1. 50 Things That Every ROR Letter Should Have
The Definitive Reservation of Rights Checklist
50 Things That Every ROR Letter Should Have
Randy Maniloff
(215)

2. The Definitive ROR Checklist
The Reservation of Rights Curiosity
Standard form terms and conditions explained in a manner that resembles fingerprints

3. The Definitive ROR Checklist
The Two Purposes of a Reservation of Rights?
The Legal Purpose – defend insured and prevent waiver of coverage defenses

4. The Definitive ROR Checklist
The Legal Purpose of a Reservation of Rights: Prevent Waiver of Coverage Defenses
Nautilus Ins. Co. v. RDB Universal Services, No (E.D. Mo. Apr. 26, 2017) (“A reservation of rights letter is a means by which, when coverage is in doubt, the insurer offers to defend the insured while reserving some or all of its policy defenses in case the insured is found liable. By notifying the insured of its reservation of rights prior to any determination of liability, the insurer suspends the operation of waiver and estoppel.”).

5. The Definitive ROR Checklist
The REAL Purpose of a Reservation of Rights: Prevent Misunderstanding
Providing a defense can create a false sense of security in the insured

6. The Definitive ROR Checklist
Choice of Law General Rule: Location of the Insured Trumps Location of Claim Maryland Cas. Co. v. Express Products, Inc., Nos. 09–857, 08–2909, 2011 WL , at *10 (E.D. Pa. Sept. 22, 2011) (“Defendant’s claim that the location of the underlying suit requires Illinois law to govern, or is even a factor to be considered, is contrary to Pennsylvania law. When analyzing each state’s contacts under the Section 188 of the Second Restatement of Conflict of Laws, courts are to focus on the contract of insurance rather than the underlying tort that give rise to the contractual dispute itself.”) (citations and internal quotes omitted).

7. The Definitive ROR Checklist
Get the Letterhead Right: Identify From whom the ROR is being sent

8. The Definitive ROR Checklist
Identify the recipient: Do not overlook sending the ROR letter to ALL insureds
Erie Insurance Exchange v. Lobenthal, No WDA 2013 (Pa. Super. Ct. Apr. 15, 2015). (“Erie’s reservation of rights letter was addressed solely to the named insureds, Adam and Jacqueline Lobenthal, not to Michaela. The letter made no mention of Michaela. As in [citation omitted], we will not impute notice to Michaela based on the fact the letter was sent to counsel where the letter was addressed to her parents and made no reference whatsoever to Michaela. By the same token, we refuse to attribute notice to Michaela based on the fact that she was living with her parents at the time. Michaela was an adult at the time the lawsuit was filed, and there is no evidence that she actually read the letter. Michaela was the defendant in the underlying tort action, and the letter should have been addressed in her name.”) (emphasis added).

9. The Definitive ROR Checklist
Addressee: How to handle numerous insureds?
Separate ROR Letters
Separate ROR letters based on defense counsel
“We are writing to you in your capacity as a person authorized to address insurance issues for [all other defendants]. If you are not so authorized, please let me know immediately. “

10. The Definitive ROR Checklist
Manner of Transmission to Ensure Proof of Receipt
Certified Mail --Return Receipt Requested? ($6.74 Insurance Policy)
Regular Mail
Overnight

11. The Definitive ROR Checklist
The Caption: Less is More Re: Named Insured:_______ Claim No.:_______ Be careful about including “loss date”. What is a “loss date” anyway? Be careful about including policy number(s). Which policy is triggered may be an open and relevant issue

12. The Definitive ROR Checklist
Introduce yourself : Writing on behalf of….
(solution to the letterhead issue)
For TPA/Claims Handling Organization: _______ serves as the [description] for [Insurer]….

13. The Definitive ROR Checklist
The Text Begins
Do not set forth your company’s “position.”
You are providing your company’s “determination.”

14. The Definitive ROR Checklist
Purpose of letter and distinguish between coverage for defense and damages This will serve as [Insurer’s] determination of its potential obligation, if any, to provide coverage to [list all defendants] for defense and any liability or damages arising out of a complaint filed against it/them in the action captioned ______ (“Underlying Action”). One sentence summary of facts.

15. The Definitive ROR Checklist
Introduce Policy: the specifics of which are discussed below

16. The Definitive ROR Checklist
Acknowledgment of defense
Please be advised that, upon review of the complaint filed in the Underlying Action, in conjunction with the [Insurer’s] Policy, [Insurer] has determined to provide a defense to [Defendant(s)] in such action. The defense is being provided under a reservation of rights.

17. The Definitive ROR Checklist
Be careful about “investigating”: If you say it – do it.

18. The Definitive ROR Checklist
If not addressing defense, why not?

19. The Definitive ROR Checklist
Defense is Limited to Post-Tender Fees Only (if that’s the law)
Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 739–40 (Minn. 1997) (“[A]n insured does not invoke its insurer’s duty to defend until it properly tenders a defense request. Logically, then, an insurer cannot be held responsible for defense costs incurred prior to the tender of the defense request giving rise to the insurer’s duty to defend, the diligence of the insured notwithstanding.”)

