It's about ethical problem in dealing with insurance claims.  Should an insurance company have a duty to defend its insured when the defense will cost the insurance company more than it would cost to simply pay the plaintiff's claim?  For example, should an auto insurance company have a duty to spend $30,000 to defend its insured when the plaintiff's claim is under $30,000.  What ethical problems arise when the outcome would affect the insured's driving record and, therefore, the rates that the insured would be charged?  What ethical problems can arise with this duty to defend when both drivers are covered by the same insurance company?

Part A

There is no easy answer to this question, as it depends on a number of factors specific to each situation. Some factors that could influence an insurance company's decision include the amount of the claim, the likelihood of winning a defense, and the costs associated with defending the claim. 

Part B

There are a few ethical problems that could arise in this situation. One issue is that the insurance company could be accused of not defending its insured fairly, in order to save money. Another issue is that the insurance company could be accused of engaging in unfair business practices by increasing the rates of an insured who has been involved in an accident, even if the insured was not at fault.

Part C

One ethical problem that can arise is that the insurance company may be more likely to defend the driver who is not at fault in order to protect its own financial interests. This can create tension between the two drivers and may result in the at-fault driver receiving a lesser settlement than they would have if the insurance company had not been involved.

Step-by-step explanation

Part A

• Generally speaking, however, insurance companies are in the business of minimizing their risks and expenses. This means that they are more likely to pay a claim than to spend money on a defense that is unlikely to succeed. In some cases, however, it may be in the company's best interests to defend its insured, even if it means spending more money than the claim is worth. 
• For example, if the insured is likely to lose the case but the company has a strong defense, it may be worth spending more money to defend the claim than to simply pay the plaintiff. On the other hand, if the company has a weak defense or if the claim is very large, it may be more cost effective to simply pay the claim. 
• There can be a number of impacts on both the insurance company and the insured if the company decides to defend the claim. For the company, defending the claim can be costly and may not be worth the expense if the company is not likely to win. This can impact the company's bottom line and may cause it to raise its rates. 
• For the insured, defending the claim can also be costly. If the company does not have a strong defense, the insured may end up paying for the defense out of pocket. This can be a significant expense, especially if the case goes to trial.

Part B

• The ethical problems mentioned above could have a number of impacts on the insured. If the insurance company does not defend the insured fairly, the insured may be found liable for the accident and could face penalties, such as increased insurance rates. If the insurance company increases the rates of an insured who was not at fault in an accident, the insured may feel that they are being unfairly punished.

Part C

• Another ethical problem that can arise is that the insurance company may be more likely to defend the driver who is not at fault in order to protect its own financial interests. This can create tension between the two drivers and may result in the at-fault driver receiving a lesser settlement than they would have if the insurance company had not been involved. This can also lead to the insurance company spending more money on the defense than it would have cost to simply pay the plaintiff's claim.
• There are a number of ethical problems that can arise when an insurance company has a duty to defend its insured. Some of these problems include the company being more likely to defend the driver who is not at fault in order to protect its own financial interests, and the company spending more money on the defense than it would have cost to simply pay the plaintiff's claim. These problems can have a negative impact on both the drivers involved and the insurance company itself.