Disclaimer of Coverage Letter

Summary

This Disclaimer of Coverage letter illustrates the components of a typical coverage disclaimer issued by an insurance carrier. This letter includes drafting notes. This coverage disclaimer letter is intended for use by insurance carriers when disclaiming coverage in response to a policyholder’s claim. It should be customized for the facts and circumstances of a claim and the relevant jurisdiction—typically the state where the policy was issued. A disclaimer of coverage is issued by an insurer when coverage for a claim is within the parameters of the grant of coverage and does not fall within an exclusion but the policyholder fails to comply with either a condition precedent or a condition subsequent to coverage. For example, the disclaimer may be based upon an alleged failure by the policyholder to timely report a claim that may otherwise be covered under the policy. Timeliness of the report of claim may become a basis to issue a reservation of rights or a denial of coverage, followed by coverage litigation. Another basis for a disclaimer of coverage can be an alleged failure or refusal of a policyholder to cooperate in the defense of a claim which the insurer is defending under the policy. The Disclaimer of Coverage letter must be specific in its assertions and should reference the actions or inactions of the policyholder, grounded in the policy, that led to the insurer disclaiming coverage. It should also specify the manner in which the insurer was prejudiced, if applicable, by the policyholder’s action or inaction. For more information, see Denial, Disclaimer, and Declination of Coverage Checklist, Denial of Coverage Letter, Declination of Coverage Letter, Non-Waiver Agreement (Third-Party Claim), Reservation of Rights, Reservation of Rights Letter and Non-Waiver Agreement Drafting Checklist, Reservation of Rights Letter (Third-Party Claim), Coverage Opinions, and Coverage Opinions Checklist.