Letters of reservation are important because they allow you to legally protect your rights so that your actions, conduct, and written statements cannot be used against you to deprive you of your rights. While an insurer may send a letter of reserve, it is still responsible for responding to claims related to a claim while conducting its investigation. Insurers send the letter to indicate that they reserve their rights, as failure to send the letter may be considered a waiver of rights. Controlling your defense is crucial even if you filed the claim as an additional insured with a subcontractor`s insurance company. In this case, you have no relationship with the subcontractor`s insurance company and you may not have confidence in how they handle claims and who they choose to defend you in a lawsuit. If the subcontractor`s insurance company does not cover the claim, or if the claim exceeds the limits of that subcontractor`s policy, and the claim exceeds the subcontractor`s financial resources, you will be financially responsible for the claim, even if the subcontractor is at fault. Therefore, if the insurance institution of the subcontractor retains title to you as an additional insured, you must exercise the same right to independent legal assistance as if your own insurance company had issued the letter. Even if no reservation of title is issued, you may have the right to hire your own lawyer at the expense of the insurance company. If the amount claimed in the complaint against your business could potentially exceed your insurance limits in your general liability insurance (not your excess policies or umbrellas), there is a dispute and the insurance company is required to pay your independent lawyer to defend you. R.G. Wegman Constr. Co. v.

Admiral Ins. Co., 629 F.3d 724 (7th Cir. 2011); Perma-Pipe, Inc. v. Liberty Surplus Insurance Corporation, 38 F.Supp.3d 890 (N.D. Ill. 2014) (Laurie & Brennan, LLP represented Perma-Pipe`s winner in this case). As a result, Mary will pay John $2,000 and give him a reservation of rights, stating that she does not agree with the $2,000 cost, but that she will make the payment to ensure John finishes the work on time. A letter of reserve is a non-binding communication from the insurance company to the insured in which the insurance company states that it may or may not have to pay for the defense of the claim and a settlement or judgment. This summary is not intended to provide legal advice or constitute an exhaustive review. If you have any questions about this article, please contact Peter J.

Jenkins of Jackson & Campbell, P.C. With respect to claims, the part of the letter that expressly reserves rights with respect to a coverage matter must mention the underlying claim or other fact that causes the booking. This does not have to and should not include many citations of underlying claims – the insured (and the Review Tribunal) will receive copies of the pleadings. However, the letter must succinctly summarize the allegations (or facts) that led the insurer to reserve rights on the subject under discussion. While most RdR includes an early discussion of the underlying facts, it is helpful to summarize the most relevant facts about the coverage issue discussed in the part of the letter that deals with this topic. The summary does not need to be long, but it is necessary to guide the reader as to why the issue of coverage is discussed in the first place. Would you like to talk to a lawyer about this legal document? Send a request with your contact information to arrange a free half-hour consultation. Insurers who issue a retention of title may ultimately reject a claim or choose to defend the insured against a claim made against them. To better understand what happened, the insurer must conduct its own investigation. Notification of its intention to conduct an investigation constitutes a reservation of rights.

These letters are necessary because when an insurer receives a claim report, it contains only a small amount of information about what happened, what caused the damage, and who was responsible. Some recent court decisions have criticized some side letters as not being specific enough to effectively reserve the insurer`s rights. The South Carolina Supreme Court recently stated that a RoR that « simply provides the insured with a copy of the policy, coupled with a general statement that the insurer reserves all of its rights, » is not « sufficient. » Harleysville Group Ins.