California Duty to Defend Lawyer

Statewide Representation When Your Insurance Company Refuses to Defend You

Every liability insurance policy sold in California comes with two separate promises: the duty to indemnify, meaning the insurer pays a covered claim, and the duty to defend, meaning the insurer provides and pays for a lawyer to defend you against a lawsuit. The duty to defend is broader than the duty to indemnify, and it is triggered far more easily. When an insurance company unreasonably refuses to defend a policyholder it is legally obligated to defend, that refusal is not just a breach of contract, it is insurance bad faith, and it can expose the insurer to damages far beyond the policy limits.

Pillsbury & Coleman, LLP has spent over four decades holding insurance companies accountable for failing to defend their policyholders, from small business owners and contractors to homeowners facing catastrophic personal injury judgments. We represent policyholders throughout California, not just in San Francisco, and our results include multiple published court rulings establishing that an insurer breached its duty to defend as a matter of law.

If your insurer denied a defense, dragged its feet, reserved its rights indefinitely, or left you to defend a lawsuit on your own, contact Pillsbury & Coleman, LLP for a free consultation.

What Is the Duty to Defend Under California Law?

Under California Civil Code section 2778 and decades of California Supreme Court precedent, an insurer that agrees to defend its insured against claims must provide a defense against any lawsuit that potentially seeks damages of a kind covered by the policy, even if the suit is groundless, false, or fraudulent. The insurer’s duty to defend is separate from, and broader than, its duty to indemnify.

The seminal case on this point is Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, in which the California Supreme Court held that the duty to defend is measured not just by the allegations in the complaint, but by any facts the insurer learns or should have learned during its investigation. An insurer cannot simply read the complaint, decide it does not like the label on the cause of action, and walk away.

The California Supreme Court reinforced this rule in Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, confirming that the duty to defend arises whenever the underlying claim is even potentially covered, and that any doubt about coverage must be resolved in favor of the insured.

The “Potentially Covered” Standard

California courts do not require a policyholder to prove that a claim is actually covered before the duty to defend attaches. It is enough that the claim is potentially or possibly covered under the policy. This is a deliberately low bar for the insured and a demanding one for the insurer, because it means:

• The duty to defend can exist even where the duty to indemnify ultimately does not
• An insurer must defend if there is any reasonable argument for coverage based on the complaint, known extrinsic facts, or the policy language
• Doubts about coverage are resolved in favor of the policyholder, not the insurance company
• An insurer that wants to avoid defending must be able to prove, as a matter of law, that there is no possibility of coverage under any theory; any unresolved factual issue determinative of coverage establishes the duty to defend

When Does the Duty to Defend Arise?

The duty to defend is triggered the moment an insurer receives, or should receive through reasonable investigation, notice of facts that give rise to the potential for coverage. In practice, this usually happens when a policyholder tenders a lawsuit or claim to their insurer and asks the insurer to appoint counsel. Common scenarios where California insurers owe a duty to defend include:

• A visitor is injured on a policyholder’s property and sues for premises liability
• A contractor or subcontractor is sued over alleged construction defects or a jobsite injury
• A homeowners association member or tenant is sued over an incident in a common area
• A pet owner is sued after their animal injures someone
• A business is sued by a former employee, customer, or competitor under a general liability, professional liability, or employment practices policy
• A director or officer is sued in connection with the operation of a company

What Happens When a California Insurer Wrongfully Refuses to Defend?

An insurer that wrongfully refuses to defend its policyholder faces serious legal consequences under California law:

Breach of Contract

If a lawsuit against the insured is potentially covered and the insurer fails to defend, the insurer has breached the insurance contract, regardless of how the underlying case ultimately turns out.

Insurance Bad Faith

Every California insurance policy carries an implied covenant of good faith and fair dealing. An insurer that unreasonably withholds a defense has breached that covenant and committed insurance bad faith. The importance of an insurer’s duty to act in good faith towards its policyholders was explained by the California Supreme Court in Egan v. Mutual of Omaha as follows: “[A]s a supplier of a public service rather than a manufactured product, the obligations of insurers go beyond meeting reasonable expectations of coverage. The obligations of good faith and fair dealing encompass qualities of decency and humanity inherent in the responsibilities of a fiduciary….”

Ignoring evidence that supports coverage is unreasonable. Failing to thoroughly investigate a claim before denying it is unreasonable. Failing to bring necessary information to the attention of the insured is unreasonable. Refusing to reconsider a denial after being presented with facts demonstrating the potential for coverage is also unreasonable.

Loss of Control Over the Underlying Litigation

Once an insurer wrongfully declines to defend, California law generally strips the insurer of the right to later contest issues that were litigated and decided in the underlying case, including liability and damages. An insurer that walked away from the defense does not get to come back later and relitigate the outcome.

Exposure to Damages Beyond the Policy Limits

Because failure to defend is a form of bad faith, damages are not capped at the policy limit. Depending on the facts, a policyholder may recover:

• The full amount of any judgment or reasonable settlement entered against them in the underlying case
• Consequential damages, such as lost income, damaged credit, or emotional distress caused by the insurer’s abandonment
• Punitive damages, where the insurer’s conduct was fraudulent, oppressive, or malicious
• Attorney’s fees incurred to obtain policy benefits, under Brandt v. Superior Court (1985) 37 Cal.3d 813

Your Right to Choose Your Own Attorney

Ordinarily, an insurer that agrees to defend a claim gets to select the defense attorney. But when the insurer defends under a reservation of rights and there is a genuine conflict of interest between the insurer and the policyholder, such as when the outcome of the underlying case could affect coverage, California policyholders have the right to select independent counsel, at the insurer’s expense, under San Diego Navy Federal Credit Union v. Cumis Insurance Society, Inc. (1984) 162 Cal.App.3d 358 and California Civil Code section 2860. This is commonly known as Cumis counsel. An insurer that ignores this right, or that tries to control a conflicted defense through its own hand-picked attorney, is exposing itself to additional liability.

