Reservation of Rights Letter

Letterhead
Date ___________________
__________________________
__________________________
__________________________
Insureds Name and Address
Re:

Insureds Name __________________________

Name of Claimant(s) ___________________________________
Policy No. ___________________
Court Cause No. ______________________

Dear ______________________ (Name of Insured):

We are handling the above noted loss for ________________________ (Name)
Insurance Company, which issued a _____________________ (type of policy) liability
policy with limits of liability of $____________. The policy is effective _______________
(date).
In this connection, we have today received a copy of the Amended Petition filed
on behalf of the claimants in Civil Action No. _____________ in the ________________
___________________________________ (Name and location of Court), naming the
insured as a defendant. This Petition makes many allegations.
The policy of ________________________ (Name) Insurance Company agrees
to pay those sums that the insured becomes legally obligated to pay as damages
arising out of an occurrence, excess of underlying insurance. This insurance applies to
Bodily Injury, Personal Injury, Property Damage, or Advertising Liability which arises
during the policy period. This policy includes as an insured, at your option, and subject
to the terms of this policy, any of your employees while within the scope of their
employment by you except for automobile use and injury to a co-employee.
In Section III. Definitions, of the Policy, the important terms of the Policy are defined.
Relevant to this loss are the terms:
Bodily Injury means:
Bodily injury, sickness, disease, disability, shock, mental anguish, and mental injury,
including death.
Property Damage means:

1.

Physical injury to or destruction of tangible property including any loss of

use of that property;

2.

Loss of tangible property that has not been physically injured if caused by
an occurrence.
Advertising injury means injury arising out of one or more of the
following offenses:

1.

Oral or written publication of material that slanders or libels a person or

organization or disparages a persons or organizations goods, products or
services;

2.

Oral or written publication that violates a persons privacy;

3.

Misappropriation of advertising ideas or style of doing business; or

4.

Infringement of copyright, slogan or program.

There are no accusations that come within the definition of Personal Injury. Allegations
of mental anguish clearly come within the definition of Bodily Injury. However, the
remainder of the allegations do not appear to allege Property Injury or Advertising injury
as defined in the Policy.
The definition of Occurrence is an accident, including continuous or repeated
exposure to substantially the same general harmful conditions that results in Bodily
Injury or Property Damage that is not intended or expected by the Insured. Many of the
allegations of the Petition allege actions on the part of __________________________
(names) that are intentional in result, such as fraud, breach of fiduciary duties and
misrepresentations, which would not be an Occurrence, as well as allegations of
negligence, which may be an Occurrence.
The Amended Petition alleges that (describe or quote allegations in point) _______
______________________________________________________________________
_____________________________________________________________________.
There is clearly a question of when the Bodily Injury, Property Damage or Advertising
Injury occurred, and to which policy period it should be attributed.
The Petition alleges that the Plaintiffs who are natural persons suffered damages as a
result of mental anguish, which is included in the definition of Bodily Injury. This is
alleged to have been caused by the negligent infliction of emotional distress as well as
the intentional infliction of emotional distress. If it is found to be result of intentional acts,
there may be no coverage under the policy for damages awarded as it is not the result
of an Occurrence.

Damages prayed for in the Petition by all Plaintiffs include compensatory damages,
statutory damages, punitive damages, and attorneys fees as well as interest and costs.
These damages could exceed the polity limit of the policy of ______________________
(Name) Insurance Company. You may have already notified those carriers carrying
liability insurance in excess of this coverage. If not, you should do so at this time.
There are a number of coverage issues raised by the Petition filed by ______________
_________________________________ (names of Plaintiffs), and as a result, and on
behalf of _________________________ (Name) Insurance Company, we reserve any
and all rights under the Policy to investigate the loss and to make a determination as to
coverage when all the necessary findings and facts are available. This action is not to
waive any of these rights under the Policy. Should you have any additional information
that may be helpful in making these determinations, we ask that you make it available.
Yours truly,
_________________________