Editor’s note: The recent decision in Harleysville Group Insurance v. Heritage Group Communities should be a wake-up call for insurers of the need to draft proper reservation of rights (ROR) letters. The consequences of getting it wrong can be severe. Hear about the case, and get a 50-Item ROR checklist, by attending the webinar on May 18: “The Definitive Reservation of Rights Checklist: 50 Things That Every ROR Needs.”

I have lost track of the number of times that I’ve explained at client seminars, in webinars and to the guy next to me in line at Trader Joe’s, that for a reservation of rights letter to be effective it must fairly inform the insured of the reasons why the insurer may not be obligated to provide coverage for certain claims or damages in a suit — even though the insurer is providing a defense. The only other reminder I’ve given more often is to my 10-year-old daughter — that she not talk to strangers.

We have all seen reservation of rights letters that set forth a brief factual summary of the claim, followed by several pages of policy language — some completely irrelevant — and then a concluding statement that, voila, the insurer reserves its rights.