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 New Jersey, the duty to indemnify is a legal obligation of an insurance company to cover the financial costs of a claim against the insured party when such a claim is found to be within the scope of the insurance policy's coverage. This duty is typically outlined 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, as it is contingent upon the insured's liability being established, often through litigation or a claims investigation process. Once liability is confirmed, the insurer must review the facts of the case to determine if the event or damage is covered under the policy terms. If it is, the insurer is then required to pay the claim up to the limits specified in the policy. New Jersey courts will interpret the insurance policy language to ascertain the extent of the insurer's indemnification obligations, and any ambiguities in the policy are generally construed in favor of the insured.