What does the 'duty to defend' mean in insurance appraisals?

The concept of 'duty to defend' refers to the obligation that insurers have to provide a legal defense for their policyholders against claims made within the coverage of the insurance policy. This means that when a policyholder faces a lawsuit or claim that is covered by their policy, the insurer must provide legal representation regardless of the merit of the claims. The rationale behind this duty is to protect the insured from potentially significant financial burdens associated with legal defense costs.

The duty to defend is broader than the duty to indemnify, which is the obligation to pay for covered losses. The insurer is required to defend any suit where there is a potential for coverage under the policy, even if, ultimately, the claim is found not to be covered. This ensures that policyholders are safeguarded during legal challenges without having to bear the costs themselves.

Understanding the importance of the 'duty to defend' is crucial for anyone in the field of insurance appraisals, as it directly impacts the relationship between insurers and policyholders and influences how claims are managed and resolved.