The Duty to Accept a Reasonable Settlement

The duty to defend also includes an obligation to give the policyholder’s interests at least as much weight as the insurer’s own interests when a reasonable settlement offer is on the table. Under Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, an insurer that unreasonably refuses to settle within policy limits, and then loses at trial, can be held liable for the entire excess judgment against its policyholder, not just the policy limit. If your insurer defended you but refused a reasonable settlement, that refusal may itself be a separate act of bad faith. Learn more about excess verdict cases.

Statewide California Duty to Defend Representation

Pillsbury & Coleman, LLP is based in San Francisco, but our duty to defend and insurance bad faith practice is statewide. We represent policyholders in Northern California, Southern California, the Central Valley, and everywhere in between, from Los Angeles and San Diego to Sacramento, the East Bay, and beyond. We have obtained rulings and results for policyholders in Alameda County, Contra Costa County, San Francisco County, and courts throughout California, against many of the largest insurers doing business in the state, including Farmers/Truck Insurance Exchange, Travelers, Federated Mutual, Colony Insurance, and others. Wherever in California your insurer left you without a defense, we can help. See a full list of the California areas we serve.

Duty to Defend Case Results

The following are representative duty to defend matters handled by Pillsbury & Coleman, LLP. Case outcomes depend on the specific facts and circumstances of each matter, and past results do not guarantee a similar outcome in any future case.

Vann v. The Travelers Insurance Company

On February 14, 1997, Philip L. Pillsbury, Jr. of Pillsbury obtained one of the largest punitive damage verdicts in the country that year. A jury in Alameda County, California, issued an award in favor of Mr. Pillsbury’s client, Gordon Vann, and against The Travelers Insurance Company of $1,500,000 in compensatory damages and $25,000,000 in punitive damages. The verdict totaled $26.5 million. This verdict was upheld completely on appeal and the Travelers Insurance Company was forced to pay Mr. Vann over $30 million with accrued interest by the time all appeals had been exhausted. Read the full case summary

Y.L., et al. v. Truck Insurance Exchange, et al.

An Alameda County jury returned a verdict against Truck Insurance Exchange, one of the Farmers Group of Companies, finding that Farmers acted in bad faith in refusing to defend its insured in an underlying dog mauling lawsuit that resulted in a $10 million judgment ($13.1 million with interest) against its insured. Liang, et al. v. Truck Ins. Exch., Alameda County Superior Court, Case No. CV24063297. Trial counsel was Terry Coleman of Pillsbury & Coleman, LLP. Defense counsel was Julie Hyashida of BHC Law Group. The trial judge was the Hon. Chad Stegeman, new to Alameda’s civil trial department. Read the full case summary and court orders.

Tucker v. Travelers (Aguilar v. The Travelers Indemnity Company)

San Francisco County Superior Court, Case No. CGC-17-560073. The Travelers Indemnity Company of Connecticut wrongfully refused to defend its insured, an excavating and grading contractor, after a jobsite accident left a laborer with catastrophic injuries. Travelers’ insured was left to settle and assign his claims, resulting in an $18.5 million judgment. Pillsbury & Coleman obtained summary adjudication establishing that Travelers breached its duty to defend as a matter of law. Read the full case summary.

Howard v. Federated Mutual Insurance Company

San Francisco County Superior Court, Case No. CGC-22-601299. Federated Mutual refused to provide its additional insured with a defense against two lawsuits arising from a catastrophic jobsite injury, forcing the insured toward bankruptcy and an eventual $16.9 million judgment. Pillsbury & Coleman pursued breach of contract and bad faith claims against Federated on behalf of both the injured worker and the insured and obtained summary adjudication establishing that Federated breached its duty to defend as a matter of law. Read the full case summary.

Kruck v. Colony Insurance Company

Alameda County Superior Court, Case No. RG18916781. Pillsbury & Coleman was retained to evaluate a coverage denial after our client suffered a severe brain injury when a tree limb fell on him. Read the full case summary.

Additional Duty to Defend Matters

Pillsbury & Coleman has litigated duty to defend and failure to defend claims against insurers throughout California in matters including:

• Mersky v. Certain Underwriters of Lloyds of London, Alameda County Superior Court, Case No. 815502-9 (summary judgment ruling against Lloyd’s that it breached the duty to defend and was liable for underlying $10 million judgment against its insured);
• Cunningham v. Clarendon America Insurance Co., Contra Costa County Superior Court, Case No. C-03-02454 (summary judgment ruling against Clarendon that it breached the duty to defend and was liable for underlying judgment against its insured)
• Barger-Carey v. Republic Indemnity Company of America, San Francisco County Superior Court, Case No. CGC-07-46644
• Medina, et al. v. Preferred Contractors Ins. Co. Risk Retention Group, Inc., Alameda County Superior Court, Case No. RG-17-848745

Additional case results, including matters where confidentiality agreements restrict the parties’ names, can be reviewed when you speak with an attorney at our firm.

Frequently Asked Questions About the Duty to Defend in California

Talk to a California Duty to Defend Attorney Today

If your insurance company failed to defend you in a California lawsuit, you may be entitled to significant compensation, even if you have already lost the underlying case. Contact Pillsbury & Coleman, LLP or call our San Francisco office at (415) 433-8000 for a free consultation. We represent policyholders throughout California and nationwide. We do not handle auto insurance claims.