Jamie has a liability policy with ABC insurance. He is being sued for damages by Margie, who is also an ABC policyholder. Which statement best describes ABC's duties?

• A. It has a higher duty to Jamie
• B. It has a higher duty to Margie
• C. It has no special duty
• D. It has equal duties to both

Answer: (A)

The main idea is that a liability insurer’s duties flow to the insured, not to every person who happens to be involved in the claim. Jamie is the policyholder and the defendant in the suit, so ABC’s primary obligation is to defend Jamie and to pay any outcome within the policy limits. Margie, though she is a policyholder too, is the plaintiff in this dispute and not the insured under Jamie’s policy. That means ABC’s duties aren’t directed to her in the same way; their responsibility is to Jamie. If a conflicting interest arises between Jamie and Margie, the insurer must address it, often by arranging independent counsel for Jamie, but that doesn’t change which party the policy obligates the insurer to defend first. Therefore, ABC has a higher duty to Jamie. The other options don’t fit because the insurer doesn’t owe the same direct duty to the claimant just because she also holds a policy, and the duties aren’t inherently equal to both when only one is the insured under a given liability policy.