New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following informal opinion on February 10, 2005 representing the position of the New York State Insurance Department.

RE: Reservation of Rights Letter

Question Presented:

Is any specific language required by regulation of the Superintendent of Insurance to be included in a standard reservation of rights letter in connection with claims under a commercial general liability policy?

Conclusion:

No. There are no requirements by regulation of the Superintendent of Insurance specifying the language to be included in a standard reservation of rights letter. Reservation of rights letters are not required by the N.Y. Ins. Law. Reservation of rights letters should not be confused with disclaimer letters in which an insurer notifies the insured or other party of the insurer’s intent to deny coverage or disclaim liability. Reservation of rights letters are usually not effective as disclaimer letters.

Facts:

No facts were presented.

Analysis:

Reservation of rights letters are not required by the N.Y. Insurance Law. But they are often used by insurers to prevent estoppel claims barring the insurer from raising defenses against or denying coverage merely by complying with an insurer’s obligation to defend the insured. See O’Dowd v. American Sur. Co. of N.Y., 3 N.Y.2d 347, 165 N.Y.S.2d 458, 144 N.E.2d 952 (1944).

There are no requirements by regulation of the Superintendent of Insurance specifying the language to be included in a standard reservation of rights letter. It is the responsibility of the insurer issuing such a letter to ensure that the letter meets any requirements that may be provided by case law.

However, reservation of rights letters should not be confused with disclaimer letters in which an insurer notifies the insured or other party of the insurer’s intent to deny coverage or disclaim liability. Reservation of rights letters are usually not effective as disclaimer letters. See Zappone v. Home Ins. Co., 55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783 (1982); Hartford Ins. Co. v. Nassau County, 46 N.Y.2d 1028, 416 N.Y.S.2d 539, 389 N.E.2d 1061 (1979); Kutsher’s Country Club Corp. v. Lincoln Insurance Co., 119 Misc.2d 889, 465 N.Y.S.2d 136 (Sup. Ct. Sullivan Co. 1983).

For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany office.