What is the insurer's duty to defend?

The insurer's duty to defend is fundamentally tied to the obligation to provide legal defense for the insured against claims that are covered by the insurance policy. This encompasses situations where the claims, if proven true, would potentially lead to liability covered under the terms of the policy. Even if a claim appears to be without merit or ultimately does not succeed, the insurer must still provide a defense if there is a reasonable possibility that the allegations could fall within the scope of coverage.

This duty is broader than the duty to indemnify, which only applies after a liability has been established and the claim has been adjudicated. The insurer is required to defend any suit where the allegations, if proven, would be covered by the policy, reflecting the principle that it is better to provide a defense in circumstances where there may be potential liability rather than wait for claims to unfold in court.

In contrast, the other options presented do not accurately depict this duty. The obligation to settle all claims out of court would suggest a broader mandate than is typically required, as settlement is a strategy that may or may not arise depending on the circumstances. The insurance company's right to collect from third parties pertains to subrogation rather than the defense of a claim. Lastly, the right to deny claims based