Introduction
by Martin C. Pentz, Esq. and Jeremy A. M. Evans, Esq.
The insurance relationship is primarily one of contract, with the insurance policy as the principal source of the parties’ obligations. As with other types of insurance, the duties of the parties—and the consequences of breaching those duties—are affected by government regulation, primarily in the form of state statutes addressing insurer conduct. Another source of law affecting insurance obligations is the judiciary. As liability insurance disputes became a staple of the courts’ civil dockets during the second half of the twentieth century, recurring issues generated a significant body of common law. Nevertheless, in any study of the obligations of insurer and insured under liability coverages, there is no avoiding the oft-used insurer admonition, “Read Your Policy.”
Excerpt
The Duty to Defend
The defense provisions of CGL policies have been aptly referred to as “litigation insurance.” See Rubenstein v. Royal Ins. Co. of Am., 429 Mass. 355, 358, 708 N.E.2d 639, 642 (1999). As stated by the Supreme Judicial Court in Rubenstein:
“[T]he promise to defend the insured, as well as the promise to indemnify, is the consideration received by the insured for payment of the policy premiums. Although the type of policy here considered is most often referred to as liability insurance, it is ‘litigation insurance’ as well, protecting the insured from the expense of defending suits brought against him.”
Id. at 358, 708 N.E.2d at 642 (quoting Brohawn v. Transamerica Ins. Co., 347 A.2d 842, 851 (Md. 1975)). The obligation is not merely one of reimbursement. Essential Obligations of Insurer and Policyholder to the CGL defense concept is the undertaking of “responsibility for defending the insured,” Id. at 358, 708 N.E. 2d at 642, which means assuming the burden of retaining, supervising and compensating the defense team, including defense counsel. (continues...)
Download the Foley Hoag eBook Obligations of Insurer and Policyholder (.pdf)
Ebook reprinted with kind permission from
Massachusetts Liability Insurance Manual - Comprehensive Coverage, Expert Guidance
1st Edition 2000, updated 2009. Copyright © 2000, updated 2009, MCLE, Inc.