Insurance Law – Difference Between Non-Waiver Agreement and Reservations of Rights

Insurance companies sometimes ask insureds who are making claims for “non-waiver” agreements. These supposedly “protect everyone’s rights” and some claim representatives tell insureds that these agreements are “required” even though policies (the contract between the company and the insured) do not require them at all.

Generally speaking, an insurance company conducting an investigation may have some concerns about whether there is coverage, the extent of coverage, whether the claim falls within the coverage, whether the claim is legitimate, and so forth. When they have these concerns, the companies do not want the insured making a claim to be able to assert that the company has “waived” its right to contest coverage or any part of the claim.

While the need for the insurance company to have this additional protection is questionable, the time-honored method used by companies to comfort themselves with this supposed added protection has been to send the insured a “Reservation of Rights” (“ROR”) letter. The traditional ROR letter typically spells out the policy provisions that concern the insurance company and states that although the company is going to investigate the loss it nevertheless reserves all rights it may have to contest coverage, contest the claim or contest both coverage and the claim.

Issuing a ROR letter has often been found to be a “two-edged sword” for insurance compaies. By their very nature, ROR letters alert insureds (and lawyers representing insureds) to the concerns that the company has about coverage or the claim. Knowledge being a powerful thing, some insurance companies believe that this allows insureds to craft the information they provide or disclose to avoid loss of coverage. The solution has been to try to get insureds to sign the “Non-Waiver Agreements” as these are bland, vague and typically do not specify the policy provisions or portions of the claim that are receiving heightened scrutiny.

From the point of view of the insured making a claim, unless a Non-Waiver Agreement is required by the policy or by the law in the state in which the claim is being made, there is generally no benefit to signing one of these agreements. The insurance company is usually required to investigate the claim anyway – and to do so fairly and in good faith. Insureds are required to cooperate with investigations and may not present fraudulent claims, but we believe they have a right to know the issues that need to be addressed.

If asked to sign a “non-waiver agreement”, insureds making claims should be aware that while in some instances the request may be nothing more than something that an adjuster does on every claim, it may signal that other issues can come up which may lead to a denial or limitation of coverage. Consulting an attorney in your local area is a good idea if this happens. Our firm has extensive experience dealing with insurance company investigations and can assist your local lawyer or help directly in those states in which we practice. Contact John Reilly by telephone or by e-mail to discuss your concerns.

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