Reservation of Rights Disclaimer letters

Transcription

1 Reservation of Rights Disclaimer letters Non-waiver agreements 50 State Survey, 2011

2 Edited by Nancy A. Zaharewicz, CPCU Munich Reinsurance America, Inc. 555 College Road East P.O. Box 5241 Princeton, NJ Special thanks to: Kevin E. Wolff Michael Chuven Coughlin Duffy LLP 350 Mount Kemble Avenue P.O. Box 1917 Morristown, NJ Tel: Fax: MUNICH RE ALWAYS ONE STEP AHEAD In the US, Munich Re provides access to a full range of property-casualty reinsurance and specialty insurance products through Munich Reinsurance America, Inc., American Modern Insurance Group and Hartford Steam Boiler Inspection and Insurance Company. Together, we deal with the issues that affect society and work to devise cutting-edge solutions to render tomorrow s world insurable. Our clients trust us to develop solutions for the whole spectrum of reinsurance from traditional reinsurance agreements to the management of complex specialty reinsurance risks. Our recipe for success: we anticipate risks early on and deliver solutions tailored to clients needs, creating opportunities to achieve sustained profitable growth.

3 Introduction The Greek philosopher Plato once stated: [t]he beginning is the most important part of the work. While these words were uttered by Plato over two thousand years ago, long before the advent of the insurance industry, they nevertheless ring true in the modern era of insurance claim handling. In the past several years, the insurance industry has experienced an unprecedented number of claims in which individuals and entities alike have sought coverage for a wide variety of claims under a broad universe of insurance policies. It suffices to say that the never-ending avalanche of claims places a significant burden on those insurance claim professionals responsible for analyzing the information, determining whether coverage should be afforded, and responding to the insured or purported insured in a timely and effective manner so as to protect the interests of the insurance company. It is during this initial phase of the claim handling process that an insurer s action or inaction is critical to its ability to protect its right to immediately disclaim coverage or adequately reserve its rights to disclaim coverage at a later time. In this survey, we have endeavored to identify the law in each of the 50 states regarding the timing and content of reservation of rights letters, disclaimer letters and non-waiver agreements. It is imperative that claims professionals are aware of the requirements, with regard to these issues, in the states in which they are working. Failing to timely issue a reservation of rights or disclaimer letter or negotiate a nonwaiver agreement, and preparing and issuing such letters or agreements without making certain that the contents comply with the requirements of a particular state, can result in the letter, be it a reservation of rights or a disclaimer letter as well as a non-waiver agreement, being deemed invalid. Knowledge of the timing and content requirements of the state in which a reservation of rights letter, disclaimer letter or non-waiver agreement is to be issued is critical. For example, Florida has a statute that requires that a reservation of rights letter be sent to an insured within thirty days after the insurer knows, or should have known, of a potential coverage defense. Fla. Stat In New York, Insurance Law 3420 requires an insurer to issue a disclaimer as soon as reasonably possible after it becomes aware of facts warranting the disclaimer. New York courts applying this statute have held that a delay as short as thirty days in issuing a disclaimer is untimely. See, e.g., W. 16th Street Tenants Corp. v. Pub. Serv. Mut. Ins. Co., 290 A.D.2d 278, 279 (4th Dep t), appeal dismissed, 773 N.E.2d 1017 (2002). MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

4 Some states require that particular language be included in a reservation of rights letter or non-waiver agreement in order to render the letter or agreement effective. For example, Mississippi requires that a non-waiver agreement state that it does not waive or invalidate any of the conditions of the policy and, further, does not waive or invalidate any rights of either the insured or the insurer. Taylor v. Fireman s Fund Ins. Co., 306 So.2d 638, 640, 645 (Miss. 1974). In New Jersey, a reservation of rights letter is not effective unless it explicitly states that the insured is free to accept or reject the insurer s offer of a defense subject to a reservation of rights and to proceed with its own defense if it wishes. Sneed v. Concord Ins. Co., 237 A.2d 289, (App. Div. 1967). Another issue claims professionals must be conscious of when preparing a disclaimer letter, reservation of rights letter or non-waiver agreement is whether the specific state requires all known coverage defenses be asserted in order to preserve them. For example, Hawaii holds that an insurer does not preserve potential defenses to coverage that are not identified in a reservation of rights letter. Enoka v. AIG Hawaii Ins. Co., Inc., 128 P.3d 850, 869 (Haw. 2006). In Washington, a disclaimer letter must include all coverage defenses of which the insurer is aware, or which it should have been aware had it pursued a diligent inquiry, and any coverage defenses not identified are waived. Bosko v. Pitts & Still, Inc., 454 P.2d 229, 234 (Wash. 1969). Conversely, Vermont expressly holds that an insurer does not waive a coverage defense if it fails to include it in a disclaimer letter if it was ignorant of the coverage defense at the time the letter was issued. Segalla v. United States Fire Ins. Co., 373 A.2d 535, 538 (Vt. 1977). With these concerns in mind, we now present the law in each of the 50 states, to the extent it exists, with regard to the timing and content of reservation of rights letters, disclaimer letters and non-waiver agreements. We trust that you will find this survey useful and helpful in the performance of your daily claim handling responsibilities. 2 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

5 ALABAMA In Alabama, an insurer that intends to defend an insured pursuant to a non-waiver agreement or reservation of rights must provide notice to its insured of that fact and keep its insured informed of the status of the case. Shelby Steel Fabricators, Inc. v. United States Fid. & Guar. Ins. Co., 569 So.2d 309, 313 (Ala. 1990). A disclaimer of coverage should describe all grounds for denial and defenses to coverage; any ground or defense not included is deemed waived. First Alabama Bank of Montgomery, N.A. v. First State Ins. Co., 899 F.2d 1045, 1063 (11th Cir. 1990). However, coverage under an insurance policy cannot be created or enlarged by waiver or estoppel. Home Indem. Co. v. Reed Equip. Co., 381 So.2d 45, (Ala. 1980). ALASKA In Alaska, an insurer can preserve its coverage defense and fulfill its duty to defend by defending under a reservation of rights to later disclaim coverage. CHI of Alaska, Inc. v. Employers Reinsurance Corp., 844 P.2d 1113, 1116 (Alaska 1993). Insurers are required to give the insured such notice of its intention to deny liability and of its refusal to defend as will give the insured a reasonable time to protect himself. Sauer v. The Home Indem. Co., 841 P.2d 176, 182 (Alaska 1992). The notice must be prompt and provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim. Lloyd s & Institute of London Underwriting Cos. v. Fulton, 2 P.3d 1199, 1204 (Alaska 2000). The notice of an intention to disclaim coverage must be given when an insurer has good reason to believe that a coverage dispute may exist. Ibid. Notice of a disclaimer of coverage must contain the basis for the decision or the insurer is precluded from later arguing that coverage under the policy did not exist. Sauer, 841 P.2d at 184. ARIZONA In Arizona, an insurer that chooses to defend an insured under a reservation of rights must properly communicate its coverage defenses to the insured or the right to contest coverage is lost. Ogden v. United States Fid. and Guar. Co., 933 P.2d 1200, 1204 (Ariz. 1996). An insurer must communicate a reservation of rights promptly or risk waiver of the right to deny coverage. Penn-America Ins. Co. v. Sanchez, 2008 Ariz. App. LEXIS 95, at *13 (Ariz. Ct. App. June 17, 2008). However, a reservation of rights does not need to be issued immediately upon learning of a suit; [an insurer] may subsequently reserve its rights upon learning new information that would provide a coverage or policy defense. United Servs. Auto. Assoc. v. Morris, 741 P.2d 246, 250 (Ariz. 1987). An insurer with a coverage defense must defend its insured under a properly communicated reservation of rights or it will lose its right to later litigate coverage. Id. at 249. When disclaiming coverage, an insurer has a duty to inform its insured of its denial of coverage without delay. Hagen v. United States Fid. & Guar. Ins. Co., 675 P.2d 1340, 1344 (Ariz. 1983), approved and adopted, 675 P.2d 1310 (Ariz. 1984). ARKANSAS In Arkansas, an insurer must give timely notice to the insured that [the insurer] has not waived the benefit of its defense under the policy. Aetna Casualty & Surety Co. v. Simpson, 306 S.W.2d 117, 122 (Ark. 1957). If timely notice is not given, or an insurer denies coverage without providing a defense or monitoring the litigation, the insurer cannot later challenge the outcome of the litigation. Employers Nat l Ins. Co. v. Grantors to the Diaz Refinery PRP Comm. Site Trust, 855 S.W.2d 936, (Ark. 1993). CALIFORNIA In California, an insurer must adequately reserve its right to deny coverage. Blue Ridge Ins. Co. v. Jacobsen, 22 P.3d 313, 317 (Cal. 2001). An insurer can issue a reservation of rights unilaterally merely by giving notice to the insured. Ibid. There, the reservation of rights letter stated the basis for the reservation under the policy, as well as the facts on which a potential denial of coverage would be based. Id. at However, an insurer does not waive a potential defense to coverage by not including it in a reservation of rights letter. Waller, Jr. v. Trust Ins. Exch., Inc., 900 P.2d 619, (Cal. 1995). Under California law, an insurer waives defenses to coverage not asserted in its denial only if the insured can show misconduct by the insurer or detrimental reliance by the insured. Id. at 638. MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

