The Duty to Defend and Indemnify
In my two previous emails, I talked about the importance of making sure you have a good business liability insurance policy given some of the concerns regarding the doctrine of respondeat superior and how entrepreneurs can be held liable for the actions of independent contractors. There are two important features of a good business liability insurance policy.
The first important feature is the duty to defend. This is where the insurance company undertakes, at their cost, the representation and defense of you, the insured, when a legal claim is brought against you. This duty to defend begins the moment a claim is reported. The claim can be investigated by professional investigators and can then be referred to adjustors and other representatives in the insurance company to determine the validity of not only what happened and who was involved, but also the extent of the damages. I’ve often see insurance companies hiring very competent expert witnesses at no small sum in order to evaluate issues regarding liability, proximate cause and damages. Once I saw experts on the scene before the fire was completely put out.
The second major feature of a good liability policy is the duty to indemnify. Suppose a claim is made arising from a motor vehicle collision. One of your employees inadvertently ran a red light and T-boned a minivan being driven by a soccer mom on her way to the soccer field. The duty to indemnify would include covering the costs of repairing or replacing the vehicle driven by the injured party, as well as all the medical costs associated with the injury sustained due to the collision and compensation for pain and suffering, loss of employment, loss of wages, etc.
These are substantial and significant benefits that come with a good liability insurance policy. They aren’t the only benefits of a good policy, but they are two of the big reasons why every business owner needs to have liability insurance coverage in place. Please speak to one or more competent insurance agents to determine if you have the best coverage you can get based upon your needs, risks and ability to pay.