Page 11 - Reservation of Rights - Special Edition

“If an insurer waived its coverage position simply by settling a claim for the insured, the insurer would be forced either to refuse to settle and face a bad faith claim, or to settle the lawsuit and lose its coverage de- fenses. The ‘resulting Catch-22 would force insurers to indemnify non-covered claims,’ violating ‘basic notions of fairness.’ Permitting an insurer to make a reservation of rights not only protects against unjust enrichment of the insured, but also ‘advances significant public policy considerations.” Id.
Time for Providing Insured with Coverage Position/ Reservation of Rights
A carrier need not reserve its rights immediately upon learn- ing of a suit, and it may subsequently reserve its rights upon learning new information that would provide a coverage or policy defense. United Services Auto Ass’n v. Morris, 154 Ariz. 113 (1987).
2018 ReseRvation of Rights - special edition
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