Courts generally apply the “eight corners" test to decide if the carrier has a duty to defend, which may also be called the “comparison test." The policy and the complaint are compared side-by-side to determine whether the allegations or events in the complaint are covered by or excluded in the policy.

Insurance policy language is a question of law, and if the courts decide the policy language is clear and unambiguous, the court must enforce the policy as written – whether for or against the insured. However, ambiguous policy language is typically found in favor of the insured. Ambiguity can create a duty to defend. 

Court finding are consistent regarding the insurance carrier's duty to defend – every state holds that the insurer's duty to defend is greater than its duty to indemnify. Following are common examples of court rulings from around the country regarding an insurer's duty to defend:

• It is well established that the insurer's duty to defend is more extensive than its duty to pay.  
• An insurer's duty to defend and its duty to indemnify are separate and independent obligations.
• An insurer's duty to defend and its obligation to indemnify are separate and distinct contractual elements.
• The duty to defend arises when the original complaint alleges a state of facts within the coverage of the policy.
• The presence of other allegations in the complaint which are not within policy coverage does not relieve [the insurance carrier] of its duty to defend.
• [T]he insurer would have the duty to defend a suit alleging facts that, if true, would give rise to coverage, even though there would ultimately be no obligation to indemnify if the facts giving rise to coverage were not established. Thus, pursuant to such policy language, the obligation to defend a suit may be broader than the obligation to indemnify.
• [W]hen an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the allegations of the underlying complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation
• [T]he insurer must defend even if the allegations in the complaint are factually incorrect or meritless. In fact, when the actual facts are inconsistent with the allegations in the complaint, the allegations in the complaint control in determining the insurer's duty to defend.
  
  
  

Last Updated: August 24, 2023