This CLE seminar examines insurance coverage issues including the evolution and preparation of the reservation of rights letters. This seminar covers the growth of non-waiver agreements, emergence of the reservation of rights letter, required elements of a reservation of rights letter, the consequences of sending reservation of rights letters and waiver and estoppel. Both policyholder and insurance company rights and obligations are reviewed.
When an insured is sued, typically it tenders the suit to its insurance carrier and requests a defense and indemnification. The insurer will evaluate the suit to determine whether there is a potential for coverage under an insurance policy. The insurer will then take the position that the matter is covered and assigned defense counsel, determined that the matter is not covered under the policy and deny coverage for the suit or, as is often the case, take the position that there is insufficient information to determine the status of coverage upon its initial evaluation of the complaint and policy. Under this circumstance, the insurer needs a mechanism to notify the insured that it may not indemnify the insured for the claims asserted within the complaint.
A reservation of rights notice is a declaration by an insurer, delivered to an insured stating that the insurer reserves the right to contest liability under a policy. Insurers generally use reservation of rights notices to preclude inferences that might otherwise be drawn by an insured or by a court from the conduct of the insurer. This notice suspends operation of waiver and estoppel when coverage issues exist.
Where there are facts which might exclude coverage, the insurer cannot always defend with complete fidelity. There must be a proceeding at which the insurer and the insured are each represented by counsel of their own choice to fight out their differences. Such a testing of the insurer's liability may take the form of a declaratory judgment. If the insurer refuses to defend and awaits the determination of its obligation in a subsequent proceeding, it acts at its peril, and if it guesses wrong it must bear the consequences of its breach of contract.
This program examines the development of the reservation of rights letter, time limitations for issuing the reservation of rights letter and differing treatment in multiple jurisdictions including New York, California, Florida and Illinois |