20. The Definitive ROR Checklist
Identify Defense Counsel
Insurer Retaining Panel Counsel or
Insured Entitled to Independent Counsel
If Panel Counsel Retained: Insured has right to retain personal counsel at its own expense

21. The Definitive ROR Checklist
Address Rates for Independent Counsel: 2 Choices Confirm rates in advance [Insurer] will pay $_____ for partners and $_____ for associates and $______ for paralegals, which are the rates of qualified counsel that [Insurer] could have retained in [state jurisdiction]. Rate dispute to follow?

22. The Definitive ROR Checklist
Billing Guidelines
[The Independent counsel firm] shall be required to follow [Insurer’s] billing guidelines (copy enclosed), to the extent that they do not interfere with counsel’s unfettered right to represent its clients – such as, with respect to, status report obligations, acceptable expenses, billing format and other aspects of the guidelines that are not directly related to the attorney–client relationship. Please advise us immediately of any instances in which counsel does not believe that it can follow these guidelines.

23. The Definitive ROR Checklist
Panel Counsel: Is the Insured’s Consent to the Insurer’s Appointment of Counsel required? ( Merchants Indemnity Corp. v. Eggleston, 179 A.2d 505 (N.J. 1962) (“[I]t would be unfair to permit a carrier to control the defense without the consent of the insured and then leave the judgment for his payment. The policy does not authorize that course. Control of the defense is coupled with the duty to pay. The carrier cannot sever them by its unilateral action. Hence we are satisfied that if a carrier wishes to control the defense and simultaneously reserve a right to dispute liability, it can do so only with the consent of the insured. “)

24. The Definitive ROR Checklist
Right to Seek Reimbursement of Defense Costs if No Defense Was Owed (if the law permits it)
No: American & Foreign Ins. Co. v. Jerry’s Sport Center, Inc., 2 A.3d 526, 546 (Pa. 2010) (“[P]ermitting reimbursement by reservation of rights, absent an insurance policy provision authorizing the right in the first place, is tantamount to allowing the insurer to extract a unilateral amendment to the insurance contract.”)
Yes: Colony Ins. Co. v. G & E Tries & Serv., Inc., 777 So. 2d 1034, 1039 (Fla. Dist. Ct. App. 2000) (“[The insurer] timely and expressly reserved the right to seek reimbursement of the costs of defending clearly uncovered claims, which it consistently identified as such. Having accepted Colony’s offer of a defense with a reservation of the right to seek reimbursement, [the insured] ought in fairness make [the insurer] whole, now that it has been judicially determined that no duty to defend ever existed.” )

25. The Definitive ROR Checklist
Coming soon…

26. The Definitive ROR Checklist
ROR Money Paragraph: Avoid the False Sense of Security
However, notwithstanding [Insurer’s] determination, to provide a defense to the defendant(s) for the Underlying Action, [Insurer] may not have any obligation to provide coverage to it/them for some or all of any settlement or judgment in such Action. Accordingly, [Insurer’s] defense is being provided subject to a full and complete reservation of [Insurer’s] rights under the terms, conditions, limitations, endorsements and exclusions contained in the Insurer’s Policies and at law.

27. The Definitive ROR Checklist
Right to Withdraw from Defense and File a DJ Action
[Insurer] reserves its rights to withdraw from the [Defendant’s] defense if it is determined that no such defense is owed.
[Insurer] reserves its rights to file a declaratory judgment action to determine the parties’ rights and obligations.

28. The Definitive ROR Checklist
Addressing Covered vs. Uncovered Claims and Damages
Under the circumstances addressed herein, should the Underlying Action proceed to trial, it may be necessary to seek an allocated verdict, through the use of a special verdict sheet, to identify what portion of any verdict (and resulting judgment), if any, is allocable to uncovered claims and damages. Special interrogatories also may be necessary to resolve factual issues that affect insurance coverage. The [Defendants ]are advised to take whatever actions are necessary to achieve these objectives. [Insurer] reserves its rights to require the [Defendants] to pursue a special verdict sheet or special interrogatories, in order to achieve these objectives. [Insurer] reserves its rights to intervene, or take other action, in the Underlying Action, for purposes of, among other things, pursuing a special verdict sheet and/or special interrogatories, to achieve these objectives.

29. The Definitive ROR Checklist
Summary of Allegations – Insured invited to add and correct Based upon the information that has been forwarded, set forth below a summary of the facts and allegations as we understand them. If any of our information is incorrect, please let us know. If you believe that additional information bears upon coverage or the conclusions rendered herein, please forward such information to my attention.

30. The Definitive ROR Checklist
Summary of Allegations – Introduction For Lengthy Complaint The allegations in the Underlying Action are lengthy. While the following is only a summary of them, the totality of the allegations were considered by [Insurer] in reaching its determination of any obligations.

