Lawyers in our firm have been involved in a number of cases in which some of the claims were covered by the defendant’s liability insurance policy with other claims either not being covered or being specifically excluded. In most every one of our cases, the insurer provided a defense for its insured for all of the claims. The insurer would defend the case under a reservation of rights as to the claims it contended were not covered.
A majority of courts in the U.S. have found that if a claimant files a lawsuit containing both covered and uncovered claims, the insurance company is generally obligated to defend all claims against the insured. This is notwithstanding the fact that the complaint contains allegations clearly outside the policy’s coverage. We are currently involved in a case where the insurance company failed to even offer a defense even though claims in our complaint were obviously covered. The insurer finally came into the case and is now defending under a reservation of rights.
Typically, a reservation of rights letter is sent to the insured. The standard letter refers to the applicable policy language that it contends supports the insurer’s claim of no coverage. A timely and properly detailed Reservation of Rights letter will usually insulate the insurer from arguments of waiver or estoppel against its no-coverage position. The insured bears the burden of proof in establishing that a covered loss has taken place. But just because the insured has the burden of proving coverage, the insured doesn’t necessarily have to prove what part of a stipulated settlement or judgment involves covered claims. If the insured fails in proving the allocation, the insurer typically asserts that because the insured has not met the burden of proving the amount of the covered loss, the insured has failed the meet the burden of proof in establishing coverage.
But the problem in dealing with “mixed lawsuits” is not always a simple matter. That’s why insurance companies have to be very careful in reserving rights in a mixed lawsuit. The insured in these cases usually has to hire a personal lawyer to protect its interest against the insurer.
Source: Claims Journal
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.