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A California court of appeal has held that when an insurance company issues a liability policy, agreeing to indemnify its insured against a third party claim for damages covered under the policy and to defend the insured against any such claim, the insurer does not have a duty to defend the insured against a third party lawsuit seeking injunctive relief but no compensatory damages. The court of appeal found that the underlying plaintiffs’ failure to seek compensatory damages against the insured meant that the dispute was not a claim for damages under the policy. The insurer’s defense obligation requires it to provide the insured with a defense against a claim seeking damages potentially payable under the policy, not to defend the insured’s honor or otherwise assist it in resolving a non-monetary dispute, the appeals court declared.

The Case

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