Publications

Impact of Reservation of Rights on Contesting Settlement

March 2, 2007
New York Law Journal

A claimant files suit against the insured alleging that the insured’s operations have caused property damage to the claimant’s facility and seeks to recover damages due to the insured’s allegedly negligent conduct. The insured tenders defense of the claim to its insurer. The insurer identifies potential coverage defenses but lacks sufficient facts to resolve these coverage issues. Consequently, the insurer agrees to defend the case, but subject to a reservation of rights. The insurer advises the insured that it will provide a defense, but reserves the right to deny coverage and withdraw from the defense if further information or proceedings demonstrate that the claim is not covered. The claimant then makes a settlement demand.