Lisa A. Szymanski, left, and Timothy P. Law, right, of Reed Smith. Courtesy photos 'Conditional Duty to Indemnify' in Pa.: An Insurance Company's Duty to Pay a Settlement
An insurance company's duty to defend carries with it a conditional duty to indemnify a settlement reached prior to judgment. When an underlying action is settled, there are often unresolved factual questions. In almost all circumstances, Pennsylvania law does not permit a trial of those facts in an insurance declaratory judgment action.
August 20, 2024 at 08:07 AM
8 minute read
An insurance company's duty to defend carries with it a conditional duty to indemnify a settlement reached prior to judgment. When an underlying action is settled, there are often unresolved factual questions. In almost all circumstances, Pennsylvania law does not permit a trial of those facts in an insurance declaratory judgment action.
The Duty to Defend
A liability insurance company has three choices when it receives notice of a lawsuit: accept the defense of its policyholder without reservation; assume the defense under a reservation of rights; or deny that it has a defense obligation, leaving the policyholder to defend the lawsuit on its own, or if it is lucky, with the help of a different insurance carrier.
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