A coverage dispute is conceived, hatched, and dies by a series of decisions made by the liability insurer. Upon receiving notice of a claim “every insurer . . . shall immediately . . . accept (yes) or deny the claim, in whole (no) or in part (maybe).”[1] In other words, when a policyholder screams “please help,” the insurer must answer succinctly with a “yes,” “no,” or “maybe.” Most policyholders should reply to each kind of response. While “yes” seems like good news, there is no deadline for an insurer to deny coverage.[2] While “no” is bad news, counsel for the policyholder and the plaintiff can take appropriate steps to analyze whether a potentially covered claim exists and if so, how and when they should reply to the insurer. An response of “maybe” is complicated and leads to a series of additional critical decisions.

Yes – Insurer Accepts Full Coverage

Insurers usually express “yes” impliedly by providing a defense to their policyholders without any warning that coverage may later be challenged. Still, confidence that the insurer accepts full coverage to both defend and indemnify their policyholders requires an express waiver. Readers wanting to learn more may hyperlink to YES.

No – Insurer Denies All Coverage

In contrast, insurers always say “no” by expressly and forcefully refusing to defend or indemnify against a claim. Encourage an insurer to reconsider its denial usually requires the assistance of counsel.  Readers wanting to learn more may hyperlink to NO.

Maybe – Insurer Reserves Rights to Later Deny Coverage

With ever increasing frequency, many liability insurers say “maybe,” agreeing to defend while asserting a reservation of rights to later deny any obligation to pay for a settlement or judgment and sometimes threatening to get money back from the policyholder.

Obviously a reservation of rights always creates some sort of conflict of interest between the insurer and its policyholders for the simple reason that by its very nature, a reservation of rights expresses that the insurer wants the policyholder to pay, while the policyholder wants the opposite. A reservation of rights is a form of coverage denial that simply puts off a final decision. Insurers that say “maybe” have as many as 10 significant decisions to make. Policyholders and plaintiffs may to respond each of these 10 decisions in a variety of ways that may seem as daunting as a game of chess where there are 170,000,000,000,000,000,000,000,000 possible moves in only the first ten turns. But even a neophyte can make smart moves, especially with the help of an experienced coach.

When an insurer reserves its rights, it has a series of additional decisions it may make:

Should the Insurer Hire Dependent Counsel? Should the Insurer Agree to Pay Independent Counsel? Should the Insurer Actually Pay Independent Counsel? Should the Insurer Accept a Settlement Offer? Should the Insurer Sue for Declaratory Relief?  Should the Insurer Seek Reimbursement of Defense Costs? Should the Insurer Seek Reimbursement of Settlement Costs? To learn more may hyperlink to Top Ten Insurer Coverage Decisions.

[1] Code of Regs. §2695.7(b).

[2]  See, Article: There Is No Deadline to Deny Coverage.

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