Reservation of Rights
Key Takeaway
A formal notice from the insurer stating that it will investigate and potentially defend a claim while reserving the right to later deny coverage if the facts reveal the claim falls outside the policy's terms. This protects the insurer from waiving its right to contest coverage by providing a defense..
Definition
A formal notice from the insurer stating that it will investigate and potentially defend a claim while reserving the right to later deny coverage if the facts reveal the claim falls outside the policy's terms. This protects the insurer from waiving its right to contest coverage by providing a defense.
Why This Matters for Law Firms
How claims are handled directly impacts your firm financially and reputationally. Understanding the claims process and related terminology helps law firm leadership make informed decisions when a claim or potential claim arises, and ensures you do not inadvertently jeopardize your coverage by failing to comply with policy requirements.
Example Usage in Context
When a partner receives a demand letter from a former client, the firm's risk manager might reference this: "We need to understand the reservation of rights requirements under our policy before taking any action. Let me contact our carrier and broker immediately."
Related terms
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