Many people are concerned when after they report a potential claim or incident the malpractice insurance company’s claims department sends them a Reservation of Rights Letter. This is a standard procedure for most malpractice claims departments. The letters purpose of the letter is to acknowledge the report of the claim and lay out the pertinent terms and conditions in the professional liability insurance policy. As the name implies, while acknowledging the claims notification, it does not confirm that this particular act will be covered until the facts are known. The carrier reserves its rights with this letter.
In some cases coverage confirmation is straight forward and shortly after the report of claim the carrier will pay the defense and claims expenses. But as with many malpractice claims, the facts and circumstances many take many months to uncover. If the malpractice policy is a “duty to defend” policy, the carrier will appoint counsel to defend the claim but still reserves its right to either discontinue the defense or not pay the claim once all the facts are known. The firm should not assume, just because a defense is being provided that they malpractice carrier will ultimately pay the claim.
It is always a good idea to communicate with the malpractice carrier’s claims department contact as soon as possible, to determine the coverage issues that might arise at a later date, so that the firm is prepared for the outcome. All insurance policies have terms and conditions, the fine print, that determine if the facts in the particular matter meet criteria for the malpractice carrier to provide coverage.
If the claims department and the firm do not agree on the interpretation of coverage it may be a good idea to hire an attorney that specializes in malpractice insurance cases to intercede. Make sure that you follow all of the steps that are spelled out in the policy to appeal any decision of coverage that you disagree with. Most courts and/or insurance departments will not intercede until the firm has followed all of the terms and conditions of the contract.