The Keynote Speaker of the 2021 Summer Membership Meeting was Randy Maniloff. Randy is counsel at White and Williams LLP and the lawyer behind the well-known monthly newsletter “Coverage Opinions.” He presented on the Top 10 Issues for Effective Reservations of Rights Letters.
Randy started the seminar highlighting the fact that insurance companies don’t provide enough training to ensure ROR letters check all the boxes and have the ability to overcome challenges. He stressed ROR letters are hard to do because there are no templates and no official court direction that says do this and it will be effective. An effective ROR letter is only an ROR that has not been found ineffective.
He provided a top 10 list:
1. The purpose of the ROR.
The real purpose of the ROR is to prevent misunderstanding. Insureds do not often understand the ROR and are just happy because the insurance company retained an attorney. The reality is the carrier is reserving rights and essentially providing a defense but may not provide coverage for all alleged damages. It is important to send a clear message here to avoid confusion on the insured’s part at a later date.
2. Choice of law is something to keep in mind.
Choice of law is particularly important for interpretation of certain policy provision such as pollution exclusions, late notice, etc. The choice of law analysis is tedious and it is hard to say with certainty which state will always apply. The general rule with choice of law is the location of the insured trumps the location of the claim.
3. Identify all the recipients.
It is very important not to overlook sending the ROR to all insureds. You cannot just send it to the highest-ranking insured. Also, you need to locate all employees named even if no longer employed. If you don’t send it, you will waive defenses as to the person who did not receive the ROR letter.
4. Defense is limited to post-tender fees only (if that’s the law).
Late notice is a very difficult issue. Finding prejudice is difficult. If the insured defended the claim, it will be hard for an insurance company to claim prejudice.
5. Is insured entitled to independent counsel?
The general rule is an insured is entitled to independent counsel if there is a conflict. Conflicts are hard to prove. In certain states you need to tell the insured they are entitled to independent counsel. Rate issues associated with independent counsel are complicated.
6. Right to seek reimbursement of defense costs if no defense was owed (if law permits).
About half the states do not allow reimbursement of defense costs if no defense was owed. Some states allow it but only if provided for in the policy. Randy has never had a case where the insured received costs back.
7. Addressing covered vs. uncovered claims and damages.
The verdict will never be neat and tidy and you run the risk of getting a verdict where you cannot make a clear determination of whether coverage is owed. At a minimum, coverage must be addressed in the ROR.
8. ROR – the “fairly inform” requirement.
There is a need to marry the facts to the policy language. You need to mention the facts from the complaint that relate to the policy language you are citing. This is the most time-consuming part of the ROR if you are going to do it right.
9. The follow up ROR.
Follow up RORs are harder than original RORs. This is because original RORs are based on very little information – complaint, demand letter, etc. As litigation proceeds and things can change from what was initially known, a follow up ROR is required. The ALI Restatements is a good source for guidance on follow-up RORs.
10. Miscellaneous issues –Randy provided a list of additional tips
- Search for wrong names if using a prior letter template.
- Consider four corner or extrinsic evidence.
- Ensure proof of delivery.
- Be careful about loss date.
- Identify correct insurer.
- Distinguish between coverage for defense and damages.
- Insuring agreements before exclusions – need to satisfy Insuring agreement first.
- Verify correct policy language version.
- Take care when paraphrasing language – (switching to conversational tone).
A replay of this presentation is available to members through the AIRROC On Demand platform.