6 COLORADO In Colorado, rather than disclaim coverage, an insurer who believes that it is under no obligation to defend, is to provide a defense to the insured under a reservation of its rights to seek reimbursement should the facts at trial prove that the incident resulting in liability was not covered by the policy, or file a declaratory judgment action after the underlying case has been adjudicated. Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1089 (Colo. 1991). An insurer may also enter a non-waiver agreement that states that the insured agrees that the provision of counsel by the insurer does not thereby waive or prejudice any of [the insurer s] rights which [the insurer] may be entitled to claim under the policy. Gen. Accident and Life Assur. Corp. v. Mitchell, 259 P.2d 862, 867 (Colo. 1953). CONNECTICUT In Connecticut, an insurer that wishes to defend under a reservation of rights should inform its insured that its investigation and defense of the claim is done without prejudice to its right to deny coverage and should specify the facts and policy language on which a potential denial is based. W. Haven v. Hartford Ins. Co., 602 A.2d 988, 995 n.6 (Conn. 1992). Notice of a reservation of rights must clearly [inform] an insured that the appearance of its attorneys on the insured s behalf is under a reservation of rights. Id. at 996. An insurer that conducts a defense under a reservation of rights will not thereby be estopped to set up any policy defenses that may be available to it. Ibid. However, the failure to disclaim coverage based on a policy condition, when the insurer has knowledge of facts that would support the disclaimer, constitutes waiver of a policy defense based on the condition. Nat l Cas. Ins. Co. v. Stella, 601 A.2d 557, 559 (Conn. App. Ct. 1992). DELAWARE In Delaware, a reservation of rights letter to an insured will be held sufficient only if it fairly informs the insured of the insurer s position. Viking Pump, Inc. v. Liberty Mut. Ins. Co., 2007 Del. Ch. LEXIS 43, at *103 (Del. Ch. April 2, 2007). Any grounds for potentially disclaiming coverage not stated in the reservation of rights letter are deemed waived. Ibid. Although an insurer may enter a non-waiver agreement with its insured, the agreement should specify what actions by the insurer do not constitute a waiver of the insurer s rights. G.M.S. Realty Corp. v. Girard Fire and Marine Ins. Co., 89 A.2d 857, (Del. Super. Ct. 1952). FLORIDA In Florida, an insurer cannot deny coverage based on a particular coverage defense unless the insurer provides notice of its reservation of rights to assert a coverage defense within thirty days after the insurer knew or should have known of the coverage defense. Fla. Stat However, the failure to comply with this statute will not bar an insurer from disclaiming liability where a policy or endorsement has expired or where the coverage sought is expressly excluded or otherwise unavailable under the policy or under existing law. AIU Ins. Co. v. Block Marina Inv., Inc., 544 So.2d 998, 1000 (Fla. 1989). For example, a reservation of rights letter should state that the insurer is reserving its right to limit or deny coverage, and specify the basis of a potential denial of coverage. Aguero v. First Am. Ins. Co., 927 So.2d 894, 896 (Fla. Dist. Ct. App. 2005). GEORGIA In order to defend an insured under a reservation of rights in Georgia, the insurer must provide timely notice that, despite its defense, it is not waiving the defenses available to it against the insured. Gant v. State Farm Mut. Auto. Ins. Co., 134 S.E.2d 886, 887 (Ga. Ct. App. 1964). The notice of a reservation of rights to an insured should include all grounds for a subsequent denial of coverage of which the insurer has knowledge. Jones v. Georgia Cas. & Sur. Co., 78 S.E.2d 861, 864 (Ga. Ct. App. 1953). Once an insurer learns of information indicating that no coverage exists under a policy, it should immediately inform the insured that it intends to deny coverage. Ponse v. Atlanta Cas. Co., 563 S.E.2d 499, 501 (Ga. Ct. App. 2002). However, the failure to do so will not create coverage not afforded under the policy because the coverage of a policy cannot be extended by estoppel or waiver. Caribbean Lumber Co. v. Phoenix Assur. Co., 488 S.E.2d 718 (Ga. Ct. App. 1997). 4 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

