Georgia Property & Casualty Practice Exam

If Lenny was not found to be at fault, why would his insurer still stop defending him?

1. A.) If there was no coverage for liability

2. B.) If the claim amount exceeded policy limits

3. C.) If Lenny requested a different lawyer

4. D.) If the claim was frivolous

The correct answer is: B.) If the claim amount exceeded policy limits

When evaluating why Lenny's insurer would stop defending him even if he was not found to be at fault, the context of policy limits becomes crucial. Insurers have contractual obligations to defend their clients as long as there is a potential for coverage under the policy. However, if a claim amount exceeds the policy limits, the insurer may choose to stop providing a defense. This scenario occurs because once the claims surpass the coverage limits, any additional liabilities fall outside of the insurer's responsibility. Thus, their obligation to defend Lenny is tied directly to the coverage they can provide, and if the claim escalates beyond that, they are no longer bound to continue legal representation. Understanding this principle helps clarify that while liability might not be an issue for Lenny, the limits of his insurance policy do ultimately affect the insurer’s obligation to defend in legal matters. Other options, such as no coverage for liability, a request for a different lawyer, or claims being frivolous, do not directly correspond to the situation where the amount of a claim surpasses what is covered under the policy limits.