Handling Liability and Coverage Claims: Splitting Files, the Duty to Defend, and Ethical Considerations for Lawyers

Liability insurers are contractually obligated to defend and indemnify their insured’s covered claims, but have no duty to indemnify or defend against claims that are clearly excluded by the insured’s policy. The insurer’s duty to defend is broader than its duty to indemnify. Therefore, a prudent insurer will frequently defend its insured pursuant to a reservation of rights or non-waiver agreement, which permits the insurer to fulfill its duty to defend the insured without waiving its right to later dispute coverage…