7 HAWAII Ordinarily, when issuing a reservation of rights letter in Hawaii, an insurer must specifically name all potential defenses to coverage. Enoka v. AIG Hawaii Ins. Co., Inc., 128 P.3d 850 (Haw. 2006). Those defenses not included in a reservation of rights letter are waived; however, the doctrine of waiver may not be used to create coverage where none exists. Ibid. Insurers may initially assume the unconditional defense of an insured while investigating whether coverage exists. Delmonte v. State Farm Fire and Cas. Co., 975 P.2d 1159, 1171 (Haw. 1999). Once the insurer learns of information on which it will base a determination to disclaim coverage, the insurer must notify the insured. Ibid. Initially, however, the insurer can disclaim coverage only if none of the facts on which it relies might be resolved differently in the underlying lawsuit. Dairy Road Partners v. Island Ins. Co., Ltd., 992 P.2d 93, 117 (Haw. 2000). IDAHO In Idaho, an insurer may defend an insured under a reservation of rights agreement; however, such an agreement does not eliminate the insurer s obligation to pay defense costs, which necessarily includes attorneys fees. Mut. of Enumclaw v. Harvey, 772 P.2d 216, 220 (Idaho 1989). A disclaimer letter should inform the insured that there is no coverage for the claim and specify the reasons why. An insurer disclaiming coverage is well advised to institute a declaratory judgment action regarding the claim. Deluna v. State Farm Fire and Cas. Co., 2008 Ida. LEXIS 134, at *16 (Idaho July 1, 2008). ILLINOIS In order to avoid being estopped from later asserting policy defenses to coverage, an insurer that believes that a policy does not provide coverage for a claim must defend a lawsuit under a reservation of rights or secure a declaratory judgment about its obligations under the policy. Utica Mut. Ins. Co. v. David Agency Ins., Inc., 327 F. Supp. 2d 922, 927 (N.D. Ill. 2004). The insurer must specifically reference any conflict of interest in its reservation of rights letter. Ibid. The reservation of rights must also adequately inform the insured of the rights which the insurer intends to reserve. Royal Ins. Co. v. Process Design Assocs., Inc., 582 N.E.2d 1234, 1239 (Ill. App. Ct. 1991). Bare notice of the reservation of rights does not suffice; the insurer must provide specific reference to the policy defense which ultimately may be asserted. Ibid. For example, a reservation of rights or disclaimer letter should state the policy language and facts on which a coverage defense is based. Gen l Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1094 (Ill. 2005). Where an insurer intends to disclaim coverage, the insured must be apprised of that decision within a reasonable time; the lengthier the delay between the decision to disclaim and notification to the insured, the more likely the insurer will be estopped from disclaiming coverage. Twin City Fire Ins. Co. v. Old World Trading Co., 639 N.E.2d 584, (Ill. App. Ct. 1993). INDIANA In Indiana, if an insurer determines that an insured has breached a policy condition, the insurer must either defend under a reservation of rights or file a declaratory judgment action. Notice of a defense under a reservation of rights must state the applicable policy language and the facts on which a potential denial of coverage may be based. Knight v. Indiana Ins. Co., 871 N.E.2d 357, (Ind. Ct. App. 2007). Insurers may also enter non-waiver agreements with their insureds. Those agreements should state that the insurer will participate in the defense of the underlying proceedings. Employers Ins. of Wausau v. Recticel Foam Corp., 716 N.E.2d 1015, 1025 (Ind. Ct. App. 1999). If the insurer wishes to cancel its obligation to provide a defense under a non-waiver agreement, it must provide notice of its intention to the insured. Id. at Should an insurer disclaim coverage, it must do so as soon as is reasonably possible after a demand to defend has been made. Protective Ins. Co. v. Coca-Cola Bottling Co., 423 N.E.2d 656, 661 (Ind. Ct. App. 1981). Failure to do so may result in a loss of coverage defenses under waiver and estoppel principles. Ibid. MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

8 IOWA In Iowa, reservation of rights letters should be detailed. United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 658 (Iowa 2002). The letter should state that the insurer is also reserving its right to file a declaratory judgment action to determine its duties under the policy. IMT Ins. Co. v. Myer, 283 N.W.2d 316, (Iowa 1979). A reservation of rights letter should be timely; however, the failure to send a timely reservation of rights or disclaimer letter will not result in waiver or estoppel if application of those doctrines would provide coverage of a policy risk not covered by its terms, or risks expressly excluded therefrom. Randolph v. Fireman s Fund Ins. Co., 124 N.W.2d 528, (Iowa 1963). Nonwaiver agreements should state that no action taken by the insurer shall be construed as a waiver of the right, if any of the insurer to deny liability to the insured. Inghram ex. rel. Inghram v. Dairyland Mut. Ins. Co., 178 N.W. 299, 304 (Iowa 1970). The non-waiver agreement should also contain a description of the claim for which the insurer is not waiving its right to deny liability. Ibid. KANSAS An insurer must give notice of its right to set up the defense of noncoverage under an adequate and proper non-waiver agreement or reservation of rights notice to the insured. Hanover Ins. Co. v. B-M-B Land Co., Inc., 769 P.2d 682 (Kan. Ct. App. 1989). The insured must be fairly and timely informed of the insurer s position. Bogle v. Conway, 433 P.2d 407, 412 (Kan. 1967). A reservation of rights letter must be as specific as possible, specifying the policy language and facts on which the reservation of rights is based. Id. at Where an insurer bases its refusal to pay a loss upon a forfeiture or failure to comply with a particular condition it cannot thereafter maintain a defense based upon another condition not referred to in such refusal to pay and of which it then had knowledge. Pacific Indem. Co. v. Berge, 205 Kan. 755, 767 (Kan. 1970). KENTUCKY When an insurer has information on which it will base a disclaimer, the insurer must notify the insured of its intentions as soon as possible. W. Farm Bureau Mut. Ins. Co. v. Danville Constr. Co., Inc., 463 S.W.2d 125, 128 (Ky. Ct. App. 1971). When defending under a reservation of rights, the insurer must clearly notify the insured that its defense is subject to its reservation of rights to later disclaim coverage. James v. Kentucky Farm Bureau Mut. Ins. Co., 2003 Ky. App. LEXIS 312, at *10-*11 (Ky. Ct. App. Dec. 12, 2003). LOUISIANA A non-waiver agreement or reservation of rights letter should state that the insurer retains its rights to defend itself based on the alleged insured s lack of coverage under [the] policy. W.T.A. v. Yeager, 832 So.2d 1217, 1219 (La. Ct. App. 2002). When an insurer intends to defend under a reservation of rights, it must do so promptly. Arceneaux v. Amstar Corp., 969 So.2d 755, 768 (La. Ct. App. 2007), writ denied, 977 So.2d 952 (La. 2008) However, the failure to timely notify an insured of a disclaimer will not result in waiver or estoppel that would provide coverage for acts not included under the policy. Balehi Marine, Inc. v. Firemen s Ins. Co., 460 So.2d 16, 17 (La. Ct. App. 1984). An insurer should identify the relevant provisions and exclusions in its disclaimer letter to its insured. Arceneaux v. Amstar Corp., 969 So.2d at 761; Balehi Marine, Inc., 460 So.2d at 17. An insurer may also enter into a non-waiver agreement that states that the insurer has the right to question coverage or bring a declaratory judgment action. Alombro v. Salman, 536 So.2d 764, 767 (La. Ct. App. 1988). MAINE A reservation of rights letter should state the policy language and the facts on which a disclaimer would be based. Patrons Oxford Ins. Co. v. Harris, 905 A.2d 819, (Me. 2006). A disclaimer of coverage should be express and should cite the language in the policy that supports the disclaimer. Marston v. Merchants Mut. Ins. Co., 319 A.2d 111, 113 (Me. 1974). 6 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

