Editor’s note: The recent decision in HarleysvilleGroup Insurance v. Heritage Group Communities should be awake-up call for insurers of the need to draft proper reservationof rights (ROR) letters. The consequences of getting it wrong canbe severe. Hear about the case, and get a 50-Item ROR checklist, byattending the webinar on May 18: “The Definitive Reservation of Rights Checklist: 50 ThingsThat Every ROR Needs.”

I have lost track of the number of times that I’ve explained atclient seminars, in webinars and to the guy next to me in line atTrader Joe’s, that for areservation of rights letter to be effective it must fairly informthe insured of the reasons why the insurer may not be obligated toprovide coverage for certain claims or damages in a suit — eventhough the insurer is providing a defense. The only other reminderI’ve given more often is to my 10-year-old daughter — that she nottalk to strangers.

We have all seen reservation of rights letters that set forth abrief factual summary of the claim, followed by several pages ofpolicy language — some completely irrelevant — and then aconcluding statement that, voila, the insurer reserves itsrights.