Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe

Vol. 7 - Issue 8
November 7, 2018


Another “Ineffective ROR” Case: The Issue Insurers Cannot Ignore

Have Me Visit Your Office To Put On My “50 Item ROR Checklist” Seminar

For the past few years I have been counseling clients, addressing in Coverage Opinions, annual top ten cases of the year articles, at client seminars, webinars, industry seminars and to the guy next to me in line at Trader Joes, that for a reservation of rights letter to be effective it must fairly inform the insured of the reasons why the insurer, despite that it is providing a defense to the insured, may not in fact be obligated to provide coverage for certain claims or damages in a suit. In other words, an ROR that cites some facts, and then quotes some policy provisions, and then says, viola, we reserve our rights, is at risk for being found to be ineffective. Translation - the insurer has waived its defenses.

Several decisions, from state appellate courts over the past few years, have found ROR letters to be ineffective because they did not fairly inform the insured, i.e., adequately explain, with specific facts tied to the potentially relevant policy provisions, why coverage might not be owed.

And this trend continued with the just-adopted ALI Liability Insurance Restatement, which includes this fairly inform standard in its ROR requirements section.

One of the oldest cases to address the “fairly inform” standard for ROR letters is Bogle v. Conway, 433 P.2d 407 (Kan. 1967) from the Supreme Court of Kansas in 1967. I was just 11 months old when it was issued -- and flipping through insurance coverage picture books. But 50 year old cases often times do not get people’s attention.

But, on Friday, October 26, the Supreme Court of Kansas made clear that Bogle is alive and well. In Becker v. Bar Plan Mutual Ins. Co., No. 113,291 (Kan. Oct. 26, 218), the Kansas Supreme Court cited Bogle’s “fairly inform” standard to determine that an ROR may not be effective because it was not timely issued. Granted, this is not the issue of an ROR not containing sufficient information to be effective. However, Friday’s Kansas high court decision made clear that Bogle’s “fairly inform” standard for ROR letters is the law. By addressing Bogle, the Kansas Supreme Court removed the belief, that sometimes exists, that old cases are less important or, somehow, have expired.

A quick look at Bogle… The court held that an ROR was ineffective (even where the insured consented to it in writing) because it did not adequately explain that the insurer was reserving its rights, for an auto claim, based on a racing exclusion. Here are the key passages from the Bogle decision:

“We turn now to the September 30, 1963, instrument upon which appellant relies. It is more vaguely and ambiguously drafted than that held insufficient in Henry. It makes no mention of any exclusionary clause in the policy or of any purported factual basis upon which a denial of coverage might be predicated; it does not tell what right of the insurer to deny liability was contemplated, nor why; it contains no reason or basis for the statements which are made, and finally, concededly, no disclaimer of liability is stated.” Bogle at 412.

“Appellant [Insurer] argues it should not be necessary for an insurer to detail fully in a reservation instrument all of its rights inasmuch as all the parties want to do is maintain the status quo. Much more is involved: the parties are hardly upon equal footing absent information to the insured as to what that status quo is and means. It has been said that good faith, the essence of insurance contracts, demands that the insurer deal with laymen as laymen and not as experts in the subtleties of law and underwriting.” Id.

Becker, as a reminder that Bogle is alive and well, continues the trend of courts saying that ROR letters must “fairly inform.” All of this is not to say that an ROR, that does not “fairly inform,” is effective if a state has not specifically said otherwise. These are simply courts that had the opportunity to specifically say what an ROR must do.

Have Me Visit Your Office To Put On My “50 Item ROR Checklist” Seminar

For the past few years I have traveled the county – to client offices -- putting on my “50 Item ROR Checklist” seminar. It addresses the “fairly inform” standard in detail - and many other things that should be included in ROR letters to have them (1) achieve their purpose and (2) avoid having them found ineffective (also based on case law lessons).

Let me know if you are interested in having me stop by your claims office to do my “50 Item ROR Checklist” seminar. Yes, 50 sounds like a lot. But you’d be amazed what needs to be in a proper ROR letter.

The seminar is very practical – people tell me that they used things learned from it as soon as they get back to their desks. And we’ll have some fun. Yes, the material is serious; but I promise it will also be light and we’ll share some laughs. And I’ll bring along a copy of the 4th edition of Insurance Key Issues for the office.


Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved