Your malpractice insurer sent a Reservation of Rights Letter (ROR) after claim is reported. Don’t panic this does not mean your insurer is going to deny your claim. An ROR is a standard procedure for malpractice insurance claims departments. The ROR acknowledges the claim report while laying out the pertinent malpractice insurance policy terms and conditions. As the name implies, while acknowledging the claim’s notification, it does not confirm that this alleged 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 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 may take many months to uncover.
Conversely, do not assume that just because a defense is being provided that the insurer will ultimately pay an indemnity payment. 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. It is always a good idea to continue to communicate with your malpractice insurer’s claims department contact to determine the coverage issues that might arise. This can prepare you for coverage determination not in the firm’s favor.
If the claims department and the firm do not agree on coverage interpretation, it may be a good idea to hire an attorney that specializes in malpractice insurance claims to intercede. Make sure that you follow all the steps spelled out in the policy to appeal any coverage decision that you disagree with. Most courts and/or state insurance departments will not intercede until the firm has followed all the terms and conditions outlined in the insurance contract.
Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080