Nature and Effects of "Direction of Defense Clause" in Liability Insurance

Liability and Insurance policies usually include provisions which state that the insurer may defend against any suit, by third party injured, alleging bodily injury or property damage resulting from an occurrence that is within the scope of the insurance coverage. This type of provision serves often to afford the insurer the exclusive right in regard to exercising control over the defense of an insured; by which the insurer protects its financial interest in the matter.There are many questions regarding the legal nature, validity and, particularly, positive and negative effects of such a provision upon the insurer and the insured.The article examines the various aspects of these questions and their responses in Iranian law with a comparative view.