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Liability Insurers Have a Duty to Defend

Thu Jan 31st, 2019 on     Insurance Law,    

Miami Insurance Law Firm

Liability insurance coverage is purchased to avoid the significant risks associated with a lawsuit, but insurance coverage does not always work out in a way that the policyholder might expect.  Insurers maximize their profits by minimizing their time investment and other costs.  It should therefore come as no surprise that liability insurers frequently deny coverage and skirt their plan-based responsibilities.  This can put the policyholder in an incredibly vulnerable position, particularly if they do not have the assets necessary to resolve their liabilities without coverage.

Among the insurer’s responsibilities is the “duty to defend.”  Let’s take a closer look.

Understanding the Duty to Defend

Duty to Defend Requires Coverage

Liability insurers are not required to step in and defend policyholders against third-party claims unless coverage would apply in the situation at-hand.  The legal duty only activates in situations where the insurer could be responsible for the damages.

For example, suppose that you have purchased a marine liability insurance policy.  The policy precludes coverage in situations where you were intoxicated at the time of accident.  If your insurer is not “on the hook” for damages due to your intoxication, then they have no duty to defend you in litigation against the third-party claimant.

Bad Faith Conduct

In Florida, insurers may be held liable for their bad faith conduct in relation to the duty to defend.  Insurers may act in bad faith in a number of different ways, including the refusal to step in and defend their policyholder when there is a legitimate duty to defend.

Alternatively, if an insurer takes up the dispute on behalf of their policyholder, they must engage in such litigation with intentions to resolve it in a manner that is favorable to their policyholder.  Failure to comprehensively and competently represent the policyholder could lead to a bad faith action.

For example, suppose that your liability insurer steps in to defend you against a third-party claimant.  The insurer realizes that they will have to pay out damages equivalent to the policy limit, and as such, they rush through settlement negotiations without properly considering the ramifications for your own liability.  The settlement reached is in excess of the policy limits.  You are therefore responsible for paying the excess amount.

Under such circumstances, you would be entitled to sue your insurer and recover damages to compensate you for the amount owed beyond the policy limits.

Contact Our Miami Insurance Law Firm for Guidance

Ver Ploeg & Marino, P.A. is a Miami-based insurance litigation firm handling a wide range of insurance-related disputes, including those that center around liability insurance coverage and the duty to defend.  Our attorneys have extensive experience helping clients favorably navigate such conflicts.

Call 305-577-3996 or send us a message online to schedule a free and confidential consultation with a skilled attorney at our Miami insurance law firm.  We look forward to helping you.

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