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The Duty to Defend and Potentiality  

https://zalma.com/blog

In the leading case of Gray v. Zurich Ins. Co. 65 Cal.2d 263, 54 Cal.  Rptr. 104 (1966) the Supreme Court of California set the basic rule  followed in most jurisdictions for deciding whether an insurer owes a  duty to defend or not. It found that insurers issuing dual-promise  policies (a promise to both defend and indemnify) are required to defend  any suit in which there is a potentiality that the insurer will have to  indemnify.  The insured in Gray was alleged to have assaulted and battered the  plaintiff. The policy, and the statutes of California, prohibited  indemnity for an intentional act of an insured. Assault and battery are,  by definition, intentional acts, so the insurer argued that it owed no  defense.  The complaint against the insured only alleged the intentional tort of  battery. The court concluded the insurer should be compelled to defend  since there was a potential that the complaint could be amended, or the  jury could find, the insured\\u2019s actions were merely negligent. The  court\\u2019s decision was founded in the wording of the policy, concluding  that the duty to defend was broader than the duty to indemnify. The  insurer\\u2019s agreement to defend suits even if they were \\u201cfalse or  fraudulent\\u201d caused the court to conclude that the insurer agreed to  extend the duty to defend far beyond those acts for which coverage for  indemnity might exist.  The potentiality concept has expanded the exposure of insurers insuring  personal and commercial risks. Even though a policy excludes liability  arising from violations of law, there is the potentiality that the jury  would find there was no violation of law and that the policy provided  coverage.  \\xa9 2021 \\u2013 Barry Zalma  Barry Zalma, Esq., CFE, now limits his practice to service as an  insurance consultant specializing in insurance coverage, insurance  claims handling, insurance bad faith and insurance fraud almost  equally for insurers and policyholders. He also serves as an arbitrator  or mediator for insurance related disputes. He practiced law in  California for more than 44 years as an insurance coverage and claims  handling lawyer and more than 52 years in the insurance business. He is  available at http://www.zalma.com and zalma@zalma.com.   Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE  Legend Award.  Over the last 53 years Barry Zalma has dedicated his life to insurance,  insurance claims and the need to defeat insurance fraud. He has created  the following library of books and other materials to make it possible  for insurers and their claims staff to become insurance claims  professionals.  Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma;  Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library \\u2013 https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and Read last two issues of ZIFL here.