The “duty to defend” and “duty to indemnify” describe different obligations that an insurer may owe to an insured who has been formally alleged to have committed wrongdoing. The wording of an insurance policy dictates whether the insurer has agreed to assume a duty to defend and/or a duty to indemnify. Though these duties are often confused, it is important to consider their difference in scope and the stage of litigation during which they are often triggered.
For example, the duty to defend can be considered forward-looking in that is often triggered early in litigation as a preliminary matter. As the Supreme Court of Canada has summarized, the duty to defend is triggered “[i]f the claim alleges a state of facts which, if proven, would fall within the coverage of the policy”. Neither the truth of the allegations nor the possible outcome of the litigation is relevant to this assessment.
In contrast, the duty to indemnify is backward-looking in that is often triggered at the end of litigation. The duty to indemnify is only engaged when the claimant’s allegations are proven at trial. Accordingly, the duty to indemnify is narrower than the duty to defend and is less often triggered.
This article has been prepared and submitted by Deepshikha Dutt (Dentons Canada LLP) and Andrea J. Sanche (Ricketts Harris LLP), please contact them for further information.