U.S. District Court explains difference between liability and indemnity policies

In my last couple of posts I have been writing about Mut. Ins. Co. v. Murphy, in which the United States District Court for the District of Massachusetts held that an insurer that did not exercise control over defense and settlement of a claim could not be liable for unfair claim settlement practices.

The decision contains an interesting discussion about the difference between liability policies and indemnity policies. A liability policy confers the right to settle and defend any claims on the insurer. An indemnity policy leaves the duty to settle and defend on the insured.

The court described the Mutual policy at issue, which I described in detail in my last post, as a "hybrid" because the insurer could associate with defense and settlement of claims but the insured was not excluded from participating in the defense and indemnity.