Duty to indemnify refers to an insurance company’s (insurer’s) obligation to indemnify the insured against any loss or damage when the claim(s) asserted against the insured (policyholder) may be covered by a liability insurance policy—which is a policy that may cover claims for personal injury and property damage suffered by third parties.

The duty to indemnify is one of the insurer’s primary duties under most liability insurance policies but is narrower than the duty to defend the insured. The duty to indemnify the insured generally arises at a later date when the liability of the insured is established and a review of the facts developed during the litigation or claims investigation process must be examined to determine if they fall within the insurer’s indemnification obligations under the insurance policy.

In California, the duty to indemnify is a legal obligation of an insurance company to cover the financial losses of the insured when a claim falls within the scope of the insurance policy's coverage. This duty is typically found in liability insurance policies, which may include coverage for third-party personal injury and property damage claims. The duty to indemnify is distinct from the insurer's duty to defend the insured in a lawsuit, which is generally broader. The duty to indemnify is triggered when the insured's liability is established, either through a settlement or a legal judgment. At that point, the insurer must review the facts and circumstances of the claim to determine if they align with the coverage provisions of the policy. California law requires that the interpretation of insurance policies is done in a manner that fulfills the insured's reasonable expectations of coverage, and any ambiguities in the policy are typically construed in favor of the insured. However, the insurer is only obligated to indemnify for losses that are explicitly covered by the policy.