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Paying questionable claims The decision to pay or not pay a questionable claim still comes with a cost. (Photo: B-D-S Piotr Marcinski/Shutterstock.com)

An insurer is faced with two options when its insured tenders a suit and coverage is doubtful: (1) deny coverage but risk a bad faith suit in retaliation; or (2) defend under a reservation of rights and seek reimbursement in another action.

The first option, to deny coverage, comes with the risk of defending against a bad faith suit. The insurer could be hit with extracontractual damages in addition to the costly litigation to defend such a suit.

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