Auto insurance companies have a responsibility to defend their clients when they are accused of liability. Almost all auto insurance policies make these two promises to their insureds:
- A promise to indemnify, which is pay for the insured’s legal liability, up to the policy limits;
- A promise to defend, meaning the insurer hires legal counsel and defends insured against the lawsuit and cover legal fees.
If an insurer is faced with a covered third-party claim, the insurer is responsible to defend the claim and pay any monetary award entered for that covered claim. Sounds straightforward, but in practice, insurers don’t always make it so easy. There are often exceptions and rules – not all of which may be explicitly spelled out on the policy. When disputes arise, it can impact the third-party case, filed by the person injured in the auto accident.
One such dispute was recently before the U.S. Court of Appeals for the Seventh Circuit, following a serious crash in Illinois. It involves a case of several teenagers and a “borrowed” car. The car belonged to a 16-year-old girl, who borrowed it on August 2013 night in question to go to a party. Another, also 16 and defendant in this action, ultimately obtained the keys to that vehicle. How she got those keys was in dispute, as the girl whose mother owned the car said she never gave them to her, but rather to another friend. Nonetheless, defendant left the party with that vehicle and picked up several passengers – plaintiff among them. Continue reading →