What does a policyholder's duty to defend entail?

A policyholder's duty to defend primarily involves the responsibility to provide a legal defense in the event of a lawsuit covered by the insurance policy. When an insured encounters a legal claim that falls within the terms of their policy, the insurer typically must assume the duty to defend the insured, regardless of the merit of the claim. This means that the insurer will cover the costs associated with legal representation and court expenses even if the allegations may ultimately prove unfounded or the insured is ultimately not liable.

Choosing the correct answer reflects an understanding of how liability insurance functions, emphasizing the insurer's obligation to defend the policyholder against claims that could result in a liability. This duty to defend is a fundamental component of liability insurance, ensuring that policyholders have access to legal resources without financial strain at a critical moment.