INSURERS’ OBLIGATION TO INDEMNIFY
Under an insurance policy, an insurance company has two principal obligations. One of those obligations in the insurance company’s duty to indemnify the insured in the event of a claim within the policy’s coverage. The insurance company’s duty to indemnify is usually triggered within the insured’s legal obligation to pay damages ins established either through a court judgment or a settlement. The duty to indemnify dependents on facts and not speculation. This makes the duty to indemnify narrower in scope than an insurance company’s duty to defend an insured.
The duty to indemnify an insured is controlled by statute and common law. After an insured presents a claim to an insurance company, the insurance company must do something. If the insurance company fails to take appropriate action, it may be stopped from denying coverage based on an available defense, like the insured’s failure to give the insurance company proper notice of the claim. If the insurance company accepts the claim, it must indemnify the insurance to the limits set fourth in the insurance policy. Alternatively, the insurance company may disclaim coverage or it may proceed under a reservation of rights.
Once an insurance company’s election to repair a damaged automobile is binding on the insured. It creates a new contract under which the insurance company is bound to restore the vehicle. If the insured suffers damages from the insurance company’s delay in making the repairs, the insured may be able to recover damages for the loss of the use of the automobile. Those damaged can be measured in the reasonable rental value of the vehicle. An insurance company’s obligation to repair a vehicle is not fulfilled until it pays for the cost of the repair less any deductible provided by the insurance policy.