Many homeowners policies include a section entitled "Comprehensive Personal Liability Insurance." This provides the homeowner with some protection against lawsuits by other people ("third parties") alleging that the homeowner has caused "bodily injury" or "property damage" to that other person. Actually there are two kinds of protection: (1) an agreement by the insurance company to pay the costs of defending the homeowner (i.e., by providing and paying for a lawyer, and associated court costs) and (2) an agreement by the insurance company to pay any judgment or settlement amount in that case. These duties are known respectively as the "duty to defend" and the "duty to indemnify." Insurance companies will sometimes tell you that you are not "covered" for a particular claim, meaning that they would not have to pay a judgment, but that does not necessarily mean they don't have to defend.
Grant of Coverage Gives; Exclusions Take Away
The way a liability policy works is that it offers a very broad grant of coverage for pretty much anything you could do to another, and then subtracts coverage by means of various "exclusions." For example, in a homeowner's policy there is often a "business pursuits" exclusion, which means that you would not be covered if the injury arose directly out of a business activity. So a homeowner who is also a contractor would probably not be covered for an injury he caused while working at a construction site. For that he would need business insurance, often called Comprehensive General Liability ("CGL"). But these "exclusions" are not necessarily clear in their application to particular facts, so if an insurer denies even a defense based upon one or more exclusions, make sure they explain exactly why they think the claim is excluded. It might not be so clear. And the general rule is, if the exclusion isn't very obviously applicable, it doesn't apply.
Coverage Not Just for the Homeowner
Typically, the liability coverage offered in a homeowner's policy is available to relatives of the named insured living in the household, as well as others under 21, or sometimes even older children if they full time students.
Tender Tender Tender!
Immediately you are sued, you should find any insurance you have that might cover it. For a homeowner, that will be the homeowners insurance policy. But don't try to figure it out yourself. Immediately send a copy of the lawsuit to the insurer (this act of sending the lawsuit with a demand for coverage is called a "tender" - the policy will tell you where to send it) and demand that the insurance company "defend and indemnify" you against the lawsuit. If the insurance company does not believe it has a legal obligation to defend you, it should send you a letter back quite promptly, explaining exactly why, and which exclusions, if any, it is relying on. If you still have some concerns and think that maybe the exclusion isn't so clear, that's the time to speak to a lawyer who works in this area, to see if you should push back.
No Indemnity Coverage for Intentional Wrongs - But Don't Give Up on Defense
A ubiquitous exclusion, written into all policies and even into the law in some states, is that a person cannot be insured against harming someone else--or someone else's property--intentionally. This makes a lot of sense: insurance is designed to cover unintended harms. But be careful. Just because the lawsuit against you alleges that you committed some intentional harm, that doesn't mean that this is established. You might have harmed someone or their property accidentally, but been accused of doing it deliberately! In such a case, you should still tender the lawsuit for defense and indemnity, because when the facts come out it might be clear that no harm was intended. Until the insurance company has excluded the possibility of accidental harm, it should not deny a defense based on this exclusion.
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