San Miguel Community Assn. v. State Farm General Ins.
Question: When an insurance company issues a liability policy, agreeing to indemnify its insured against a third party claim for damages covered under the policy, and to defend the insured against any such claim, does the insurer have a duty to defend the insured against a third party lawsuit seeking injunctive relief but no compensatory damages? Answer: No. The third party’s failure to seek compensatory damages against the insured means the dispute is not a claim for damages under the policy. The insurer’s defense obligation requires it to provide the insured with a defense against a claim seeking damages potentially payable under the policy, not to defend the insured’s honor or otherwise assist it in resolving a nonmonetary dispute.
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