below your policy limit.
Experienced Legal Defense
Your insurer has probably defended many policyholders in the past and has experienced legal counsel. You will benefit from a network of proven attorneys with established practices and procedures if you give your insurer a chance to defend you in a personal injury case. The attorney will handle the deadlines and the complex paperwork. There will be no conflict of interest between you and your insurer because you strive to win the case and keep the costs low. Your insurance company meets the judgment and settlement expenses in the end. This strongly motivates them to work well on your behalf.
Protection Against Fraudulent Lawsuits
A duty to defend policy can assist you in defending against fraudulent lawsuits in a personal injury case. For example, the defendant could file a lawsuit against you over losses unrelated to the accident. Your insurer has a duty to defend you if there is a chance that the accusation could lead to a valid insurance claim. The policy will cover your legal costs even if the case is thrown out of court.
Legal Help For Iffy Claims
If your insurance company has a duty to defend you, it has to do so in any potential claim after your involvement in an accident. Your insurer has to meet the legal expenses even if the claim does not turn out to be covered.
Your vehicle could get involved in an accident with another car, and the other vehicle's driver could claim that you are responsible for the accident. However, whether the crash involved criminal negligence, professional liability, or even whether you are at fault could be unclear. Whatever the results, your vehicle company's Errors and Omissions (E&O) insurer has to defend you against the lawsuit until the court makes its determination.
At times, a case could include multiple allegations, some that your policy does not cover and some that it covers. As a result, your insurer has to defend you in the entire lawsuit as long as one claim is coverable.
Breaching The ‘’Duty To Defend’’
When an insurance company fails to defend you against a claim, Nevada law considers the act denying coverage to the policyholder. Therefore, if your insurer wrongfully refuses to defend you in a personal injury claim, they could be held responsible for the expenses of the defense and any damages that occur because of a breach of duty to defend you.
For your insurer to avoid a bad faith claim, they can accept to defend you under a reservation of rights. They will do this even if they are unsure if the allegations fall under the scope of the policy's coverage. Damages for bad faith breach of 'duty to defend can include:
- Damages for emotional distress caused by the insurer’s bad faith
- Cost of hiring an attorney to defend the claim
- Punitive damages
The End Point Of Your Insurer’s ‘’Duty To Defend You’’
The insurer’s duty to defend you ends when your policy limits are reached. For example, most general liability policies state that the duty to defend you stops once your insurance company exhausts the applicable limit in meeting the settlements and judgment expenses. The responsibility of the insurer to defend you also stops when your injury case is settled within your coverage limits. For example, this could happen if the court determines a judgment that your company must pay or when you agree with the defendant on a settlement.
Unfortunately, when there are multiple claims, things could get a little more complicated. For example, there could be a possibility that your policy limits are insufficient to cover settlement expenses for every person who filed a claim. In this case, the priority will be for those who filed the claim first.
Your insurance company cannot pay settlements after the coverage limits are over. The liability will fall back on your company. You can decide to appeal, especially if your policy does not outline the scope of the duty to defend. For example, you could appeal a judgment, which rules that your company should only meet damages of $100,000. In these types of cases, most courts in Nevada often rule in favor of policyholders, assuming the appeal has reasonable ground.
Choosing To Defend Yourself In A Personal Injury Case
If the company you work for strongly prefers a specific law firm or has its legal team, you could opt for a duty indemnify or non-duty to defend the policy. This policy allows you to preside over your defense counsel. You can opt for your attorneys and make crucial decisions. If your insurer does not have a duty to defend you, the company can only meet your legal expenses. However, the insurer cannot offer direct legal support for ongoing lawsuits against you. The benefits of having a non-duty to defend policy include:
More Say In Your Defense
A duty to defend policy limits your powers on legal counsel; for example, some policies allow only your insurer to determine whether to take your injury case to court or settle it outside court. A non-duty to defend policy enables you to have a say over these crucial decisions instead of having the insurer decide on your behalf.
Often, insurance companies will opt to take control of your defense. Fortunately, the insurance company allows the defense to control the expenses they end up paying. In case your insurance company fails to take the responsibility to defend your claim in a personal injury lawsuit, you can ask for a declaratory judgment from the nearby court. Many cases involving the duty to defend in Nevada end in favor of the insurance policyholder.
You Can Choose Your Attorneys
A non-duty to defend policy allows you to seek the services of your legal team. Your insurer will compensate you fully if your attorney charges what your insurer considers reasonable rates. However, the insurance company cannot cover every attorney. The insurer could request to review and approve your legal team before it accepts to meet the bills for their services. If you have a specific law firm to work with, request your insurance company to include the right to use your preferred law firm in your policy coverage. Most accident victims seek the services of the best personal injury attorneys to represent them.
Find A Las Vegas Personal Injury Attorney Near Me
If you sustain injuries in an accident caused by another person's negligence, you can pursue a personal injury claim to seek compensation. However, sometimes, you could be fully or partially liable for the accident. This is where your insurer's duty to defend sets in. Contact the Las Vegas Personal Injury Attorney Law Firm for reliable legal counsel and representation. Call us at 702-996-1224 to speak to one of our attorneys.
