USE NOTES: This Model Letter assumes that the insurer has hired its lawyer and assumed control the policyholder’s defense and settlement. It should be signed by the policyholder, as the contracting party to whom the insurer owes fiduciary-like duties. It should not be signed by independent counsel to whom the insurer owes no duties. Adapt the form below by using the Legend. Before sending the text below, delete everything above this line.
City, State Zip Code
Re: &Plaintiff& v. &Client&
Your Claim No. ___
Thank you for your recent letter. Please confirm to me in writing that &InsCo& has completed a thorough investigation and has determined that it has no basis upon which &InsCo& may in the future reserve any rights to deny coverage on any ground.
Attached is a memo I got off of the internet.
Very truly yours,
MEMORANDUM OF LAW
“Every insurer shall conduct and diligently pursue a thorough, fair and objective investigation and shall not persist in seeking information not reasonably required for or material to the resolution of a claim dispute.” (Cal. Code Regs. §2695.7(d).) “For the insurer to fulfill its obligation not to impair the right of the insured to receive the benefits of the agreement . . . it is essential that an insurer fully inquire into possible bases that might support the insured’s claim.” (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 819; Hughes v. Blue Cross of No. Calif. (1989) 215 Cal.App.3d 832, 846.) “[The adequacy of investigation is among] the most critical factors bearing on the insurer’s good faith. . . . The insurer must fully inquire into possible bases that might support the insured’s claim.” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072.)
WAIVER OF COVERAGE DEFENSES
“The general rule supported by the great weight of authority is that if a liability insurer, with knowledge of a ground of forfeiture or noncoverage under the policy, assumes and conducts the defense of an action brought against the insured, without disclaiming liability and giving notice of its reservation of rights, it is thereafter precluded in an action upon the policy from setting up such ground of forfeiture or noncoverage. In other words, the insurer’s unconditional defense of an action brought against its insured constitutes a waiver of the terms of the policy and an estoppel of the insurer to assert such grounds. . . . [The insurer] waived the right to reserve a denial of coverage.” (Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 754.)