9 MARYLAND A reservation of rights or disclaimer letter must state all defenses arising from the failure of the claimant to satisfy some technical condition subsequent or those defenses will be deemed waived. Creveling v. Gov t Employees Ins. Co., 828 A.2d 229, 243 (Md. Ct. App. 2003). Grounds for disclaiming coverage based on the scope of the risks to be covered that are not included in a reservation of rights or disclaimer letter are not deemed waived. Id. at 244. Nevertheless, a proper reservation of rights or disclaimer letter should include all of the policy language and facts on which a denial of coverage is based. Wolfe v. Anne Arundel County, 761 A.2d 935, 944 (Md. Ct. Spec. App. 2000). Notice that an insurer is disclaiming coverage must be sent to the insured within a reasonable time. Medical Mut. Liab. Ins. Soc y of Maryland v. Miller, 451 A.2d 930, (Md. Ct. App. 1982). MASSACHUSETTS A reservation of rights is the notification to the insured that the insurer will defend the insured, but that the insurer is not waiving any defenses it may have under the policy, and it protects an insurer from a subsequent attack on its coverage position on waiver or estoppel grounds. The Med. Malpractice Joint Underwriting Assoc. of Mass. v. Goldberg, 680 N.E.2d 1121, 1129 n.31 (Mass. 1997). A reservation of rights or a disclaimer must be made within a reasonable length of time. Merrimack Mut. Fire Ins. Co. v. Nonaka, 606 N.E.2d 904, 905 n.5 (Mass. 1993). If an insurer chooses to defend an insured under a non-waiver agreement, the agreement must state that no step taken by the insurer will constitute a waiver of the insurer s right to claim that the policy does not require it to take that step or to assert any defense to coverage under the policy. See Aetna Cas. & Sur. Co. v. George, 3 Mass L. Rep. 246 (Mass Sup. Ct. 1995). Once an insurer has sufficient information to warrant a disclaimer of liability, it must cease the defense of the insured. Shapiro v. State Farm Mut. Ins. Co., 242 N.E.2d 753, 755 (Mass. 1968). MICHIGAN Notice to an insured that an insurer will provide a defense under a reservation of rights must be timely, and specifically state the policy language on which the insurer bases its opinion that coverage may not be afforded under the policy. City of Grosse Pointe Park v. Michigan Mun. Liab. and Prop. Pool, 702 N.W.2d 106, 117 (Mich. 2005). The letter should state that some or all claims against an insured may not be covered, that the insurer reserves the right not to indemnify the insured in the event a judgment is entered against it, and should review the allegations against the insured, along with the relevant portions of the policy. Id. at 110. A non-waiver agreement between an insured and an insurer should state that the insurer s investigation, negotiation, settlement or defense of a specific claim does not waive any of the rights of the insurer. MacDonald v. State Farm Mut. Auto. Ins. Co., 165 N.W.2d 665, 669 (Mich. Ct. App. 1968). If an insurer has actual or constructive knowledge of a defense to coverage, it must timely notify the insured of its intention to disclaim liability. Allstate Ins. Co. v. Harris, 1998 Mich. App. LEXIS 2733 (Mich. Ct. App. Jan. 16, 1998). MINNESOTA An insurer must provide timely notice of a reservation of rights to an insured. Britamco Underwriters, Inc. v. A & A Liquors of St. Cloud, Inc., 2001 Minn. App. LEXIS 392, at *4 (Minn. Ct. App. April 17, 2001). If an insured fails to comply with a condition subsequent in the policy, such as a breach of the duty to cooperate, the insurer must disclaim coverage; the inclusion of such defenses in a reservation of rights letter will not preserve those defenses. Oehme v. Johnson, 231 N.W. 817, 820 (Minn. 1930). When disclaiming coverage, an insurer must do so seasonably to avoid prejudicing the insured, Sorenson v. Kruse, 293 N.W.2d 56, 60 (Minn. 1980), and identify the relevant provisions or exclusions in its policy on which it is relying for its disclaimer. See Milbank Ins. Co. v. B.L.G., 484 N.W.2d 52, 56 (Minn. Ct. App. 1992). MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

10 MISSISSIPPI A reservation of rights letter should state that the insurer is investigating whether coverage exists for a claim, and should recite the relevant portions of the policy and the complaint against the insured. Moeller v. Am. Guar. and Liab. Ins. Co., 707 So.2d 1062, 1066 (Miss. 1996). A non-waiver agreement in Mississippi must state that any action taken by the insurer does not waive or invalidate any of the conditions of the policy and does not waive or invalidate any rights of the insured or the insurer. Taylor v. Fireman s Fund Ins. Co., 306 So.2d 638, 640, 645 (Miss. 1974). MISSOURI Missouri courts require that an insurer provide notice to an insured that its defense of an action should not be construed as a waiver of any policy defense and the insured accepts the defense of the action without protest and with full knowledge of the position of the insurance company of its right to assert nonliability. Atlanta Cas. Co. v. Stephens, 825 S.W.2d 330, 333 (Mo. Ct. App. 1992); see Brooner & Assoc. v. W. Cas. and Sur. Co, 760 S.W.2d 445, 447 (Mo. Ct. App. 1988). Such a reservation puts the insured on notice that there may be a conflict between the insured s interest and those of the insurance company, along with the fact that the insured may be exposed to personal liability not covered by insurance. Ibid. In addition, the reservation of rights letter should identify the relevant portion of the policy that may lead to non-coverage; however, a general reservation may suffice. Ibid. (The court ruled that a reservation of rights letter in which insurer notified insured that any action arising out of the accident would be under a reservation of rights under its policy was enforceable). When issuing a disclaimer letter in Missouri, an insurer must identify those defenses on which it plans to rely to disclaim coverage. [A]n insurer, having denied liability on a specified ground, may not thereafter deny liability on a different ground. Stone v. Waters, 483 S.W.2d 639, 645 (Mo. Ct. App. 1972); see Brown v. State Farm Mut. Auto. Ins. Co., 776 S.W.2d 384, 386 (Mo. 1989). That is, when an insurance company denies liability on specific grounds, it waives all grounds not so specified. Brown, supra, 776 S.W.2d at 387. MONTANA Montana has strict requirements for the proper contents of a reservation of rights letter. In Montana, an insurer must issue a timely reservation of rights, informing the insured of the insurer s position. Safeco Ins. Co. of Am. v. Liss, 2005 Mont. Dist. LEXIS 1073, *31-32 (Mont. App. Ct. 2005). The insurer s position must be definitively stated and it should not use terms such as may. Id. at 39. The letter must identify that a conflict of interest exists and the reason for such conflict. Ibid. The purpose of the reservation of rights is to permit the insured to make an intelligent choice to accept the insurer s attorney or retain his own. Ibid. After a reasonable investigation of a matter, and based on the facts available to it, an insurer can issue a disclaimer letter denying coverage to its insured. Lorang v. Fortis Ins. Co., 192 P.3d 186, (Mont. 2008). The disclaimer letter should identify those provisions that the insurer is relying on for disclaiming coverage or the reasons for its denial. See e.g. id. at 206. NEBRASKA In Nebraska, a reservation of rights letter should be provided to the insured to allow the insured to protect its own interests by retaining control over its own defense and to avoid conflicts of interest between the insurer and its insured. First United Bank of Bellevue v. First Am. Title Ins. Co., 496 N.W.2d 474, 481 (Neb. 1993). The letter should offer to defend the insured, but reserve all of its policy defenses. Ibid. In addition, the letter should be timely as a court will look to the insurer s actions to see if it waived its right to avoid coverage. Ibid. In Nebraska, a disclaimer letter must be timely. Boren v. State Farm Mut. Auto. Ins. Co., 406 N.W.2d 640, 643 (Neb. 1987). It should specify the reasons that the insurer is disclaiming coverage. See, e.g., Radecki v. Mut. of Omaha Ins. Co., 583 N.W.2d 320, 324 (Neb. 1998). 8 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

