Most commercial general liability insurance policies obligate an insurer to fund the defense and subsequent judgment or settlement of an underlying suit against its policyholder. These protections are fundamentally important for commercial and corporate policyholders of all shapes and sizes. Extensive litigation stems from disputes concerning an insurer's duty to defend and indemnify its policyholder. Most recently, the New York Court of Appeals reaffirmed the swift and severe penalties an insurer faces if it wrongfully fails to honor its broad defense obligation.1
Duty to Defend
Most standard-form general liability coverage obligates an insurer to: (1) "pay all sums that the insured becomes legally obligated to pay"; and (2) defend the insured against any suit seeking those damages, even if the allegations of the suit are groundless, false or fraudulent. New York courts consistently hold that an insurer's duty to defend pursuant to a general liability policy is exceedingly broad:
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