The property management mould claim illustrated a dynamic that most policyholders never encounter but that every policyholder should understand: the insurer can defend a claim and simultaneously reserve the right not to pay the result. This is not a contradiction. It is the system working as designed, a system that separates the duty to defend from the duty to indemnify and allows each duty to be assessed independently, at its own time, using its own standard.
This lesson distills the key principles from the course into a form that can be referenced quickly and applied practically.
The duty to defend is triggered by the possibility of coverage. The duty to indemnify is determined by the actuality of coverage. A claim can create a duty to defend, because the pleadings describe a loss that could potentially be covered, without creating a duty to indemnify, because the actual facts place the loss outside the coverage. The two duties can exist independently. The insurer can fulfill one while denying the other.
This is not intuitive. Most people assume that if the insurer is defending the claim, the claim is covered. That assumption is wrong. The defence is triggered by the possibility of coverage. The payment is triggered by the reality of coverage. The two may align. They may not. The reservation of rights exists to manage the gap between the two.