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Duty to Defend

What is Duty to Defend? 

It is the obligation of insurance companies to defend and indemnify their policyholders in California. The insurer must investigate a claim made by a third party promptly and fairly in good faith if it is made for a covered risk. If the claim is potentially covered, the insurer must also provide a legal defense to the policyholder.


It is possible that an insurer will act in "bad faith" by failing to defend and indemnify a policyholder. California can award damages for a breach of the "duty to defend" in bad faith, including legal fees, emotional distress damages, and punitive damages.

“Good Faith”

“Good Faith” Obligation For Insurance Companies 

A contract between a policyholder and an insurer is an insurance policy. Every contract in California contains an implied covenant of fair dealing and good faith. Each contracting party owes its obligations to the other in good faith. It shall not be permissible for any party to unfairly interfere with the other party's right to benefit from the contract.


A California insurance policy generally requires the insurer: to pay claims when a potential "covered risk" occurs, to investigate a claim to determine liability, to provide a defense against third-party claims, and to settle claims in good faith.

“Bad Faith” By An Insurer

“Bad Faith” By An Insurer

California insurers can claim bad faith for a wide range of reasons. The following examples of California insurance bad faith cases may be considered: Unreasonably denying or delaying paying a claim. The process of investigating claims is not thorough, prompt, or fair. The standards of investigation are not reasonable. Insufficient communication with the policyholder. A false statement about the policy benefits, policy provisions, policy limits, or coverage. Unreasonable refusal or delay in getting a settlement offer or settling a valid claim. Lack of adequate explanation of a denial. Violation of contract. Taking any action that compromises the insured's ability to defend a lawsuit.

Duty To Defend A Policyholder

Duty To Defend A Policyholder

California requires insurers to defend and indemnify policyholders if even a "potentially" covered risk exists. The insurer must nonetheless cover an accident no matter what its cause, at least at the outset. 

Furthermore, the policyholder must act in good faith and comply with any notification requirements specified in the policy. An accident misrepresentation could invalidate a policy and possibly result in a fraud prosecution.

Covered Risk 

Covered Risk 

California courts examine the language in an insurance policy to determine whether a risk is covered. By looking at this language, the court decides what is a "reasonable expectation" of the insured. An ambiguity in the policyholder's intent is resolved by the court in their favor. This means that even if an insurance company can or cannot cover a claim depending on facts that are not yet known, it still has to investigate and defend against third-party claims.

Damages Recoverable

Damages Recoverable From Bad Faith Insurers 

In the case of bad faith failure to defend and indemnify, damages can be up to the insured having to compensate the injured party, the insured's costs of defending a lawsuit against the other party, the insured's legal fees to obtain benefits from the policy, and/or damages for anxiety, mental suffering, and emotional distress.

An emotional distress lawsuit does not follow any fixed standard for calculating damages. A jury may award any amount deemed reasonable by the jury. If the breach of duty-to-defend was truly egregious, the insured might also be entitled to punitive damages.

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