11 NEVADA In Nevada, the insurer should identify all relevant defenses and provisions of its policy in which it is relying on to deny coverage in a non-waiver agreement. Havas v. Atlantic Ins. Co., 614 P.2d 1, 2 (Nev. 1980). If the insurer needs time to investigate the matter further, it should make this apparent to its insured. S.B. Corp. v. Hartford Accident & Indem. Co., 880 F. Supp. 751, 753 (D. Nev. 1995), aff d, 100 F.3d 964 (9th Cir. 1996). The letter should inform the insured that the insurer is reserving its rights under the terms and conditions of the policy while there is an investigation into the loss. Ibid. In Nevada, the insurer should identify all relevant defenses and provisions of its policy which it is relying on to deny coverage in its disclaimer letter. Havas, supra, 614 P.2d at 2. For example, if the insurer can deny coverage on late notice and a policy exclusion, it should identify both in its disclaimer letter. Ibid. ( [w]here the insurer s denial of coverage on one ground encourages or excuses the insured s untimely notice, the late notice defense is generally held to be waived ). NEW HAMPSHIRE New Hampshire requires that the reservation of rights letter notify the insured of the issues giving rise to a coverage dispute. Binda v. Royal Ins. Co., 744 A.2d 634, 637 (N.H. 2000). In addition, the reservation of rights letter should identify the terms of the policy that may give rise to non-coverage. Id. at At least one court has held that a letter identifying the facts and terms of the policy potentially allowing for non-coverage, including a statement that it would conduct an investigation, was sufficient in providing a reservation of rights to the insured. Id. at In New Hampshire, the disclaimer letter should provide an adequate recitation of the factual basis and policy provisions on which the insurer relies to disclaim coverage. See e.g. Bowen v. Merchants Mut. Cas. Co., 107 A.2d 379, 384 (N.H. 1954). The disclaimer letter should contain all relevant policy provisions. Ibid. The insurer will be estopped from relying on provisions not contained in the letter if the insured has reasonably relied on the letter to its detriment. Id. at NEW JERSEY New Jersey requires that an insurer s reservation of rights must fairly inform the insured of the insurer s position. An insurer should set out all of the reasons of which it is aware, or should be aware, at the time it issues the reservation of rights letter as to why the insured may not be entitled to coverage. Battista v. W. World Ins. Co., Inc., 545 A.2d 841, 846 (Law Div. 1988), aff d and rev d in part, 594 A.2d 260, (App. Div.), certif. denied, 606 A.2d 366 (N.J. 1991). In addition, a reservation of rights letter must specifically inform the insured that the offer to defend subject to the insurer s right to later disclaim indemnity may be accepted or rejected by the insured. Sneed v. Concord Ins. Co., 237 A.2d 289, 293 (App. Div. 1967). If further investigation is required to ascertain whether coverage is available, the letter should state that the insurer reserves its right to disclaim based on further factual development. An insurer must issue a disclaimer in a timely manner. Shotmeyer v. New Jersey Realty Title Ins. Co., 948 A.2d 600, 609 (N.J. 2008). [O]nce an insurer has had a reasonable opportunity to investigate, or has learned of grounds for questioning coverage, it then is under a duty promptly to inform its insured of its intention to disclaim coverage or of the possibility that coverage will be denied or questioned. Griggs v. Bertram, 443 A.2d 163, 168 (N.J. 1982). The letter should identify the relevant defense or policy provision that the insurer will rely on. See e.g. Gen. Acc. Ins. Co. v. New York Marine and Gen l Ins. Co., 727 A.2d 1050, 1052 (App. Div. 1999); Hanover Ins. Group v. Cameron, 298 A.2d 715, 718 (Ch. Div. 1973). MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

12 NEW MEXICO In New Mexico, coverage defenses may be properly preserved by a reservation of rights agreement. Am. Employers Ins. Co v. Crawford, 533 P.2d 1203, 1208 (N.M. 1975). The reservation of rights should enunciate all applicable policy language that may lead to a possible disclaimer. In addition, the reservation of rights should include a general reservation so that the insured is made aware that there may be a possibility that a provision of the policy which has not been cited may lead to non-coverage. Crawford v. Am. Employer s Ins. Co., 526 P.2d 206, 216 (N.M. Ct. App. 1974) (Sutin, J. Dissent), rev d 533 P.2d 1203 (N.M. 1975). Because the actions of the insurer may waive its defense, the reservation of rights letter should be timely. See Miller v. Phoenix Assur. Co., Ltd., 191 P.2d 993, 996 (N.M. 1948). When disclaiming coverage, the insurer must notify the insured of the reasons for its denial. Martin v. W. Am. Ins. Co., 993 P.2d 763, 766 (N.M. Ct. App. 1999). The insurer must state the reason for its denial based on the facts known to it at the time or the facts that the insurer should reasonably be aware of at the time of the disclaimer. Ibid. NEW YORK In New York, the purpose of a reservation of rights letter is to inform the insured of the insurer s coverage position, enabling it to fulfill its duty to defend the insured, while preserving its right to assert a coverage defense at a later time. The letter must give fair notice that the insurer intends to assert coverage defenses or to pursue declaratory relief at a later date. United Nat l Ins. Co. v. Waterfront N.Y. Realty Corp., 948 F. Supp. 263, 268 (S.D.N.Y. 1996). The letter should state the possible defenses to coverage, referencing the specific policy provisions that form the basis for the insurer s reservation. Ibid. If further investigation of a claim is warranted, the insurer should notify the insured that the insurer reserves the right to disclaim coverage based upon further factual development. Merchants Mut. Ins. Co. v. Allcity Ins. Co., 245 A.D.2d 590, (N.Y. App. Div. 1997). When disclaiming coverage in New York for a bodily injury or death claim, the insurer must issue its disclaimer as soon as reasonably possible. N.Y. Ins. Law. 3420(d). The denial of coverage must be issued to the injured person or any other claimant as well as the insured. Ibid. The notice must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated. Gen l Accident Ins. Group v. Cirucci, 387 N.E.2d 223, 224 (N.Y. 1979). A delay as short as 30 days has been held to be untimely. W. 16th Street Tenants Corp. v. Public Serv. Mut. Ins. Co., 290 A.D.2d 278, 279 (N.Y. App. Div. 2002), appeal dismissed, 773 N.E.2d 1017 (N.Y. 2002). However, a declaratory judgment action against an insured has been held sufficient to fulfill the insurer s obligation to disclaim under New York Insurance Law. An insurer may be deemed to have waived possible defenses when it issues its disclaimer based upon one provision and then later seeks to deny based on another provision. See e.g. Cirucci, 387 N.E.2d at MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

