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What is a 'reservation of rights'? concl.

Is it El Niño, or is it just that we had not noticed this before? Has ice fog been a problem for Minneapolis in other years? Either way, it has made morning treks to the transit station or from the parking lot a little nerve-racking. Ice fog, for anyone unfamiliar with the phenomenon, gives the air a slightly shimmery effect and, more importantly, coats sidewalks and road surfaces with a very thin but unbelievably treacherous layer of ice. The unwary can easily lose their footing and go down -- and, if it's your sidewalk, file a claim against your property insurance.

Policyholders often approach a property insurance claim with trepidation. Haggling with the insurance company is no one's idea of fun. What you need to remember is that you and your insurer have the same goal here: to make sure the payout is reasonable. If you disagree about anything, it is most likely whether you are covered at all.


As we explained in our last post, the insurance company has the duty to defend you in a claim. You may need an attorney, though, before the claim investigation is completed -- in fact, you may need an attorney in order to complete the investigation. Because the duty to defend is generally more important than the duty to indemnify (also discussed in our last post), the insurance company will probably hire an attorney on your behalf. There may be conditions, though, and this is where the reservation of rights letter comes in.

Reservation of rights: If there is a question about coverage, the insurance company may send the policyholder a reservation of rights letter. Typically, the letter will say that the insurance company will defend the policyholder, but, should it turn out that the claim is not covered, it may refuse to pay the claim (to indemnify) and it may seek reimbursement for attorney's fees and court costs.

Remember, insurance will not pay for illegal or intentional acts. So, if the person who fell on your sidewalk says that she fell because you pushed her or because you deliberately or willfully refused to clear the ice off the walkway, the insurance company might not pay the claim. The insurance company agrees to defend you but reserves the right to deny the claim if, at trial, the jury is persuaded that you did deliberately push the victim.

Source: IRMI, Glossary of Insurance & Risk Management Terms: reservation of rights, accessed Jan. 29, 2016

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