A denial states that the insurer will not defend or indemnify, identifying the policy provisions relied upon. It differs from a reservation of rights, which continues the defense while preserving coverage arguments.
Most states require denials to be in writing and to state the specific basis.
Alternative Names:
Denial of Coverage, Claim Denial
Why it Matters?
Denial is the highest-risk coverage decision because it exposes the insurer to bad faith liability if wrong and to an assignment of claims if the insured is left to defend itself. The safer course where coverage is genuinely doubtful is defending under reservation and seeking a declaratory judgment, which resolves the question without abandoning the insured. A denial should rest on grounds that are clear rather than arguable.
Frequently Confused with
Related terms
Frequently asked questions
How does denial differ from a reservation of rights?
What is the risk of denying coverage?
