The duty to defend is always broader than the duty to indemnify. California case law, and that of most states, requires that the insurer provide a defense if there is "potential" that coverage applies. This has resulted in allegations that create, through creative lawyering, a "potential" for coverage. The Supreme Court of California recently concluded that there is a line that the potentiality arguments cannot cross.

In Jonathan Delgado v. Interinsurance Exchange of the Automobile Club of Southern California (Aug. 3, 2009), a suit for damages was brought against Craig Reid, who was insured under a homeowner's insurance policy issued by the Interinsurance Exchange of the Automobile Club of Southern California (ACSC). The homeowners policy provided coverage for, among other things, Reid's liability to others from "accidents" resulting in bodily injury. Reid, while the policy was in effect, "hit and kicked…Jonathan Delgado" with the intent to cause injury to Delgado.

When Delgado sued, Reid asked ACSC to defend him. ACSC denied coverage and refused to provide Reid with a defense on the basis that assault and battery is never accidental and therefore, because there was no accident, there was no obligation to defend or indemnify Reid.