Newsroom / Risk Management
Lockton Advises Clients on Reservation of Rights Letters

(London, UK) - 26 February 2013 - Lockton, the world's largest, privately owned, independent insurance broker, has today recommended to clients that they add a clause to insurance contracts to help them deal with the reservation of rights by insurers in a more structured way.

The clause - drafted by Herbert Smith Freehills and approved by the Association of Insurance and Risk Managers in Industry and Commerce (Airmic) - should help to counter the worrying trend in the use of reservation of rights letters by insurers in response to claims notifications.

Graham Wynes, a Claims Advocate at Lockton in London and author of a newly published white paper on the subject of reservation of rights, said, "65% of respondents to an Airmic survey last year said that they had received a reservation of rights letter from their insurer which they believed had been issued unfairly, and 57% indicated that the matter had not been resolved to their satisfaction. The scale of the problem is also of concern, with 35% of respondents receiving at least one reservation of rights letter in the past two years.

"This seems to suggest that certain insurers are reserving rights routinely, and often in inappropriate circumstances. These statistics come as no surprise. Our experience is that insurers are reserving rights far too readily; some appearing to adopt it as the default response in relation to any high-value or complex claim notification. The situation is undoubtedly exacerbated by the ongoing economic conditions.

"The suggestion by Airmic to add a clause to insurance contracts is a positive step in giving clients greater certainty around the reservation process, as well as speeding up the negotiations. In our view, the clause is fair and reasonable and we are recommending to clients that they add this to the contract, irrespective of the limit."

Contact Graham Wynes on 020 7933 2266 or email him at graham.wynes@uk.lockton.com

    
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