The Chanin Building, 122 East 42nd Street, Suite 725, New York, New York 10168

Blog Post

Insurance Company Reservation of Rights Letters—Better be Specific!

Insurance Company Reservation of Rights Letters—Better be Specific! by Evan Schwartz

A recent case decided by the Supreme Court of South Carolina, Harleysville Group Insurance v. Heritage Communities Inc., exemplifies an important lesson for lawyers on both sides of the insurance recovery spectrum—particularly concerning reservation of rights letters sent by insurance companies. 

In the case, two Myrtle Beach condominium complexes were built with major construction defects. A lawsuit was brought against a series of developers, resulting in multi-million dollar verdicts. Harleysville Group Insurance was one of the insurance companies that was going to be partially responsible for paying out these verdicts—indemnifying its insured, Heritage Communities. 

At the time that the cases were litigating, Harleysville received notice from Heritage and agreed to defend. Harleysville also sent a reservation of rights letter, however, reserving its right to deny coverage in the future for the ultimate verdicts in the cases. 

Harleysville’s letter to Heritage was intended to preserve its right not to indemnify, and the letter quoted, verbatim, block sections of the policy that Harleysville believed afforded it this right. After the verdicts were rendered, Heritage was forced to sue Harleysville to pay for the judgments obtained by the plaintiffs in the construction defect cases.  

The South Carolina Supreme Court required Harleysville to pay for its share of the verdicts because its reservation of rights letter was not specific enough—it lacked an explanation as to why those sections of the policy it quoted in its reservation of rights letter gave it the right to refuse coverage. 

Due to lack of specificity in its reservation of rights letter, Harleysville unwittingly waived its right to refuse coverage.    

Insurance companies often fail to follow their legal obligations when refusing coverage. This case is a perfect example of it. Lawyers representing insureds need to examine a reservation of rights letter very carefully. They should first examine whether or not the insurance company has been specific in explaining why there is not or may be no coverage. Second, the lawyer should determine whether or not applicable state law provides the type of waiver remedy that South Carolina provided to this particular insured—where the waiver of the insurance company’s right to refuse coverage in its reservation of rights letter is not specific.                            

Please contact us with any questions or comments.

Evan-Schwartz

 

Evan S. Schwartz
Founder of Schwartz Law
800-745-1755
moc.c1534316534pwalz1534316534trawh1534316534cs@SS1534316534E1534316534


what our clients say about us

Testimonials

  • We as a society are not prepared to deal with catastrophic illness, and although I was smart enough to have taken out a Long-term Disability policy in my thirties, the

    Long Term Disability Client – California
  • Desperate and devastated with everything to lose, I put my life in the hands of Evan and Michail on faith. In my heart I always believed they would deliver, and

    Lawyer – Oklahoma
  • During the most trying part of my life, Schwartz Law’s attorneys were fighting for my life. I was physically just barely up on my own two feet, with a diagnosis

    Long Term Care Client – New York
  • A company made an error in how they sold me my long-term disability insurance policy and they offered me a lump sum settlement. I did not fully understand the offer

    Physician–New York
  • My claim was denied by my insurance company. My medical condition wasn’t understood by my physicians. My first attorney gave me terrible advice. My family faced financial ruin without the

    Physician – New York

Latest News

Send us a message

Manhattan Offices

The Chanin Building, 122 East 42nd Street, Suite 725, New York, New York 10168

Toll Free: (800) 745-1755
Phone: (212) 608-5445

Garden City Office

666 Old Country Road, Ninth Floor, Garden City, New York 11530

Toll Free: (800) 745-1755
Phone: (516) 745-1122
Fax: (516) 745-0844