This question usually comes up after a car accident, or when a slip and fall accident or dog bite is covered by a homeowners' insurance policy.
If You Were Injured
If you were the one who was injured, and you are making a "first party" claim under your own insurance policy -- after a car accident, for example -- the insurance company will not pay for you to sue the party who was responsible for causing the accident, nor will the insurer sue them on your behalf. Your insurance company's obligation is to investigate and pay any valid claim that is covered by your policy, up to the dollar limits of your coverage.
If you want to make a third-party claim with the other driver's insurance company, and try to negotiate a settlement with them, you're free to do so. (Learn more about How Third-Party Car Insurance Claims Work, from the Nolo Network.) You're even free to file a lawsuit against the other driver, but your insurance company won't play a role in that suit. So if you want to hire a lawyer, you'll need to do so on your own.
But if you are worried about the cost of hiring an attorney, keep in mind that most personal injury cases are handled on a contingency basis. This means that you pay no upfront costs, and your personal injury lawyer is only paid a fee for representing you if you receive funds via settlement or trial verdict. Most experienced personal injury lawyers offer free consultations to potential clients too. (Learn more: What is a Contingency Fee?)
If You (Allegedly) Caused the Injury
The situation is different if someone is claiming that you caused their injury, and you have an insurance policy in place that applies to the underlying accident. Insurance companies have what’s referred to as a “duty to defend” when a policyholder is sued over an incident that is covered by their policy. Generally, any time a successful lawsuit over the matter would result in the insurance company covering damages, they are going to have a duty to defend the policyholder.
For example, if someone slips and falls in your home, and they file a personal injury lawsuit against you, your homeowner’s insurance company will pay the cost of hiring an attorney to defend you in that lawsuit (assuming the incident is covered, of course). The insurance company would also pay other costs associated with the lawsuit, such as filing fees, fees for obtaining transcripts and records, and the cost of hiring any necessary expert witnesses. In addition, if a judgment is entered against you, or if a settlement is agreed upon, your insurance company will pay the full amount, up to the specific limits established in your policy. This is referred to as a “duty to indemnify.” Once a settlement or court award reaches the dollar limits established in the policy, the insurer's duty to indemnify ends.
Additionally, if the insured person took actions that amounted to a breach of their contract with the insurance company, the insurer can refuse to cover the cost of a lawsuit. In the above example, if you took some kind of intentional act or demonstrated extreme recklessness in causing your guest's slip and fall, the insurance company may not have a duty to defend you in any resulting claim.
Learn more about The Role of Insurance in Settling a Personal Injury Case.