Source: http://dutytodefend.com/duty-to-defend/
Timestamp: 2019-04-22 08:35:40+00:00

Document:
California law describing a liability insurer’s duty to defend is well developed and substantially settled. The nature of the duty to defend arises from the language of a liability policy, many of which use standardized forms. The duty to defend arises from contract and statute. The duty to defend is distinct from and broader than the promise to indemnify and arises whenever there is a mere possibility that the insurer may be obligated to indemnify its policyholder.
Civil Code § 2778 recognizes that a liability insurer must pay for the defense of its policyholder, which the policyholder may control, and that if the insurer fails to do so, it is responsible to pay for a judgment or settlement. “An indemnity against . . . liability . . . embraces the costs of defense against such . . . liability incurred in good faith, and in the exercise of reasonable discretion. The [insurer] is bound, on request of the [insured], to defend actions . . . brought against the [insured] in respect to the matters embraced by the indemnity, but the [insured] has the right to conduct such defenses, if he chooses to do so. If, after request, the [insurer] neglects to defend the [insured], a recovery against the [insured] suffered by him in good faith, is conclusive in his favor against the [insurer].” The Insurance Code is silent regarding the affirmative duty to defend.
“[W]here more than one insurer owes a duty to defend, a defense by one constitutes no excuse of the failure of any other insurer to perform.” An insurer may not delay or deny a claim on grounds that responsibility for payment should be assumed by others.
While several California cases award tort damages where an insurer both 1) wrongfully fails to defend and 2) rejects a settlement offer, tort damages are also available for a breach of the duty to defend alone.
In Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825 (Amato II), an insurer wrongfully refused to defend on grounds that the insurer later established that it had no duty to indemnify. Notwithstanding a subsequent finding of no coverage, the court held “that where an insurer tortiously breaches the duty to defend, the insurer is liable for the judgment, which is a proximate result of its wrongful refusal to defend. We also conclude the insured is not required, in these circumstances, to conduct a “trial [of the underlying case] within a trial,” in order to recover the amount of the judgment from the insurer who wrongfully refused to defend.” “Breach of an insurer’s duty to defend violates a contractual obligation and, where unreasonable, also violates the covenant of good faith and fair dealing, for which tort remedies are appropriate. We hold [the insurer] is liable for the judgment, which is a proximate result of its wrongful refusal to defend. [T]he insurer must defend in some lawsuits where liability under the policy ultimately fails to materialize. In purchasing his insurance the insured would reasonably expect that he would stand a better chance of vindication if supported by the resources and expertise of his insurer than if compelled to handle and finance the presentation of his case. He would, moreover, expect to be able to avoid the time, uncertainty and capital outlay in finding and retaining an attorney of his own. The insured’s desire to secure the right to call on the insurer’s superior resources for the defense of third party claims is, in all likelihood, typically as significant a motive for the purchase of insurance as is the wish to obtain indemnity for possible liability.
 The Insurance Services Office (ISO) drafts policy language which a vast majority of insurers use verbatim.
 Crawford v Weather Shield Mfg., Inc. (2008) 44 Cal. 4th 541, 553 (Crawford).
 Ins. Cd. § 533.5 specifies that an insurer had no duty to defend a criminal action.
 California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 37 (ellipses omitted).
 Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 268.
 Buss v. Superior Court (1997) 16 Cal.4th 35, 48 (Buss); Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295-296 (Montrose I); see also, Continental v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 45.
 Crawford, supra, 44 Cal. 4th at 558.
 Montrose I, supra, 6 Cal.4th at 295-296.
 Montrose I, supra, 6 Cal.4th at 295.
 Blue Ridge Ins. Co. v. Jacobsen (2001) 25 Cal.4th 489, 503.
 Montrose I, supra, 6 Cal.4th at 300.
 See, Duty to Investigate – MoL.
 Mullen v. Glens Falls Ins. Co. (1977) 73 Cal.App.3d 163, 173-174.
 Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 949.
 Wint v. Fidelity & Cas. Co. of New York (1973) 9 Cal.3d 257, 263; Safeco Ins. Co. of America v. Parks (2009) 170 Cal.App.4th 992, 1005.
 Campbell, supra, 44 Cal.App.4th at 1319-20 (ellipses omitted).
 Amato II, supra, 53 Cal.App.4th at825, 829 (ellipses omitted).
 Amato II, supra, 53 Cal.App.4th at825, 831-32 (citations, quotation marks, and ellipses omitted).
 Cutler-Orosi Unified School Dist. v. Tulare County School etc. Authority (1994) 31 Cal. App. 4th 617, 630, 632; Prichard v. Liberty Mut. Ins. Co. (2000) 84 Cal.App.4th 890, 912 (ellipses omitted).
 Scottsdale Ins. Co. v. MV Transp. (2005) 36 Cal.4th 643, 654-55 (citations, ellipses and quotation marks omitted).

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