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.
A South Carolina Reservation of Rights Letter is a legal document issued by an insurance company to its policyholders, indicating that the insurer reserves its right to deny coverage or defend claims under certain circumstances. This letter defines the specific terms and conditions within the insurance policy that may affect the insurer's obligations in providing coverage. In the state of South Carolina, there are various types of Reservation of Rights Letters, depending on the nature of the insurance policy and the circumstances of a claim. Some key types of Reservation of Rights Letters include: 1. Liability Insurance Reservation of Rights Letter: This type of letter is typically issued in cases where a liability claim has been filed against the insured. It aims to inform the policyholder that the insurer is investigating the claim but reserves the right to deny coverage if it determines that the claimed event is not covered under the policy's terms. 2. Property Insurance Reservation of Rights Letter: This letter is commonly used in property insurance cases, such as homeowners' insurance or commercial property insurance. It notifies the policyholder that the insurer is investigating a claim for property damage or loss, but reserves the right to deny coverage if it finds any indication of policy violations or exclusions. 3. Personal Injury Protection Reservation of Rights Letter: To address personal injury claims arising from car accidents, a Reservation of Rights Letter may be issued under a personal injury protection (PIP) insurance policy. This letter outlines the insurer's intentions to investigate the claim and reserves its right to limit or deny coverage based on policy provisions. 4. Professional Liability Insurance Reservation of Rights Letter: Professionals, such as doctors, lawyers, or architects, may receive a Reservation of Rights Letter if a claim is made against their professional liability insurance. It states that the insurer will investigate the claim while preserving its right to refuse coverage if the alleged incident falls outside the scope of the policy or policy provisions have been violated. 5. Employment Practices Liability Insurance Reservation of Rights Letter: This type of letter is relevant to businesses with Employment Practices Liability Insurance (EPL) coverage. It informs the policyholder, typically an employer, that the insurer will examine an employment-related claim against the insured party but retains the right to deny coverage if the claim does not meet the policy's conditions or exclusions. In summary, a South Carolina Reservation of Rights Letter is a crucial legal document used by insurance companies to inform policyholders of their intent to investigate a claim while preserving the insurer's right to deny coverage if the circumstances fall outside the policy's provisions. The various types of Reservation of Rights Letters cater to different insurance policies and have specific considerations applicable to each type.
