Impact | Business Risk Management Blog

In the face of rising litigation costs, the most valuable benefit of a company’s insurance policy may be its insurer’s duty to defend claims. Often, claims asserted in litigation may include a mixture of covered and uncovered claims with some claims potentially excluded from the coverage provided by an insurance policy. Alternatively, the claims asserted may potentially exceed the coverage afforded under the policy. In these circumstances (and others), an insurer’s first move in response to a claim under an insurance policy is likely to be a lengthy “reservation of rights” letter. The insurer’s response will track the language of your policy identifying the reasons the insurer contends that there may not be coverage for your claim or portions of the claim. But confess: the language used in the policy was so mind-numbing that you may not have read it when you purchased it or were uncertain as to what was actually covered by the policy. So what does a reservation of rights letter mean to you as an insured?