A reservation of rights letter^[1] is an insurer’s notification to an insured that there may be none or only limited coverage for a claim under the insurance policy. Such a notification allows an insurer to investigate or even defend a claim to determine whether coverage applies (in whole or in part) without waiving its right to later deny coverage based on information that is revealed during the course of the investigation.

Insurers use a reservation of rights letter because, in many claim situations, all the insurer has at the beginning of the claim process are various unsubstantiated allegations. In reserving its rights to later deny coverage, the insurer advises the insured regarding its concerns that the claim may not be covered under the policy pending further investigation.  Although a reservation of rights letter protects an insurer’s interests, it also alerts an insured to the fact that some elements of the claim may not be covered. When you receive such a letter it should alert you to the fact there may be a coverage issue and you should consult with an experienced Vancouver insurance policy lawyer to determine what steps may be necessary to protect your interests and avoid an uninsured claim.

Concerns About Coverage

As Cacchione J., of the Nova Scotia Supreme Court, wrote in the case of Snair v. Halifax Insurance Nationale-Nederlanden North America Corporation^[2] (1995), 145 N.S.R. (2d) 132 (N.S.S.C.):

“The reservation of rights letter and the non‑waiver agreement are both vehicles by which the insurer advises its insured that it has concerns about coverage. These documents are issued so that an insured does not infer from the defence of an action, the hiring of experts, and the continuing investigation of the claim that coverage is in place.”

Generally, if an insurer does not advise the insured which areas of the claim are not covered by the policy at the time when the insured first reported the claim, and the insured was prejudiced as a result of the insurer’s silence, the doctrines of waiver and estoppel will apply against the insurer. In other words, the insurer will be deemed to have waived the breach of the policy and will, thus, be estopped from pleading said breach.  As a result, oftentimes the best strategy for insurers to avoid this result is with the use of a reservation of rights letter.

Contact a Vancouver Insurance Policy Lawyer

If you have received a reservation of rights or denial letter from an insurance company, it is important to speak to a Vancouver insurance policy lawyer as soon as possible to determine the nature of the coverage issue and what steps may need to  be taken. We can explain your rights under your insurance policy.  Contact either Ross McLarty or Murray Wolf for a no obligation 30 minute free consultation. Call the law offices of McLarty Wolf at (604) 688-9542 today or contact us via our online form here.

References:

[1] https://www.irmi.com/online/insurance-glossary/terms/r/reservation-of-rights.aspx
[2] http://canliiconnects.org/en/summaries/19717
[3] http://www.bclaws.ca/civix/document/id/complete/statreg/12037_00

In British Columbia, being totally disabled may not be enough to entitle you to benefits under a disability policy as a result of two common disability policy provisions.

First, the policy typically defines the policy term “totally disabled” as your being unable to perform substantially the “whole of the duties of your regular occupation” and being under the “regular care of a physician”. Even if you are “totally disabled” in terms of not being to perform your regular occupation, unless you are under the regular care of a physician, you are not considered to be totally disabled as defined in most disability policies and therefore not entitled to total disability benefits. In British Columbia, unlike other jurisdictions such as Ontario and the United States, you must be under the regular care of a physician even if you are permanently disabled and no useful purpose would be served by your regular attendance on a physician. This decision was reached in a British Columbia Court of Appeal decision, Andreychuk v RBC Life Insurance Co. 2008 BCCA 492 relying on an earlier decision of the Court of Appeal in Rose v. Paul Revere Life Insurance Co [1991], 85 D.L.R. [4^th] 433.

What does this mean as a practical matter? If you have a disability claim, you must ensure that you are under the care of a physician and attend upon their offices from time to time even in the event that “no useful purpose” is being served by your doing so. It is not unusual in the case of a total disability that after your condition plateaus that limited medical attention is required or there is no treatment required. While there is no timetable or precise number of attendances that you have to have upon a physician, you want to ensure that you attend upon the offices of your doctor at reasonable intervals to ensure that you are considered to be undergoing treatment by a physician. This holds true as well for rehabilitation or treatment programs mandated by the insurer. If you do not participate in those programs, in our experience, some disability insurers will terminate your benefits fairly quickly.

The second typical disability policy provision that can result in your not obtaining total disability benefits even when you are totally disabled is called deductions for “Other Income Benefits” or “Basic Reductions to Monthly Disability Benefits” or “All Source Maximum for the Monthly Disabled Benefit”. You should consider whether the disability policy you might purchase contains such a provision if you have, or may have in the future, other insurance or other sources of income.

These types of provisions limiting payments under the policy can typically provide that any benefits you would otherwise be entitled to receive as a result of your total disability including monies that you receive from other sources are deductible on the benefits that you are entitled to receive under the disability policy and sometimes are more broadly worded to include monies received from a variety of sources including for example retirement income. Depending on the specifics of the terms in your policy, this can mean that because you have other income or qualify for other benefits, that you will not receive any disability payments under the policy or receive reduced payments. This can be true if you have other business or retirement income, government benefits or another insurance policy that entitles you to some sort of benefits. Cases in which these issues have been discussed include Milner v Manufacturers Life Insurance Co., 2006 BCSC 1571 and Dubasoff v. Mutual Life Assurance Co. of Canada [S.J. No. 171] (Sask. C.A.)