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Area of Law: | Insurance Law |
Keywords: | Reservation of rights; Insurance coverage; Indemnification |
Jurisdiction: | Texas |
Cited Cases: | 715 P.2d 1133; 594 A.2d 260; 545 A.2d 841; 773 S.W.2d 916; 521 So.2d 1298; 564 F. Supp. 303; 161 Cal. Rptr. 322; 889 F.2d 1245; 100 Cal. App. 3d 739; 719 F.2d 116; 744 S.W.2d 601; 727 S.W.2d 1; 227 N.J. Super. 135; 604 F.2d 1052; 601 S.W.2d 520; 717 S.W.2d 476; 789 F.2d 1196; 192 A.2d 169 |
Cited Statutes: | None |
Date: | 04/01/2001 |
When an insurer assumes the defense of its insured but questions its liability under the policy, the insurer frequently uses a reservation-of-rights document as "a means by which, prior to determination of the liability of the insured, the insurer seeks by agreement to suspend the operation of the doctrines of waiver and estoppel." Farmers Texas County Mut. Ins. Co. v. Wilkinson, 601 S.W.2d 520, 522 (Tex. Civ. App.–Austin 1980, writ ref’d n.r.e.). Upon notification of the insurer’s reservation of rights the insured may either accept the insurer’s conditional defense of the claims against him or he may reject the reservation of rights and take over the defense himself. City of Carter Lake v. Aetna Casualty & Sur. Co., 604 F.2d 1052, 1060 n.7 (8th Cir. 1979). The general rule then is that a reservation-of-rights notice "will be held sufficient only if it fairly informs the insured of the insurer’s position." Transamerica Ins. Group v. Beem, 652 F.2d 663, 666 (6th Cir. 1981) (quoting Annotation, Liability Insurance: Insurer’s Assumption of or Continuation in Defense of Action Brought Against the Assured as Waiver or Estoppel as Regards Defense of Noncoverage or Other Defense Existing at the time of Accident, 38 A.L.R.2d 1148, 1151 (1954)). See also Richards Mfg. v. Great Am. Ins. Co., 773 S.W.2d 916, 919 (Tenn. Ct. App. 1988) (It is the "insurer’s conclusion regarding the existence or nonexistence of certain coverage that must be clearly and fairly communicated […]
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