Draft an information letter to the client, Mr. Daniel Hope, Vice President, National Insurance Company. In the letter, summarize the state law concerning National’s duty to defend persons it insures under its automobile insurance policies. Draft the letter for the signature of your supervising attorney, Alice Black. Use the letterhead presented in the Application section of this chapter. National Insurance Company’s address is 459 Twenty-Second Street, Friendly, NW, 00065. There is no statutory law governing an insurance company’s duty to defend its insured. The relevant case law follows.
Case Law: Wrickles v. Washington Ins. Co., 61 N. Wash. 104 (Ct. App. 2008). Where it is determined that the insurer has unjustifiably failed to defend against claims against its insured, the insurer is liable for any judgment entered against its insured. In addition, the insurer may be liable for any reasonable settlement entered into by the insured. State Farm Ins. Co. v. Peterson, 56 N. Wash. 38 (1995). The obligation to defend arises out of and must be found in the insuring agreement promising to defend the insured against liability. Alison v. Lincoln Ins. Co., 60 N. Wash. 677 (Ct. App. 2000). The duty to defend is triggered when an injured party’s complaint against the insured states facts that bring the case within the coverage of the policy.

Jamison v. Lincoln Ins. Co., 58 N. Wash. 430 (1998). An insurance company may refuse to defend its insured only when the allegations in the complaint are completely outside the insurance policy coverage. Wilson v. Washington Ins. Co., 59 N. Wash. 980 (1999). If the allegations in the complaint against the insured may fall within the coverage of the policy but are potentially excluded by any noncoverage provision in the policy, then the insurer is under a duty to defend the insured in the primary action. The duty continues until a court having jurisdiction over the case finds that the insurer is relieved of the liability under the noncoverage provisions of the policy.