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.
Reservation of Rights Letter
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Multi-State
Control #:
US-01995BG
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Word;
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Description Sample Reservation Of Rights Letter
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Reservation Of Rights Insurance FAQ
State that you are reserving all of your rights under the policy; state that you will cooperate and will provide the information the insurer requested to the attorney the insurer retained to defend you; correct any errors as to dates or facts set forth in the ROR letter;
ROR letters are used when an insurer identifies coverage defenses and/or policy defenses. Insurance companies routinely send reservation of rights letters, as failing to send one can waive their rights. If you receive one, you should contact your insurance company to find out why your claim may not be covered.
The reservation of rights letter contains specific information about the claim, including the policy in question, the claim made against the policy, and the part of the claim that may not be covered.
Insurance companies send a reservation of rights letters because not doing so could be considered a waiver of their rights at a later time.Under a liability insurance policy, your insurer may have a broader obligation to defend the insured than to actually secure against losses.
There are states that required insurance companies to send a letter by certified mail when your rates are transitioned to a much higher premium. Also, if you have been in a bad wreck and they have been seeking verbal recordings or written information from you on the accounts of the incident.
A court might wonder why the insurer abandoned the claim after it initially thought it was covered. The court could say that by its own acts, the insurer waived its rights to deny coverage. The legal system often refers to this as bad faith.A reservation of rights letter does not mean the claim isn't covered.
This creates a potential conflict of interest because the insurer-retained defense counsel may be able to control the insured's defense in such a way as to affect the outcome of the coverage issue.
Reservation of rights is a useful tool for the insurer to protect itself against the risk of loss of coverage or avoidance rights.