Under the BAP insuring agreement, when does the insurer have the right and the duty to defend, and what happens if there is no coverage?

• A. The insurer has the right and the duty to defend any insured against a suit seeking covered damages or cleanup costs; if there is no coverage, the insurer does not have to defend; once the limit of insurance is paid, there is no duty to defend
• B. The insurer always defends regardless of coverage
• C. The insurer never defends
• D. The insured must hire their own attorney in all cases

Answer: (B)

The main idea is that the defense obligation under the BAP arises only for claims that could be covered by the policy. The insurer has the duty to defend a lawsuit when the damages sought are potentially within the coverage for bodily injury or property damage arising from the use of a covered auto. If there is no coverage for the claim at all, the insurer has no duty to defend and will not pay defense costs for that claim. In that situation, the insured would typically need to hire their own attorney or rely on other coverage. When a claim is partly covered and partly not, the defense is generally limited to the covered portions, with the noncovered parts handled by the insured. Defense costs are usually paid as part of the policy, subject to how the contract treats limits, but the essential point is: there is a defense obligation only if coverage applies; there is no obligation if there is no coverage.