Page 25 - Reservation of Rights - Special Edition

The reservation-of-rights notice must, in a straightforward manner, inform a reader of average intelligence that while the insurance company is providing a defense, it is doing
so without waiving any rights to contest liability under the policy. Ambiguities in the reservation notice will be construed against the insurance company. Id.
Waiver/Estoppel
When an insurer assumes the defense of an action against its insured without a reservation of its rights, and with knowledge of facts which would have permitted it to deny coverage, it may be estopped from subsequently raising the defense of non-coverage. Cincinnati Ins. Co. v. Mallon, 409 N.E.2d 1100, 1105 (Ind. Ct. App. 1980), citing C Appleman, Insurance Law and Practice (Burdal ed. 1979) s 4682, pp. 22-23.
In Gallant Ins. Co. v. Oswalt, an automobile insurer was entitled to raise the defense of insured’s non-cooperation in supplemental proceedings to enforce a judgment against
its insured, where the insurer defended the insured under a reservation of rights in an automobile collision action. Gallant Ins. Co. v. Oswalt, 762 N.E.2d 1254 (Ind. Ct. App. 2002).
Reimbursement for Defense Costs
Indiana has not addressed the issue of reimbursement di- rectly, whether at the state or federal court level.
Conflicts of Interest and Independent Counsel
If an insurance company’s independent investigation of
facts underlying a complaint against its insured reveals a claim patently outside of the risks covered by the policy,
the company may properly refuse to defend the insured. However, if the insurer elects to provide a defense for its insured under a reservation of rights, it must then pay for the insured’s choice of independent defense counsel. Walton v. First American Title Ins. Co., 844 N.E.2d 143, 146 (Ind. Ct. App. 2006); Snodgrass v. Baize, 405 N.E.2d 48, 51 (Ind. Ct App. 1980).
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