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What is a reservation of rights letter?

23 July 2011

In some cases a liability insurer (for eg. homeowner’s insurance, boatowner’s insurance) is faced with a situation whereby an insured who has been sued may or may not be covered by the policy issued by the insurance company. The answer to this question may be complicated depending on the policy and the facts of the suit, so it’s possible the insurer does not know for certain prior to the answer having to be filed in response to a lawsuit if the insured is in fact covered.

In that event, the insurer will typically go ahead and defend the insured against the claim, but simultaneously send the insured a “Reservation of Rights” letter. This letter explains to the insured that since there is or may be a question of coverage, the insurer retains the right to withdraw from the defense of the insured if it is later determined that the claim is not covered under the existing policy. An example typically given in this regard is that negligent acts are likely covered, while intentional acts are not. This will, in effect, leave the insured with the obligation to personally fund any further legal representation on his or her own behalf.

Please see related article~~ The Tilley Rule: Who is the client of the attorney hired by the insurance company to defend the insured?

Full disclosure: I work as a paralegal in insurance defense.

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Sami K. Hartsfield, ACP is a freelance writer, insurance defense paralegal, and NALA Advanced Certified Paralegal living in downtown Houston. She has worked as a law firm Webmaster, law firm social media marketer, and ghostwriter for personal injury law firms. She holds a degree in paralegal studies with a 4.0 GPA and a bachelor of science degree in political science, graduating summa cum laude. Sami interned with Texas’ 14th Court of Appeals under Chief Justice Adele Hedges, and completed the University of Houston Law Center’s Summer 2008 Prelaw Institute with a 4.0. A glutton for acquiring new knowldedge–in addition to her national advanced paralegal certification–she has earned six specialty certifications since 2007: Discovery; Trial Practice; Contracts Management; Social Security Disability Law; and Entity & Individual Medical Liability. You can find her on Facebook and e-mail her with questions, comments, or ideas at

Sami Hartsfield


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Copyright 2011 Sami K. Hartsfield – All Rights Reserved
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