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Many cannabis insurance issues are relatively new. From fire protection on farms to protection against theft during transport, policyholders and insurers alike are faced with new situations that are being carried over to the old policy language. When a new or complicated situation arises in the insurance world, many insurers accept coverage under a “reservation of rights”. This means that the insurer is not entirely sure whether coverage should be available in a particular situation, but they do take responsibility for the insured event, subject to further investigation.
For many policyholders, this can be quite confusing. What role does the policyholder play at this point in time? Should the policyholder rely on the coverage? And when will the policyholder know whether the insurer’s answer is “yes” or “no” about coverage?
Generally, the acceptance of a claim by an insurer under a legal reservation signals that they will take responsibility for the claim while doing a little more work figuring out whether the claim should be covered under a policy. The insurer will temporarily meet its obligations and protect the insured until this additional work.
If an insurer notifies a policyholder of its intention to reserve rights, the insurer takes over the defense of the policyholder’s claim (hiring a lawyer and defending the proceedings against the policyholder) and examines the substantive merits of the claim to contractual coverage (determining whether a claim consists). Coverage at the beginning). The policyholder must then remember his important contractual obligation to support the insurer in investigating the claim, and in defending the underlying litigation. If a policyholder does not comply with this obligation, an insurer can later assert it as a defense of insurance cover.
A policyholder who receives a legal reservation from an insurer should not automatically count this as money in the bank. Although reputable insurers hire good lawyers at reasonable prices to defend the policyholder’s lawsuit, the policyholder could keep the bill for those lawyers if the insurer later determines that it was not covered. If the question arises of whether a settlement should be made subject to legal reservation, policyholders should also play an active role in deciding how to settle the case, as they may later be able to request the reimbursement of this payment. During this time, many rights and obligations will change and policyholders should consider these rights and obligations from the outset. Recognizing and complying with insurance conditions during an investigation by an insurer could later prove to be essential during a judicial coverage determination.
There is no set schedule for the time an insurer must give to the policyholder as long as the time the insurer takes is “reasonable”. Policyholders should protect certain rights, such as: As long as the policyholder conscientiously meets his obligations under the policy, he maintains the best arguments for cover at the end of the day.
Harris Bricken’s cannabis insurance attorneys are on hand to discuss the new realities of difficult cannabis insurance situations. We have experience in representing policyholders and insurers in a variety of industries. If your insurer has reserved its rights, you should understand your rights and obligations under your insurance policy in order to maximize your chances of coverage.