Liability insurance policies require the insurance companies which issued them to fulfill two basic responsibilities.
First, the liability insurance company is supposed to pay valid claims. A valid claim might arise when a customer slips and falls on a business’s premises or an employee of a business injures another motorist in a work-related car accident.
However, the company will typically also agree to pay for their customer’s legal defense if the customer gets sued. This obligation is called an insurance company’s duty to defend.
Among other things, the duty to defend involves the insurance company’s hiring an attorney to represent its customer in court proceedings so that the customer’s legal rights are protected.
The duty to defend is broad in Texas
The law of Texas is relatively favorable to policyholders when it comes to the duty to defend.
Basically, if the allegations in the lawsuit and the terms of the policy, when read together, suggest that the insurance company might have to pay the claim, then the duty applies.
The insurance company is not permitted in most cases to investigate in order to come up with some reason why the claim is not covered so as to avoid the expense of hiring counsel.
While offering a defense, the insurance company may choose to issue what is called a reservation of rights. The company will send this type of letter to a policyholder if the company reasonably believes that, ultimately, the claim will not be covered.
Individuals and businesses in the Austin area who receive a lawsuit, no matter how frivolous it may seem, should ask their insurance carriers to defend it right away.
If an insurance company does not do so when it should, then a policyholder may need the help of an experienced attorney. The policyholder may be able to receive compensation from an insurance company which ignores its duty to defend.