Another part of the insuring agreement is coverage for "covered pollution cost or expense" (some limits apply). It is important to note that the insurer will only pay for the covered pollution costs if there is either bodily injury or property damage that is caused by the same accident that causes the covered pollution cost or expense.
The insurer has the right and duty to defend any insured against a suit. There is no intention on the part of the insurer "to defend any insured against a suit seeking damages for bodily injury or property damage to which the insurance does not apply". As a general rule, however, the duty to defend is said to be broader than the duty to pay damages. If the allegations of a complaint against the insured are within coverage, even if they may be false or fraudulent, the insurer is ordinarily obliged to defend. If a complaint against the insured contains numerous allegations, some potentially within policy coverage and others that are not, the insurer will still usually be required to defend. In addition to expressing its right and duty to defend, the insurer also reserves the right to investigate and settle any claim or suit as it considers appropriate; the insurer’s duty to defend or settle ends when the liability coverage limit of insurance has been exhausted by payment of judgments or settlements.
The promises to pay damages and to defend any claim or suit asking for those damages are separate and independent promises. The insurer has a duty to indemnify and a duty to defend an insured. That is why defense costs are considered to be in addition to the limit of liability. For example, if the policy has a limit of liability of $300,000, this full amount is available for indemnification; an attorney’s fee of $10,000 plus court costs of $2,000 will not reduce the limit of liability by the $12,000 figure. However, the insurer’s duty to settle or defend does end when the limit of liability has been exhausted by payment of judgments or settlements