The notice avoids later claims that one waived legal rights that were held under a contract, copyright law, or any other applicable law.
[1] If the insurance company later decides to deny coverage, it cites the original reservation of rights as the warning that it might do so.
A reservation of rights permits an insurer to fulfill its broad duty to defend[4] while avoiding waiver, estoppel, or forfeiture of rights[5] or being bound by a judgment entered against its policyholder[6] and serves to warn the policyholder to take steps to protect oneself from the reserving insurer.
[7] An insurer that reserves its rights may recover reimbursement from its own policyholder certain sums spent for the costs of defense[8] and the costs of settlement.
[10] A valid reservation of rights does not require the policyholder’s consent.