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📋 '''Duty to indemnify''' is the legal obligation an [[Definition:Insurance carrier | insurance carrier]] owes its [[Definition:Policyholder | policyholder]] to pay covered losses, damages, or judgments that fall within the scope of the [[Definition:Insurance policy | insurance policy]]. Unlike the broader [[Definition:Duty to defend | duty to defend]] — which requires the insurer to provide legal representation when a covered claim is alleged — the duty to indemnify is narrower and ultimately determined by the actual facts established at the conclusion of litigation or settlement. It represents the core financial promise at the heart of every insurance contract: that the insurer will make the insured whole, up to the [[Definition:Policy limit | policy limits]], for losses the policy was designed to cover.

⚙️ When a [[Definition:Claim | claim]] is brought against a policyholder, the insurer first evaluates whether the allegations could potentially trigger coverage, which activates the duty to defend. The duty to indemnify, however, crystallizes only when liability is established and the resulting damages clearly fall within the policy's [[Definition:Coverage | coverage]] grant, after accounting for [[Definition:Exclusion | exclusions]], [[Definition:Deductible | deductibles]], and [[Definition:Self-insured retention (SIR) | self-insured retentions]]. In practice, insurers often resolve both duties simultaneously through [[Definition:Settlement | settlement]] negotiations, but disputes arise when an insurer acknowledges a duty to defend yet contests the duty to indemnify — a scenario common in complex [[Definition:Liability insurance | liability]] lines such as [[Definition:Directors and officers insurance (D&O) | directors and officers]], [[Definition:Professional liability insurance | professional liability]], and [[Definition:Commercial general liability insurance (CGL) | commercial general liability]] policies.

💡 For insurers and policyholders alike, clarity around this obligation shapes the economics of [[Definition:Claims management | claims management]] and litigation strategy. A carrier that wrongfully refuses to indemnify a covered loss exposes itself to [[Definition:Bad faith | bad faith]] liability, consequential damages, and regulatory scrutiny — risks that can dwarf the original claim amount. Policyholders, meanwhile, rely on the certainty of indemnification when purchasing coverage, making this duty a cornerstone of [[Definition:Insurable interest | insurable interest]] and market trust. Disputes over the duty to indemnify also drive significant [[Definition:Insurance law | insurance law]] precedent, particularly in jurisdictions where courts distinguish sharply between the two duties and impose different standards of proof for each.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Duty to defend]]
* [[Definition:Bad faith]]
* [[Definition:Coverage]]
* [[Definition:Policy limit]]
* [[Definition:Indemnity]]
* [[Definition:Reservation of rights]]
{{Div col end}}

Definition:Duty to indemnify - Revision history

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