13 NORTH CAROLINA In North Carolina, a reservation of rights letter is generally required to prevent the insurer from being estopped to deny coverage under the policy once the defense is conducted with knowledge of facts taking the loss outside the coverage of the policy. Nat l Mortgage Corp v. Am. Title Ins. Co., 255 S.E.2d 622, 629 (N.C. Ct. App. 1979), rev d on other grounds, 261 S.E.2d 844 (1980). The reservation of rights should provide the insured with notice so that it understands that the insurer will not pay the costs of an action based on an incident not covered by the policy and to which the insurer has no duty to defend. N.C. Farm Bureau Mut. Ins. Co. v. Fowler, 589 S.E.2d 911, 914 (N.C. Ct. App. 2004) (Court ruled that non-waiver agreement entered into by insured that stated no action heretofore or hereafter taken by [plaintiff] shall be construed as a waiver of the right of [plaintiff], if in fact it has such right, to deny liability and withdraw from the case, was sufficient to put insured on notice that the insurer would not indemnify an incident not covered by the policy). In North Carolina, where an insurer denies liability for a loss on one ground, at the time having knowledge of another ground of forfeiture, it cannot thereafter insist on such other ground if the insured has acted on its asserted position and incurred prejudice or expense by bringing suit, or otherwise. Council v. Metro. Life Ins. Co., 256 S.E.2d 303, 305 (N.C. Ct. App. 1979). The insurer must specify the exact terms relied on to deny coverage to the insured. Ibid. NORTH DAKOTA In North Dakota, where an insurer is doubtful about its liability and wishes to retain all rights and at the same time protect itself against the claim that it has unjustifiably refused to enter a defense, it may enter into a non-waiver agreement or reservation of rights agreement with the insured. Allied Mut. Ins. Co. v. Hingst, 360 F. Supp. 1204, 1208 (D.N.D. 1973). The agreement should be signed. Ibid. The agreement should be timely and notify the insured of the insurer s position. Ibid. A general reservation may be sufficient. Id. at (Court ruled that the agreement stating that any action by the insurer shall not waive or invalidate any of the rights of the insurer was enforceable to reserve the insurer s rights under the policy). In North Dakota, the insurer must identify the provisions of the policy on which it is denying coverage. D.E.M. v. Allickson, 555 N.W.2d 596, (N.D. 1996). The notice must be timely and apprise the claimant of the grounds for the disclaimer with a high degree of specificity. Id. at 600. An insurer that disclaims liability on a specified ground may be estopped from denying coverage on a different ground if the insured relied on the disclaimer and was prejudiced by that reliance. Id. at OHIO Ohio recognizes that a potential conflict of interest exists when an insurer assumes control of a defense of an insured but also intends to challenge its duty to indemnify if the defense is unsuccessful. Patitucci v. McNeal Schick Archibald & Biro, 2006 Ohio 5727, P19 (Ohio Ct. App. 2006), appeal not allowed, 2007 Ohio 1266 (2007). As such, Ohio allows the insurer to assume a defense if it issues a reservation of rights letter. Ibid. A reservation of rights consists of notice given by the insurer that it will defend the suit, but reserving all rights it has based on noncoverage under the policy. Ibid. The reservation of rights should put the insured on notice that it may be in the insured s best interest to retain personal counsel. Ibid. In addition, the reservation of rights must be timely. Britton v. Smythe, Cramer Co., 743 N.E.2d 960, 966 (Ohio Ct. App. 2000), appeal not allowed, 941 N.E.2d 145 (Ohio 2001). In Ohio, an insurer s disclaimer of coverage must be based on circumstances that furnish reasonable justification for the disclaimer. Goodrich Corp. v. Commercial Union Ins. Co., 2008 Ohio 3200, P12 (Ohio Ct. App. 2008). Such circumstances necessitate a full investigation by the insurer as to the insured s claim prior to disclaiming coverage. Id. at P13. MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

14 OKLAHOMA In Oklahoma, a reservation of rights letter should identify those relevant provisions of the policy on which the insurer may rely to disclaim coverage. Melton Truck Lines, Inc. v. Indem. Ins. Co. of N. Am., 2006 U.S. Dist. LEXIS 43179, at *9-*10 (N.D. Okla. June 26, 2006). In addition, the insurer should make apparent that any further actions taken by it shall not be construed as a waiver of any rights or defenses. Ibid. In Oklahoma, an insurer must disclose the rationale for coverage denial within a reasonable time. Cust- O-Fab Serv. Co., LLC v. Admiral Ins. Co., 158 Fed. Appx. 123, 129 (10th Cir. 2005). The disclaimer must make specific reference to the policy defense being relied upon by the insurer. Id. at 130. OREGON In Oregon, the insurer, when tendered the defense of an action, cannot, as a condition of its assumption of the defense, reserve the right to later question coverage. Ferguson v. Birmingham Fire Ins. Co., 460 P.2d 342, 348 (Or. 1969). Rather, the insured is required to agree to such a reservation either impliedly or expressly. Ibid. Incorporated in the letter must be an identification of the policy terms in dispute. In addition, if there are terms that may arise in the future that give cause for non-coverage, the insurer must provide a general reservation stating that the insurer reserves the right to withdraw at any time in the future. United Pac. Ins. Co v. Pac. Nw. Research Found., 593 P.2d 1278, 1280 (Or. Ct. App. 1979). However, if an applicable exclusion is known to the insurer at the time of the reservation of rights, the insurer must identify that exclusion in the reservation letter. Ibid. In Oregon, the disclaimer letter must identify the relevant policy provisions on which the insurer is relying to disclaim coverage. Dillingham Corp. v. Employer s Mut. Liab. Ins. Co. of Wisconsin, 503 F.2d 1181, 1185 (9th Cir. 1974). The insurer is required to apprise the insured fully of its position. Failure to do so will estop the insurer from asserting any defense other than those brought to the notice of the plaintiff. Ibid. PENNSYLVANIA In Pennsylvania, when an insurer believes a claim is not covered, it may protect itself by issuing a reservation of rights under the policy which fairly informs the insured of the insurer s position. Beckwirth Mach. Co. v. Travelers Indem. Co., 638 F. Supp. 1179, 1187 (W.D. Pa. 1986), appeal dismissed, 815 F.2d 286 (3d Cir. 1987); see Brugnoli v. United Nat l Ins. Co., 426 A.2d 164, (Pa. Super. Ct. 1981). The notice must allow the insured to protect its interests and avoid detrimentally relying on the insurer to indemnify it. Ibid.; see Nichols v. Am. Cas. Co., 225 A.2d 80 (Pa. 1966). Notice must be given in a timely matter. Beckwirth, supra, 638 F. Supp. at Pennsylvania does not require the assent of the insured. Ibid. In Pennsylvania, when an insurer disclaims coverage, it should identify the reasons for its denial. An insurer may be estopped from disclaiming on other grounds after its initial disclaimer. Slater v. Gen l Cas. Co. of Am., 25 A.2d 697, 699 (Pa. 1942). This will only occur if the insured was misled or lulled by the insurer s initial disclaimer. Ibid. 12 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

