In Part 1 of this series, we covered how Texas decides whether your insurer must defend you against a lawsuit. But the defense is only half of what a liability policy promises. The other half is indemnity, the promise to actually pay. Policyholders routinely treat these as the same thing. They are not, and the difference decides who pays the lawyer, who pays the judgment, and when each fight happens.
Two Separate Duties
Texas treats the duty to defend and the duty to indemnify as distinct and separate obligations. See Farmers Texas County Mutual Insurance Co. v. Griffin, 955 S.W.2d 81 (Tex. 1997). One can exist without the other. Your insurer can owe you a defense and, in the end, owe nothing on the judgment. It can also, in the right case, owe nothing on the defense yet still owe indemnity. See D.R. Horton-Texas, Ltd. v. Markel International Insurance Co., 300 S.W.3d 740 (Tex. 2009).
That independence surprises people. It is easy to assume that if the carrier is paying for the lawyer, it has accepted the claim. It has not necessarily done so.
The Duty to Defend Is Broad and Decided Early
The duty to defend is the front-end promise. It is triggered at the outset of the lawsuit, decided on the pleadings under the eight-corners rule, and read broadly in favor of coverage. If any allegation in the petition is potentially within the policy, the carrier must defend the entire suit. It defends first and sorts out coverage later.
The Duty to Indemnify Is Narrow and Decided Late
The duty to indemnify is the back-end promise. It does not turn on what the plaintiff alleged. It turns on what is actually established. As a result, it is usually decided only after liability and the underlying facts are resolved, and it is narrower than the duty to defend. The question is no longer “could this claim be covered.” It is “is this proven liability actually covered.”
Why the Timing Matters
Picture a petition that alleges both negligence, which your policy covers, and assault, which it excludes. Because the negligence theory is potentially covered, your carrier must defend the whole lawsuit. But if the case is tried and the jury finds that you acted intentionally rather than negligently, the insurer may owe nothing in indemnity. The defense obligation was real. The indemnity obligation never matured. Same lawsuit, two different answers, arrived at two different times.
The Exception: When Indemnity Can Be Decided Early
Ordinarily indemnity has to wait for the underlying facts. There is one well-recognized shortcut. When the same reasons that defeat the duty to defend also eliminate any possibility that the insurer could ever owe indemnity, a court can decide both at once. See Griffin, 955 S.W.2d at 84. In Griffin itself, the claim arose from a drive-by shooting, and the policy covered only injuries arising from the use of an auto. No version of the proven facts could bring a shooting within auto coverage, so there was neither a duty to defend nor any possible duty to indemnify.
What This Means for You
Three practical points follow. First, a defense provided under a reservation of rights is not a coverage concession. The carrier is defending while expressly reserving the right to deny indemnity later. Second, track the two questions separately from day one, because they can come out differently. Third, how the underlying case is tried can determine the indemnity outcome, so the defense strategy and the coverage position need to be coordinated, not handled in isolation.
The defense fight is now. The payment fight may come later, and it may turn on findings that have not been made yet.
Next in this series: the cracks in the eight-corners rule. How Avalos and Monroe opened the door to extrinsic evidence, and how narrow that door really is.
Matthew M. Clarke is a shareholder at Kelley Clarke, PC and Chair of Litigation. He represents businesses, investors, and policyholders in Texas insurance coverage and commercial disputes. This article is for informational purposes only and does not constitute legal advice.
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