Insurance generally refers to a legally enforceable contract—known as an insurance policy—in which an insurance company (the insurer) agrees to (1) defend the person or entity who purchased the policy (the insured) against future claims or lawsuits; and (2) pay for losses (usually financial) that are covered under the written terms of the insurance policy.
These two primary legal obligations of an insurer under a liability insurance policy are known as the duty to defend and the duty to indemnify.
Insurance may be purchased to cover a wide range of future claims or losses—ranging from health insurance to pay future medical expenses, to commercial general liability (CGL) to cover future claims and losses incurred by a business.
In Texas, insurance is regulated by the Texas Department of Insurance (TDI), which oversees the enforcement of state insurance laws and ensures that the insurance policies sold in the state meet regulatory standards. The duty to defend obligates the insurer to provide a defense for the insured against claims or lawsuits that fall within the scope of the insurance policy. The duty to indemnify means the insurer must pay for any covered losses or claims. These duties are fundamental to liability insurance policies, such as commercial general liability (CGL) policies, which businesses often purchase to protect against potential legal claims. Texas follows what is known as the 'eight corners rule' to determine an insurer's duty to defend, which compares the four corners of the insurance policy with the four corners of the complaint to decide if the allegations trigger coverage. If the facts alleged in the complaint potentially fall within the policy's coverage, the insurer must defend the insured. Insurance policies in Texas can cover various risks, including health, auto, property, and professional liability, among others. It's important for policyholders to understand the specific terms and coverage limits of their policies, and they may consult with an attorney for guidance on insurance matters.
