Reservation of Rights Letter
(Third-Party Claim)

Summary

This template is a Reservation of Rights Letter for a Third-Party Claim. It guides an attorney who has been retained by an insurer to draft a reservation of rights letter. The reason that an insurer may decide to issue the letter differs by the facts of the claim and the terms of the insurance policy involved. Review the insurance code of the governing state, particularly those sections of the code that relate to claims administration for required contents, timing, and other specifics relating to it. This template contains practical guidance, drafting notes, and alternate clauses. There is a common denominator in all situations in which a reservation of rights letter is issued. That purpose is to place the insured(s) on notice that all or a portion of the claim may not be covered. On initial review, further investigation of the claim, or as facts devolve through discovery, the insurer reserves its rights to withdraw from providing and paying for the defense of the insured(s), or affording indemnification. Reservations of rights are sometimes also issued in first-party claims, although that is not the purpose of this template. First-party reservations of rights do not focus on telling the insured that a defense won't be provided or may be withdrawn because no defense is involved in a first-party claim (such as for property insurance). Instead, it focusses upon policy defenses such as: • Whether the property loss was to property covered by the policy at the time of the loss • Whether the cause of loss was one contemplated by the policy • Whether the insured(s) was/were complicit in the loss –and– • Whether the policy was in force at the time of the loss For additional information, see Reservation of Rights, Reservation of Rights Letter and Non-Waiver Agreement Drafting Checklist, Insured's Right to Independent Counsel, Insured's Right to Independent Counsel Checklist, Insured's Right to Independent Counsel State Law Survey, Insured's Right to Independent Counsel and Related Issues State Law Survey, Duty to Defend and Duty to Indemnify, Duty to Defend and Duty to Indemnify Checklist, Insurer Duty-to-Defend Standard State Law Survey, Insurer's Right to Reimbursement of Defense Costs State Law Survey.