15 RHODE ISLAND Rhode Island requires that a reservation of rights letter be issued timely. Pickering v. Am. Employers Ins. Co., 282 A.2d 584, (R.I. 1971). The letter should have some specificity, simply alleging that there is a manifest disregard of the terms and conditions of the policy will not be held sufficient. Ibid. Courts will strike down a reservation if it states that coverage neither exists nor applies in manner and form as you have alleged, without any identification of the policy terms in question. Ibid. However, it has been held sufficient for an insurer that lacks sufficient knowledge to make a determination as to coverage issues to issue a reservation that states we will agree to take part in the defense of this claim, from the date it was reported to [us], under a full reservation of rights, of all our policy terms and should we determine that we have no coverage for this claim we can withdraw from the defense upon providing written notice. Textron, Inc. v. Liberty Mut. Ins. Co., 639 A.2d 1358, 1363, n.4 (R.I. 1994). When disclaiming coverage, the insurer must identify the reasons for its disclaimer. Gregelevich v. Progressive Nw. Ins. Co., 882 A.2d 594, 595 (R.I. 2005). The letter should make apparent that the insurer is denying coverage to the insured. Rumford Prop. & Liab. Ins. Co. v. Carbone, 590 A.2d 398, 401 (R.I. 1991). SOUTH CAROLINA A non-waiver agreement or reservation of rights letter must put the insured on notice that the insurer is not waiving any rights or defenses to dispute coverage under the policy. Am. Mut. Fire Ins. Co. v. Green, 106 S.E.2d 265, 271 (S.C. 1958) (non-waiver agreement); Laidlaw Envtl. Servs. v. Aetna Cas. & Sur. Co, 524 S.E.2d 847, 852 (S.C. Ct 1999) (reservation of rights). In addition, the letter or agreement should inform the insured that any investigation conducted by the insurer in no way constitutes waiver. Ibid. The reservation of rights letter should be made timely and, once the insurer has a reasonable basis to assert the proper term of the policy to which it will disclaim coverage, the insurer should identify this provision in the reservation of rights letter. Laidlaw, supra, 524 S.E.2d at 852. An insurer that disclaims coverage should do so promptly, identifying the relevant provisions in the policy leading to disclaimer. See e.g. Washington v. Nat l Serv. Fire Ins. Co., 168 S.E.2d 90, 92 (S.C. 1969); Miles v. State Farm Mut. Auto. Ins. Co., 120 S.E.2d 217, 219 (S.C. 1961). Any denial must be made in good faith and with a substantial basis. Miles, supra, 120 S.E.2d at 219. SOUTH DAKOTA In South Dakota, a reservation of rights is a notice to the insured that the insurer will defend them, but that it is not waiving any defenses it may have under the policy. St. Paul Fire and Marine Ins. Co. v. Engelmann, 639 N.W.2d 192, 201 (S.D. 2002). Once an insurer issues a reservation of rights, it cannot then insist on conducting the defense of the insured, without the insured s consent. Kansas Bankers Sur. Co v. Lynass, 920 F.2d 545, 548 (8th Cir. 1990). The letter should identify the specific clauses and requisite facts that may lead to non-coverage, but maintain the insurer s rights on all provisions in the policy. See e.g. ibid. Generally in South Dakota, an insurer must notify the insured of the reasons for its disclaimer of coverage. Nat l Sun Indus. v. S. Dakota Farm Bureau Ins. Co., 596 N.W.2d 45, 47 (S.D. 1999). However, if the insurer notifies the insured of a reason, it may be estopped from asserting additional bases for noncoverage at a later time. However, the insured must suffer prejudice. Ibid. MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

16 TENNESSEE Tennessee requires that an insurer give proper notice to its insured that it is reserving its rights. Transamerica Ins. Group v. Beem, 652 F.2d 663, 666 (6th Cir. 1981). This notice is accomplished only if it fairly informs the insured of the insurer s position. Ibid. The insurer must provide the reasons for its potential denial of coverage. In addition, in order to preserve the right to later litigate coverage, the insurer must advise the insured that it will represent the insured, but that it intends to reserve the right to litigate the issue of policy coverage of the insured should there be an adverse judgment in the tort action. Richards Mfg. Co. v. Great Am. Ins. Co., 773 S.W.2d 916, 918 (Tenn. Ct. App. 1988). The reasoning given for the insurer s position does not need to be legally correct. Rather, it is the conclusion regarding the existence or non-existence of coverage that must be clearly and fairly communicated to the insured. Id. at 919. The insurer must be specific as to the time period to which the reservation applies. That is, if the insurer wants to reserve its rights until after the defense of the action, i.e., the payment of the underlying claim, it must specify this or it will waive the right to disclaim. Allstate Ins. Co. v. Dixon, 1991 Tenn. App. LEXIS 386 (Tenn. Ct. App. May 17, 1991). An insurer must identify the relevant reasons why it is denying coverage. Bennett v. Allstate Ins. Co., 1993 Tenn. App. LEXIS 593 (Tenn. Ct. App. Sept. 9, 1993). An insurer s failure to raise a policy defense until after there has been a judgment against its insured will result in the insurer being estopped to raise that defense. Knox-Tenn Rental Co. v. Home Ins. Co., 833 F. Supp. 665, 670 (E.D. Tenn. 1992), aff d, 2 F.3d 678 (6th Cir. 1993). TEXAS In Texas, the purpose of a reservation of rights letter is to allow the insurer to provide a defense for its insured while it investigates coverage issues. J.E.M. v. Fid. & Cas. Co. of N.Y., 928 S.W.2d 668, 673 (Tex. Ct. App. 1996). The insurer must inform the insured of its position in a timely manner. Am. Eagle Ins. Co. v. Nettleton, 932 S.W.2d 169, 174 (Tex. Ct. App. 1996). The reservation of rights letter must detail specific coverage problems that the insured might face, inform the insured that a conflict of interest exists, and inform the insured that they have the right to seek outside counsel. Ibid.; see also Employers Cas. Co. v. Tilley, 496 S.W.2d 552, 559 (Tex. 1973). The disclaimer letter should set out the policy provisions or exclusions that the insurer is relying on to disclaim coverage. See e.g. Nguyen v. State Farm Lloyds, 947 S.W.2d 320, 322 (Tex. Ct. App. 1997). If the insurer asserts one ground for its denial, it may have waived and be estopped from later asserting another ground for a disclaimer. Lanco v. Employers Nat l Life Ins. Co., 424 S.W.2d 321, 323 (Tex. Civ. App. 1968). However, the insurer will only have waived its right or be estopped from asserting a different policy provision if the insured can show that the company knew the fact which would entitle it to insist on forfeiture at the time it denied liability. Ibid. UTAH Utah requires that a reservation of rights letter be sent timely. Cont l Ins. Co. v. Kingston, 114 P.3d 1158, 1164, n.8 (Utah Ct. App.), cert. denied, 2005 Utah Lexis 217 (Utah 2005). It should be sent immediately after learning about the incident or at least right after the insurer learns of the reason to disclaim coverage. Ibid. The letter should indicate that the insurer will continue to reimburse the insured s ongoing expenses as though they were covered under the policy, but with a full reservation of its right to deny coverage if its further investigation showed it is entitled to deny coverage. Ibid. When denying a claim, an insurer must issue a timely disclaimer letter. S.W. Energy Corp. v. Cont l Ins. Co., 974 P.2d 1239, 1242 (Utah 1999). This letter should identify the reasons and relevant provisions or exclusion in the policy as to which the insurer will rely. Green v. State Farm Fire & Cas. Co., 127 P.3d 1279, 1281 (Utah Ct. App. 2005), cert. denied, 138 P.3d 589 (Utah 2006). The actions of the insurer, including the identification of certain provisions in a policy, may lead to waiver of other possible defenses if not disclosed. Kingston, supra, 114 P.3d at MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