31. The Definitive ROR Checklist
Which Allegations To Address
Focus on the allegations that matter -- those tied to the coverage issues to follow. [Looking ahead to the ROR.]
Focus on the various defendants
Address the causes of action and damages being sought

32. The Definitive ROR Checklist
Identify the Policy(ies)
Policy number
Policy Period
Limits of Liability
Deductible or SIR

33. The Definitive ROR Checklist
Policy Section: Is there a limits issue?
Number of plaintiffs and/or defendants?
Number of occurrences?

34. The Definitive ROR Checklist
Begin the Reservation of Rights – Reiterate its Purpose As stated above, [Insurer] has determined to undertake the defense of [Defendants] for the Underlying Action. However, notwithstanding [Insurer’s] determination to do so, [Insurer] may not have any obligation to provide coverage to it/them for some or all of any settlement or judgment in such Action. Accordingly, [Insurer’s] defense is being provided subject to a full and complete reservation of [Insurer’s] rights under the terms, conditions, limitations, endorsements and exclusions contained in the Insurer’s Policies and at law.

35. The Definitive ROR Checklist
Reservation of Rights: The “Fairly Inform” Requirement Safeco Ins. Co. of Am. v. Liss, No. DV , 2005 Mont. Dist. LEXIS 1073, at *41 (Mont. Dist. Ct. Mar. 11, 2005) (“In this case, the Court finds that Safeco’s reservation of rights letter did not ‘fairly inform’ Liss of the reasons it was reserving its rights and that the letter was inadequate as a matter of law to preclude application of the estoppel doctrine. The only factual reference contained within the policy is: ‘As you are aware, this lawsuit arises out of a gunshot incident on July 10, 1997.’ More importantly, the letter sets forth pages of policy provisions but does not explain why Safeco believed the insurance policy would possibly not cover Liss for the shooting incident. In other words, Safeco did not ‘apply’ the sole fact stated to the policy’s legal terms.”).

36. The Definitive ROR Checklist
Reservation of Rights: The “Fairly Inform” Requirement
Advantage Builders & Exteriors, Inc. v. Mid-Continent Casualty Co. (Mo. Ct. App. 2014) (“The letters generally discussed the nature of the underlying lawsuit and set forth various provisions of Advantage’s general liability policy. Neither letter clearly and unambiguously explained how those provisions were relevant to Advantage’s position or how they potentially created coverage issues.”).

37. The Definitive ROR Checklist
Reservation of Rights: The “Fairly Inform” Requirement Harleysville Group Insurance v. Heritage Group Communities, No (S.C. Jan. 11, 2017) “These letters explained that Harleysville would provide a defense in the underlying suits and listed the name and contact information for the defense attorney Harleysville had selected to represent Heritage in each matter. These letters identify the particular insured entity and lawsuit at issue, summarize the allegations in the complaint, and identify the policy numbers and policy periods for policies that potentially provided coverage. Additionally, each of these letters (through a cut-and paste approach) incorporated a nine- or ten-page excerpt of various policy terms, including the provisions relating to the insuring agreement, Harleysville's duty to defend, and numerous policy exclusions and definitions. Despite these policy references, the letters included no discussion of Harleysville’s position as to the various provisions or explanation of its reasons for relying thereon. With the exception of the claim for punitive damages, the letters failed to specify the particular grounds upon which Harleysville did, or might thereafter, dispute coverage.” (emphasis added).

38. The Definitive ROR Checklist
Reservation of Rights: Reminder of the Basic Rule Insuring Agreement Comes Before Exclusions

39. The Definitive ROR Checklist
Citing Policy Language
Focus on the policy language that matters (no policy language regurgitation)
Eliminate Irrelevant – Relevant Policy Language (use ellipses)
Policy language must be tied to the allegations (satisfy the “fairly inform” requirement)

40. The Definitive ROR Checklist
Verify Correct Policy Language/Version
Take Care When Paraphrasing Policy Language (switching to conversational tone)

41. The Definitive ROR Checklist
Additional Considerations:
Timeliness
Insured’s Obligation to Cooperate
Give notice to other insurers
Address insured’s rights as additional insured and “other insurance”
Advise insured to give notice to excess insurers
Undertaking the coverage investigation

42. The Definitive ROR Checklist
Concluding Reservation of Rights – The “Catch All” [Insurer] reserves all of its rights under the terms, conditions, limitations, endorsements and exclusions of any [Insurer’s] policy and at law. [Insurer] reserves the right to amend and supplement this letter.

43. The Definitive ROR Checklist
Concluding Non-Waiver Statement The foregoing is not intended as a waiver, modification or alteration of any of the terms, conditions, limitations, endorsements or exclusions of any [Insurer’s] policies or rights at law.

44. The Definitive ROR Checklist
Any Statutory Obligations California’s notice of Insurance Commissioner New York’s obligation to provide copy to claimant’s counsel for bodily injury claims

45. The Definitive ROR Checklist
The Follow-up Reservation of Rights letter as case develops

46. The Definitive ROR Checklist
Identifying which Parties to CC
Broker
Defense Counsel?

47. The Definitive ROR Checklist
Signed copy of ROR in the file

48. The Definitive ROR Checklist
Bonus:
Search and Find for wrong names from prior letter