A reservation of rights defense is a means by which a liability insurance carrier agrees to protect and defend its insured against a claim or suit while reserving the right to further evaluate and perhaps even deny coverage for some or all of the claim. It is most commonly used when the claim or suit contains both covered and non-covered allegations, when the allegations are in excess of policy limits, or when the insurer is still investigating its defense and coverage obligations. For the insurer, a reservation of rights provides the flexibility to satisfy its duty to defend without committing to coverage. For the business owner who ultimately may have to pay for an adverse judgment, it requires careful monitoring and attention.
Maryland Reservation of Rights Letter is a legal document that is typically issued by an insurance company to inform a policyholder that coverage for a specific claim may be denied. The letter serves as a notice that the insurance company is reserving its right to deny coverage or defend the claim under the policy, while still providing the insured with a defense in the meantime. This written communication is crucial in Maryland, as it ensures transparency and legal understanding between both parties involved. It defines the insurance company's stance regarding the claim and allows the insured to take necessary steps accordingly. By reserving their rights, insurance companies usually aim to protect themselves from potential obligations that may not be covered under the policy. It is important to note that there can be different types of Reservation of Rights Letters in Maryland, depending on the circumstances of the claim. These variations may include: 1. Coverage Exclusion: This type of Reservation of Rights Letter is issued when the insurance company believes that the claim falls under an exclusion specified in the insurance policy. Hence, they may reserve their right to deny coverage based on that exclusion. 2. Investigation: In some cases, where there are uncertainties or insufficient information regarding the claim, the insurance company may issue a Reservation of Rights Letter to conduct further investigation. This allows them to analyze the facts of the claim and determine if coverage can be provided. 3. Late Notice: If the insured fails to notify the insurance company within the specified timeframe after an incident or loss, the insurance company may send a Reservation of Rights Letter to assert that the delayed notice breaches the policy terms. Consequently, they may reserve their rights to deny coverage due to the late notice. 4. Multiple Claims: When there are multiple claims filed under a policy, the insurance company may issue a Reservation of Rights Letter specifically addressing each claim individually. This ensures clarity and helps in distinguishing between claims that may be covered and those that may not. To summarize, a Maryland Reservation of Rights Letter is a significant legal document that the insurance company issues to inform the policyholder about their intention to potentially deny coverage for a specific claim. These letters aim to maintain transparency in the insurance process and safeguard the interests of both parties involved in the claim.