17 VERMONT In Vermont, when an insurer undertakes the defense of its insured, it waives any defenses it may have against payment under the policy unless it reserves its rights either in a reservation of rights letter or nonwaiver agreement. In Re Lynch, 226 B.R. 813, 815 (Bankr. D. Vt. 1998). The insured must consent to the reservation of rights, as unilateral reservations by the insurer are ineffective. Am. Fid. Co. v. Kerr, 416 A.2d 163, 165 (Vt. 1980). An insurer cannot simply issue a general reservation of rights letter. Lynch, supra, 226 B.R. at 815. Rather, the insurer must identify specific defenses and provisions in its policy that it may rely upon in disclaiming coverage. Ibid.; see Cummings v. Connecticut Gen l Life Ins. Co., 148 A. 484, 487 (Vt. 1930). [W]hen liability insurers cite specific defenses to coverage in a non-waiver agreement, all defenses not cited therein are waived. Lynch, supra, 226 B.R. at 815; Cummings, 148 A. at 487. In addition, if further investigation is needed so that the insurer can identify other defenses not known to it at the time of its initial reservation letter, it must identify this fact and make certain the insured knows that the insurer reserves the right to disclaim coverage based on further factual investigation. Ibid.; see also In Re Aberdeen 100, Inc., 1995 Bankr. LEXIS 1032 (Bankr. D. Vt. July 21, 1995) (Holding that non-waiver agreement that reserved insurer s rights to disclaim coverage under policy provisions, conditions, or exclusion which may prove to be pertinent to this claim as additional facts presently unknown to us may warrant, did not waive rights to disclaim coverage.) The insurer should identify the reasons for which it is disclaiming coverage. See e.g. Armstrong v. Hanover Ins. Co., 289 A.2d 669, 670 (Vt. 1972). However, when one defense is cited by the insurer for disclaiming a loss, all others may be deemed waived. Id. at 185. Yet an insurer cannot be considered to have waived a defense to a claim of which it was ignorant at the time of sending the letter. Segalla v. United States Fire Ins. Co., 373 A.2d 535, 538 (Vt. 1977). VIRGINIA Virginia allows an insurer to defend an insured while reserving its rights to later dispute coverage in a reservation of rights letter. Such reservation of rights must be communicated to the insured, must fairly inform the insured of the insurer s position, and notice must be timely given. Nationwide Mut. Ins. Co. v. Gentry, 117 S.E.2d 76, 81 (1960); see Estate of Laura Feury v. Princeton Ins. Co., 68 Va. Cir. 330, 334 (Va. Cir. Ct. 2005) (the insurer must notify all insured parties of its position in a timely manner of its reservation of rights). Its sufficiency is to be determined by the facts of the particular case. Gentry, supra, 117 S.E.2d at 81. Notice must be given to the claimant within 45 days of issuing the reservation of rights letter to the insured. Va. Code Ann [I]n any claim in which a civil action has been filed by the claimant, the insurer shall give notice of reservation of rights in writing to the claimant, or if the claimant is represented by counsel, to claimant s counsel not less than thirty days prior to the date set for trial of the matter. Ibid. Whenever any insurer on a policy of liability insurance discovers a breach of the terms or conditions of the insurance contract by the insured, the insurer shall notify the claimant or the claimant s counsel of the breach. Notification shall be given within forty-five days after discovery by the insurer of the breach or of the claim, whichever is later. Va. Code Ann MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements

18 WASHINGTON In Washington, where an insurer desires to reserve the right to contest liability under a liability policy before defending an action, all that is required is notice to the insured that the insurer is defending under a reservation of its rights. Associated Indem. Corp. v. Wachsmith, 99 P.2d 420 (Wash. 1940). Notice requires that the insurer fully inform the insured of the reasons for its reservation and of developments relevant to coverage under the policy in a timely manner. Red Oaks Condo Owners Ass n v. Am. State Ins. Co., 2007 Wash. App. LEXIS 2177, at *16-*17 (Wash. Ct. App. July 30, 2007). In Washington, the disclaimer letter must contain all possible reasons for disclaiming coverage known to the insurer at the time the insurer issues the disclaimer. Bosko v. Pitts & Still, Inc., 454 P.2d 229, 234 (Wash. 1969). [I]f an insurer denies liability under the policy for one reason, while having knowledge of other grounds for denying liability, it is estopped from later raising the other grounds in an attempt to escape liability, provided that the insured was prejudiced by the insurer s failure to initially raise the other grounds. Ibid. This has been extended not only to what the insurer knows, but what the insurer could have known had it pursued a diligent inquiry. Ibid. Thus, the insurer should issue a disclaimer letter identifying the relevant facts and portions of the policy that it is relying upon in denying coverage. WEST VIRGINIA In West Virginia, the insurer must issue a letter to the insured so that the insured has notice that coverage with regard to the accident is questionable. Farm Family Mut. Ins. Co. v. Bobo, 486 S.E.2d 582, 587 n. 6 (1997). The insurer must inform the insured that the defense being provided is not unconditional. By stating that [i]f our investigation reveals that your policy provides no coverage for this claim, we may elect to exercise our rights under the policy and decline to continue paying your defense an insurer was deemed not to waive any rights under the policy. Ibid. An insurer must issue a timely disclaimer identifying the reasons for its disclaimer. Potesta v. United States Fid. & Guar. Co., 504 S.E.2d 135 (W. Va. 1998). If the insurer identifies one provision in its disclaimer, but later wants to deny based on another provision, the denial will be allowed unless there is either prejudice to the insured in its reliance on the initial disclaimer or the insurer intentionally relinquished a known right. Id. at 138. WISCONSIN In Wisconsin, an insurer can preserve its right to later disclaim coverage by entering into a non-waiver agreement or reservation of rights agreement. Struebing v. Am. Ins. Co., 222 N.W. 831, 837 (Wis. 1929); see Iowa Nat l Mut. Ins. Co. v. Liberty Mut. Ins. Co., 168 N.W.2d 610, 613 (Wis. 1969). This agreement must put the insured on notice that the insurer is not waiving any rights by entering into the agreement or by conducting an investigation to determine whether coverage exists under the policy. Struebing, supra, 22 N.W. at 837. The agreement should state that it is intended to preserve the rights of the parties involved. Ibid. In Wisconsin, when disclaiming coverage, the insurer must do so on a timely basis, identifying the relevant policy provisions and reasons for doing so. See e.g. Estate of Logan v. Nw. Nat l Casualty Co., 424 N.W.2d 179, 189 (Wis. 1988). WYOMING Wyoming requires that an insurer provide adequate notice of the reasons why a possible exclusion of coverage under the policy applies in order to later disclaim coverage. The Doctors Co. v. The Ins. Corp. of A., 864 P.2d 1018, 1030 (Wy. 1993). The letter must make specific reference to the policy defense which the insurer may assert. Ibid. Thereby, the insurer will reserve its right to later disclaim coverage. The insurer should identify the relevant provisions it intends to rely on in issuing its disclaimer letter. St. Paul Fire & Marine Ins. Co. v. Albany County Sch. Dist., 763 P.2d 1255, 1262 (Wyo. 1988). After identifying the provisions on which it intends to rely, the insurer may issue a general disclaimer and reserve its right to disclaim for other reasons that may not be known to it at the time. Ibid. 16 MUNICH RE Reservation of Rights, Disclaimer Letters, Non-waiver Agreements 2011

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