Very often, pleadings filed in lawsuits assert a variety of claims. Sometimes the claims are closely related and sometimes they are not. Some of the claims may be potentially within the coverage of an insurance policy, while others may clearly be outside of any possible coverage of the insurance policy. This phenomenon has raised questions as to the extent of the insurer’s duty to pay attorneys’ fees and costs to defend the action: Does the insurer only have to pay for a partial defense, such as by hiring lawyers who only defend against some but not all of the claims, or by paying only a percentage of the lawyers’ bills proportionate to the potentially insured vs. uninsured claims?

California courts have recently considered the many practical problems that would arise if insurers were permitted to defend less than 100% of the claims asserted against their policyholders. Thankfully for policyholders, the courts have recognized that insurers are required to provide a complete defense to their insureds, even when the claims against the insureds include both uncovered and potentially covered claim. In a recent decision, Presley Homes, Inc. v. American States Insurance Co. , the California Court of Appeal held that this 100% defense obligation does not arise from language in the insurance policies, but from public policy. The Court quoted language from a California Supreme Court decision, Buss v. Superior Court , affirming this obligation: “[W]e can, and do, justify the insurer’s duty to defend the entire ‘mixed’ action phrophylactically, as an obligation imposed by law in support of the policy. To defend meaningfully, the insurer must defend immediately. To defend immediately, it must defend entirely. It cannot parse the claims, dividing those that are at least potentially covered from those that are not.”

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