Section 3.23 Tortfeasor’s Insurance Carrier Defends Under a Reservation of Rights

• Library: Settling Cases 2014

Reservations of rights usually arise in two different types of situations:

1. A technical policy defense may be available, but the carrier is concerned about the sufficiency of the proof of the defense.

2. The insured is sued on several different grounds, some of which are covered by the insurance policy and some of which are not.

See 14 STEVEN PLITT ET AL., COUCH ON INSURANCE § 202.38 (3^rd ed. 2013). Under those circumstances, the insurance company may conditionally tender a defense, reserving the right to contest its liability under its policy if its insured is found to be liable.

This is the worst of both worlds for the plaintiff. Unlike an outright refusal of coverage, the plaintiff is faced with the likelihood of a vigorous defense on the issues of liability and the extent of the injuries. Even if the plaintiff prevails, when trying to collect on the...