You report a malpractice claim now the insurer sends a Reservation of Rights Letter (ROR). Don’t panic this does not mean that the insurer is about to deny your claim. An ROR is a standard procedure for most malpractice claims departments. The ROR acknowledges the claim report while laying out the pertinent terms and conditions contained in the malpractice insurance policy. As the name implies, while acknowledging the claim’s notification, it does not confirm that this particular act is covered until the facts are known; the insurer reserves its rights.
The ROR letter gives the insurer the ability to start paying defense costs and gather facts shortly after the claim is reported even if coverage has not been determined. Many malpractice policies are “Duty to Defend” policies, so the insurer needs to fulfill its obligations without knowing all of the facts. Your insurer 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. As with many malpractice claims, the facts and circumstances many take many months to uncover. The firm should not assume, just because a defense is being provided that the insurer will ultimately pay an indemnity payment. In most cases coverage is confirmed and the insurer will continue to provide a defense and ultimately pay the indemnity payment if needed.
But it is not unheard of if the facts do not support coverage to have the insurer withdraw from continuing to pay by use of a ‘declaratory action’ from the court or ‘a coverage opinion letter’ from counsel. Many times if the insurer determines there is no coverage, the insurer will quickly withdraw with 30 days or less notice. So it is always a good idea to communicate with your malpractice insurer’s claims department contact as soon as possible to determine the coverage issues that might arise at a later date. This can prepare the firm for a coverage determination not in the firm’s favor.
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.