Almost every company doing business of any type is going to have some sort of insurance against claims by third parties . Commercial General Liability ( CGL ) insurance , Employment Practices Liability ( EPL ) insurance , and Director & Officer ( D & O ) liability insurance all fall into this category . One part of these policies , and the thing that makes them so valuable to companies , is their ability to pay for legal defense costs when businesses are being sued by third parties .
Issues can arise , at times , with the specific language being utilized in the policies . No two policies are going to be exactly the same , so having an understanding of the policy language and what it means is essential for the insured . There are two large areas in which confusion and misconceptions can arise , ultimately leading to friction during the claims process :
• Duty-to-defend – Duty-to-defend means that if a claim is made against the insured , the carrier of the insurance has the right and the duty to defend that claim , even if the claim is groundless or false .
• Non-duty-to-defend – This is also known as indemnity or reimbursement language . It is found in most D & O policies , errors and omissions ( E & O ) policies , and EPL policies . The clause states that the insured is the one responsible for defending a claim , subject to the written approval or consent of the insurance carrier .
To make things even more complex , some policies will contain hybrid-defense language that may state that the carrier has the right to defend a claim but that the carrier does not have the duty to