Under a PAP, when does the insurance company cease to defend the insured?

• A. The insurance company is not obligated to defend the insured
• B. After the case has been resolved
• C. When the policy limit is exhausted
• D. At the policy's expiration

Answer: (C)

Under a Personal Auto Policy, the insurer's duty to defend the insured lasts as long as there is coverage left under the policy limits. Defense costs and any settlements or judgments count against those limits, so once the total amount paid reaches the policy limit, there is no remaining coverage to defend further claims. At that point the insurer ceases to have an obligation to defend future claims arising from the same incident. The defense isn’t guaranteed to continue indefinitely or simply end at case resolution or policy expiration; it ends specifically when the policy limit is exhausted.