Liability insurance claims are legal claims or lawsuits brought against you by another person or entity, for which you seek insurance coverage in the form of a legal defense against the claim or action, and indemnification by settling the claim. Liability claims, also known as third-party claims, arise under a multitude of policies and circumstances. Homeowners policies, automobile policies, business policies all have liability components. You could get sued, and need to make a liability claim, for any number of reasons, like your business had an accident, you hit someone with your car, a person was injured in your home, etc. Any of these circumstances could give rise to a legal claim against you, and request for liability coverage from your insurer.
The basic thing to know about third-party liability claims in California are the insurance company owes two distinct duties: (1) to defend you, and (2) to indemnify you. The duty to defend is broader than the duty to indemnify. It encompasses not only claims actually covered under the insurance, but also claims or legal actions that are potentially or possibly covered. Therefore, an insurance company will often agree to defend you under a reservation of rights, without making any promises about ultimately indemnifying you. This is to be an expected in many cases as the standard for defense and indemnification are different. If an insurance company fails to defend you, and is found to have breached the duty to defend, they may be liable if any damages that are ultimately imposed against you.
To trigger an insurance company's duty to defend and indemnify when a legal claim is asserted, you must tender the claim to the insurance company. This is accomplished by sending the insurance company a copy of the lawsuit, demand letter, or other evidence of a claim, and requesting a defense and indemnification under your insurance policy or policies. The insurer's duty to investigate is then also triggered, and the insurance becomes liable for your defense to the extent there is defense coverage.
Numerous issues and complications can arise when you are on the receiving end of a lawsuit and are making an insurance liability claim. The first issue is whether the insurer assumes the defense. If your insurance company denies a defense, you need to act fast, as you are facing a legal claim that is progressing while you also deal with the dispute with your insurance company over the insurance claim. Where the insurance company assumes the defense, issues may arise which create a conflict between you and your insurance company and entitle you to independent, or Cumis counsel, paid for by the insurance company. A coverage issue dependent on facts developed in the underlying legal case (i.e., was the insured drunk driving?) could create a conflict warranting independent counsel. If you want your insurance company to settle the third party claim, and the insurance company resists for its own reasons, you may need independent counsel, including potentially to approach the third party claimant about taking an assignment of your insurance claim to settle.
Liability claims are complicated and technical, and by their nature involve hiring attorneys as they arise out of legal claims. If you are making a liability claim, and are not receiving fair treatment, you can call or send an email for a free consultation.