Duty to Defend Policies


There are two types of policies: those with a duty to defend and those without. Most carriers offer nonprofits those policies that include a duty to defend.


“The duty to defend is always greater than the duty to indemnify, so although they, at the end of the day, may not have to pay the losses associated with all of those causes of action, they do have to defend the insureds for those.”


Janet Dreifuss, Alliant


In a duty-to-defend policy, the insurer will defend against all causes of action, even for those parts of a complaint that are non-covered claims. The carrier has the right to assign counsel to represent all of the insureds under the policy. In an indemnity policy, which does not include a duty to defend, the nonprofit has the responsibility to hire counsel, but the insurer will pay defense costs only for those claims that are covered for losses. The insurer also has the right to consent to that counsel. In most cases, insurers will offer only duty-to-defend policies to nonprofits. That’s because their policies tend to have smaller limits and lower retentions, and insurers want to have tight control over the handling of claims.


When evaluating a duty-to-defend policy for a nonprofit, brokers should ask to see the carrier’s counsel list and litigation management guidelines. It’s also possible to specify particular defense counsel in the policy.


Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26