Page 16 - Reservation of Rights - Special Edition

DELAWARE
A reservation of rights occurs when an insurer provides a defense for their insured while expressly reserving its right to withdraw the defense and/or to deny coverage on some or all of the claims at a later date. The purpose of a reservation of rights is to avoid a situation where an insured claims that an insurer waived its coverage defenses or should otherwise be estopped from raising such coverage defenses.
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An insurer reserves its rights to deny the claim through a “reservation of rights letter” sent to an insured to put the insured on notice that future coverage defenses are not waived. 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 WL 1207107 (Del. Ch. Apr. 2, 2007). Any grounds for potentially disclaiming coverage not stated
in the reservation of rights letter are deemed waived. Id. 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, 858-860 (Del. Super. Ct. 1952).
Use of Extrinsic Evidence to Determine Duty to Defend
In Delaware, extrinsic evidence may not be considered when determining if an insurer has a duty to defend. The insurer’s duty to defend can only be determined by the language of its policy and the four corners of the complaint. “In constru- ing an insurer’s duty to [defend] ... the test is whether the underlying complaint, read as a whole, alleges a risk within the coverage of the policy.” Pac. Ins. Co. v. Liberty Mut. Ins. Co., 956 A.2d 1246, 1254-55 (Del. 2008); see also Cont’l Cas. Co. v. Alexis I Du Pont Sch. Dist., 317 A.2d 101, 103 (Del. 1974).
2018 ReseRvation of Rights - special edition
DELAWARE
With more than 50 years experience, Tybout, Redfearn & Pell specializes in civil litigation, workers compensation, and banking law in Wilmington Delaware. Tybout, Redfearn & Pell has experience in all areas of tort litigation, medical malpractice, products liability, workers compensation, commerical and construction litigation, municipal liability, civil rights, litigation involving insurers, alternative dispute resolution, Delaware law, bankruptcy, labor law and professional licensing. Our offices are conveniently located in Wilmington, Delaware.
Tybout, Redfearn & Pell attorneys also have experience handling business and commercial disputes including bankruptcy, employment, real estate disputes, contract claims, loan workouts and lender liability claims, construction disputes, trust actions and property claims.
Tybout, Redfearn & Pell attorneys practice in all Delaware federal and state courts. There are also two attorneys that are certified mediators that can mediate any dispute.
Tybout, Redfearn & Pell is a member of The Lawyers Committee of the National Center for State Courts, in which leaders of the nation’s preeminent law firms have partnered with the National Center for State Courts and its collaborative work with state and federal Chief Justices, court administrators, and other judicial leaders, to improve the performance of the state courts for the benefit of their clients and the public.
Practice Areas: Insurance Law; Product Liability; Employment Law; General Liability/Personal Injury Defense; Workers’ Compensation Defense; Construction Law; Arbitrations and Mediations; Business and Commercial Litigation Department; Trial Practice.
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