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  • Our FAQs

    • What is the "Duty to Defend"?

      Most commercial liability insurance policies – such as a typical General Liability policy, Directors and Officers policy, Professional Liability policy – insure the policyholder against the financial cost of defending lawsuits filed by third parties. An insurer has a "duty to defend" any lawsuit that includes any claim against its policyholder that is even "potentially" or "possibly" covered by the terms of its policy.

      When served with any lawsuit, therefore, a policyholder should immediately tender the lawsuit to all of its liability insurers. If even a single potentially covered claim has been alleged in the lawsuit, the insurer may have a duty to pay the cost of defending the entire lawsuit and may also have to cover any settlement or adverse judgment obtained against the insured.

    • Should an insurance company's denial of the duty to defend be viewed with suspicion?

      Yes, always.

      All too frequently, even the most sophisticated commercial policyholders accept an insurer's denial of the duty to defend without question. However, insurance companies make mistakes. In our experience, this is especially true with regard to the duty to defend. The legal standards applicable to an insurer's duty to defend are favorable to policyholders, requiring that they show only a "potential" or "possibility" of covered liability.

      Moreover, when an insurance company wrongfully denies a policyholder's claim for a defense, it directly increases the insurer's profits. As such, insurers have an economic incentive to "get it wrong."

      Identifying and successfully challenging a wrongful denial of the duty to defend can enable a policyholder to recover the full amount of its defense costs, settlement costs, and judgment amounts, plus a portion of attorney fees incurred in the coverage litigation, pre-judgment interest, and punitive damages.

      The bottom line is this: Any denial of the duty to defend should be viewed with suspicion and, in a case of significant size, should be reviewed by an insurance coverage lawyer as soon as possible.

    • Why do policyholders rarely challenge wrongful denials of the duty to defend?

      Commercial policyholders, their lawyers, and their brokers are often simply unaware of the full scope of coverage a liability policy can provide, - especially when it comes to the triggers and breadth of the duty to defend.

    • So what types of claims are typically covered by liability policies?

      Far more than most insureds realize. For example, even the most basic General Liability policy will often cover claims that are frequently pled in business litigation such as libel, slander, trade libel, and invasion of privacy. Even certain intellectual property and breach of contract claims can under certain circumstances be covered by General Liability policies. The range of potentially covered claims broadens dramatically if an insured has purchased Directors and Officers and/or Professional Liability policies and can extend to many torts and contract claims alleged in business litigation.

    • What is the legal standard in California governing an insurer's duty to defend?

      Under California law, the rules governing an insurer's duty to defend favor policyholders. The mere "potential" that an insured faces liability for a covered claim can trigger an insurer's duty to defend. This potential can be gleaned from any factual allegation made in a third-party's lawsuit, regardless of the causes of action pled, and even from facts extrinsic to the lawsuit. If a policyholder is exposed to liability based on a single potentially covered claim, then its liability insurer may have a duty to defend the entire lawsuit.

    • How long does a policyholder have to challenge a wrongful denial of the duty to defend?

      Under California law, a policyholder has four years to challenge a wrongful denial of the duty to defend. What is more, this four year period does not even begin to run until the underlying lawsuit, which the insurer has refused to defend, has concluded. For this reason, by way of example, a wrongful denial of the duty to defend issued six years ago, in which the underlying lawsuit did not conclude until only three years ago, can still be challenged.

    • What is the cost of challenging a wrongful defense denial?

      Although insurance litigation can be expensive, we are frequently willing to review and challenge a wrongful denial of the duty to defend on a contingency fee or "percentage-of-recovery" basis.

    • What monies can be recovered from the insurer?

      Potential recoveries can include the attorney fees and costs incurred to defend the third party lawsuit, the amount of any settlement or judgment paid, as well as prejudgment interest, bad faith damages, and even punitive damages. We have obtained substantial recoveries on behalf of clients by successfully identifying and challenging wrongful denials of the duty to defend.

    • Why should I select Osborne & Nesbitt as my coverage counsel?

      In this field, expertise and experience matter. Coverage analysis and litigation on behalf of policyholders is all we do. We have represented some of California's leading companies against many of the nation's largest insurers. Having ourselves at one time worked on behalf of the insurance companies, we are able to apply an invaluable "Insider's Edge" to your claim.