When does a personal auto policy cease to defend the insured?

A personal auto policy ceases to defend the insured when the limits are exhausted by payments. In the context of insurance, the duty to defend is typically tied to the policy limits. Once the insurer has paid out claims that reach the maximum limit of liability coverage, they are no longer obligated to provide legal defense for any remaining claims or suits related to that incident.

Defense costs are separate from the settlement amounts or damages awarded in claims. Insurance policies often stipulate that the costs of defense are included within the policy limits. Therefore, if the defense costs consume all available limits, the insurer's obligation to defend ends. Understanding this concept is crucial for policyholders as it emphasizes the importance of purchasing sufficient coverage to avoid the potential gap in defense availability after limits are reached.