The Duty to Defend and the Duty to Settle in California
Two duties sit at the center of third-party insurance in California, and they are not the same. The duty to defend is broad and triggered easily. The duty to settle is narrower but carries the larger consequence.
The duty to defend is broader than the duty to pay
An insurer must defend whenever the claim is potentially covered — even where most of the allegations are not, and even where the suit ultimately fails. Doubts are resolved in favor of defending. Refusing to defend a potentially covered claim is one of the clearer ways an insurer gets into trouble.
Reservation of rights
An insurer may defend while reserving the right to deny coverage later. That creates a conflict of interest, and in California a sufficient conflict can give the insured the right to independent counsel at the insurer's expense.
The duty to settle within limits
Where liability is clear and damages plainly exceed the policy, an insurer that refuses a reasonable within-limits demand is gambling with money that is not its own. A settlement demand or expression of interest is generally needed to trigger the duty.
Excess judgments are the consequence
If the case then produces a judgment above the limits, the insured carries that excess — and has a bad-faith claim against the carrier for putting them there. That claim is assignable, which is how injured claimants ultimately reach the insurer.
Common questions
My insurer is defending me but says it may deny coverage.
That is a reservation of rights. Depending on the conflict it creates, you may be entitled to independent counsel paid for by the insurer.
There is a judgment against me above my policy limits.
If your insurer unreasonably refused a reasonable within-limits settlement, it may be responsible for that excess. This is worth reviewing quickly.
Is your insurer treating you unfairly?
A free, confidential review can tell you whether what happened crosses the line — no cost, no obligation.
Related California law
Official sources
General information about California law, not legal advice. Every policy and every claim is different.