The insured may reject reservations on the rights of insurers

Insurance companies have an obligation to defend and replace an insured under a typical liability insurance. When a company is notified of the claim or lawsuit, the company must begin to comply with the contractual obligation that will include speaking with the insured, investigating, collecting facts, protecting evidence, hiring a lawyer for the insured and responding to the claim. Sometimes, under the language policy, the insurance may have an exception, under which the company has no obligation to defend and replace the insured. This is a problem for the insured, but insurers do not have to keep promises that they do not give. Unfortunately, companies do not always have a true picture of the facts or the language of the policy and will not defend or replace the insured even when they should.

Many companies simply use a reservation of rights as a standard operating procedure. This practice has become commonplace, and insurance companies often respond by sending letters that reserve the right to refuse coverage for as many reasons as possible and for whatever reason they may think or discover in the future. Under a copyright reservation, which the insurer says, we will defend you for now, but we can still sue you in another lawsuit before a court to decide that we do not need to defend or indemnify you. Many workmans comp insurance companies also do not fulfill their obligation to fairly consider the agreement when a reservation of rights has been issued. Unfortunately for policyholders, this means massive uncertainty, possible loss of settlement opportunities, financial risk and further litigation. If the insured loses the liability and the coverage claim, he is liable for the judgment in the first claim and will also have to pay the insurance company the legal fees and expenses incurred by the insurer. This can lead to bankruptcy financial consequences and bankruptcy for most people.

The acute practice of issuing a reservation of rights occurs even when an insurer receives favorable coverage statements for the insured. To achieve leverage, insurers try to squeeze the insured by including language that extends the rights reservation not only to the reasons stated in the letter, but also reserves the right to extend the reason for the refusal for some reason. The insured is also reminded that they have a duty to cooperate and if they do not, they lose their coverage. This means that the insured does not know what is coming next.

Insurers often also use favorable dates in such letters, so that the contingent obligation they make under the rights reservation is not the date they first became aware of the claim, but a date that best positions the company for future litigation. This is especially true if the insurer has breached its liquidation obligation before the insured made a formal claim for defense and compensation. In Missouri, many of the bad things that can happen when a rights reservation is issued can be avoided by rejecting those reservations. Missouri law prevents insurers from using threats and leverage to scare policyholders into accepting a reservation of rights. Under Missouri law, the insured has the right to treat a reservation of rights as a breach of duty because a reservation of rights is a prompt refusal of the contract. Although the insurer still has the benefit because of its financial strength and experience, this allows the insured to withdraw and control the litigation without the insurer's intervention. This also allows the insured to settle the claim by negotiating with the company on an equal basis, or the insured can defend or settle the underlying claim on their own and then sue the company for breach of contract. The insured can also settle the claim so that the plaintiff has an obligation to pursue the insurer so that the insured can settle and leave without further risk.

The decision to accept or reject a reservation of rights depends on many factors and may not be a good decision depending on the situation. These decisions can be particularly complex for companies, as reservation of rights can have consequences that are not immediately visible and must be considered with great care. Anyone who has received a copyright reservation from their insurance company should consult with a private lawyer who is knowledgeable in this area of ​​law.