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Federal Court Outlines Characteristics of Proper Insurance Company Reservation of Rights Letter - Insurance Coverage

Insurance Coverage

Posted on: Mar 8, 2018

By Richard K. Shoultz and Michael R. Giordano, both of Lewis Wagner LLP

This case from a federal court in Missouri provides guidance that all insurance practitioners should be aware of. Specifically, the court addresses what a proper reservation of rights letter issued my an insurance company should contain.

Nationwide Affinity Insurance Company ("Nationwide") filed a declaratory judgment action against its insured and a claimant in a Missouri federal court to address whether insurance coverage was owed for the claimant's underlying suit. Specifically, the claimant has filed a separate lawsuit against the insured alleging that the insured's employee stole proprietary information from the claimant's company and used the information to solicit business for the insured's company. Nationwide provided its insured with a defense in the underlying lawsuit under a reservation of rights. Nationwide also proceeded with its declaratory judgment action where it contended no coverage was owed pursuant to the "business pursuits" exclusion of the insurance policy.

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