Most Georgia businesses have (or should have) some sort of an insurance policy to provide protection in the event the business is sued for some act of negligence.  This policy may be a Commercial General Liability (“CGL”) policy, a professional negligence or malpractice policy, or an automobile insurance policy. 

This liability insurance provides protection to an insured business in 2 separate and distinct ways:

1. The insurance carrier has the duty to defend its insured business in the event the business is sued, and
2. Sometimes the insurance carrier has the duty to pay any claim or judgment awarded against the insured business.  

A duty to provide a defense is not the same as a duty to pay a claim.  The duty to provide a defense generally means that the insurance company will select and pay for a lawyer to represent the insured business.      

The insurance carrier’s duty to provide a defense is triggered when:

1. A lawsuit is filed against the insured business AND
2. The lawsuit contains an allegation against the business that, if true, would be a covered loss under the insurance policy.  The allegation need not actually be true to trigger an insured’s duty to defend the lawsuit.        

There are certain allegations that would not trigger the insurance company’s duty to provide a defense.  For example, a breach of contract claim generally would not trigger the duty to defend.  Another example is an intentional act by the insured that causes harm to another may not trigger the duty to defend.  Damage caused by the insured’s violation of a law would probably not trigger the duty to defend either. 

Generally, a defense is only provided for claims arising out of an “accident” or “occurrence” as defined by each particular insurance policy.  Often, if a lawsuit against a business contains a combination of claims that trigger the duty to defend and claims that do not, the insurance company will provide a defense to the lawsuit. 

If an insurance carrier refuses to provide a defense when it is required to do so under the insurance policy, the insured can sue its insurance carrier for damages.

The insurance carrier’s obligation to actually pay for the damage caused by the accident is a completely separate obligation and is triggered under a separate set of circumstances.   

If you have any questions regarding an insurance carrier's duties to your Georgia business, please feel free to contact V&T Law.