Everyone knows that your auto insurance company is supposed to “cover” you if you get in a car accident, or that your homeowner’s insurance policy is supposed to cover you if a visitor trips on your doorstep. But your premium dollars pay for insurance benefits far beyond those kinds of situations.

If you get sued for some type of claim that is within the coverage of your insurance policy, the insurance company owes you at least two basic duties:

•  Pay for your defense of the lawsuit; and

•  Fund a reasonable settlement, or pay for any covered liability that is determined against you.

The first duty, referred to as the defense obligation, is generally held to be much broader than the duty to pay for liability. The duty to defend  is often held to apply when there is just a potential for a claim that would be within the coverage of your insurance policy.

Many homeowners have ” homeowners’ insurance ”  that protects them if someone is accidentally hurt in their homes. For businesses, a very common form of general business insurance is called commercial general liability (“CGL”). In California, as well as in many other states, a wide variety of claims have been held to impose on insurance companies a duty to pay for the defense of their policyholders under both homeowners’ and CGL insurance policies.

Insurance policies are contracts. When people have questions about their rights under contracts, such as leases and purchase agreements, they often go to lawyers. Questions about an insurance policy should be no different. As a policyholder, you have certain rights and obligations. Those rights and obligations may not always be entirely clear. It is often beneficial to discuss your rights and duties with a lawyer before addressing issues with the other party to a contract.

The law provides an attorney-client privilege so that the client can freely discuss with the attorney all of the underlying facts, and receive the benefit of the attorney’s advice as to how to best preserve the client’s rights. Those communications are usually confidential and protected against disclosure to other parties. This allows the party to assemble and present the facts in a manner best suited to preserving his or her rights.

It should be no surprise that insurance companies use lawyers. They are among the largest employers of lawyers in the U.S. When they have questions concerning their rights and obligations under insurance policies, they usually huddle with their lawyers, knowing that their communications are protected by the attorney-client privilege.

Insurance companies make good use of their ability to converse in privacy with their lawyers, to best protect their own interests under the insurance policy. To protect against unpleasant surprises, and to protect your rights in the insurance policy you purchased, it is best to obtain the advice of a lawyer as early as possible in the process of deciding whether and how to make a claim.

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