• Introduction
1. Duty to Pay
2. Duty to Defend
3. Conditions in the Policy
4. Carrier's Options
5. Effects of a Refusal to Defend
6. Differences Between Reservation of Rights Letters and Non-Waiver Agreements
7. Contents of Reservation of Rights Letters
8. Effects of Defending without reserving rights; Effects of modifications or changes to Reservation of Rights Letters
1. Waiver and Estoppel - The General Rule
2. The Exception to the General Rule
3. Specific Cases Discussing the Prejudice Element
9. Insured's Rights When Offered a Qualified Defense - The Legal Answer
10. Insured's Rights When Offered a Qualified Defense - The Practical Answer
11. Practical Tips for Monitoring Litigation as Personal Counsel

Your client telephones you and informs you that his/her company has been served with citation. Hoping to buy some time, and realizing you have three or four weeks in which to file any responsive pleadings to the citation, you ask your client to mail the citation and pleadings to your office. Your client responds that all pleadings have already been faxed and/or e-mailed. Your client wants an immediate response.

Remembering your ethical duties, you review the petition to make certain there are no allegations which might potentially be covered under a commercial general liability policy. In your review, you notice several claims which have a potential for coverage and you tell your client to notify its insurance carrier of the lawsuit and to request a defense. You may even suggest that your client ask the carrier to hire you to defend your client in the case since you have attended all eleven Construction Law Conferences and know construction law better than the $50/hour 'fender bender lawyer' the carrier may prefer to hire. You calendar the answer date to ensure that a timely answer is filed.

Sometime prior to the answer date, your client telephones you and says that he/she has received some good news and some bad news. This news is in the form of a multi-page letter from the carrier which offers to defend your client in the litigation but also desires to reserve its rights to later claim that some or all of the allegations made against your client in the lawsuit are not covered by the policy. Your client informs you that this letter is almost as long as the insurance policy itself and the letter quotes virtually every coverage and exclusion provision found in the policy.

You immediately explain to your client that he/she has received what is known as a reservation of rights letter and that the insurance carrier, despite having received thousands of dollars in premiums over the years, will only offer to defend the case but will not commit to paying any damages should the plaintiff in the underlying case be successful. Your client then asks, "Do I have to take this?"

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