Insurers Issuing Reservation of Rights Notices to Insureds Must Invoke All Potentially Applicable Policy Exclusions
A recent decision of the Superior Court of Pennsylvania underscores the need for insurers to conduct an adequate investigation prior to the issuance of reservation of rights letters. In Selective Way Insurance Co. v. MAK Services, Inc., the intermediate appellate court reversed the trial court’s award of summary judgment to Selective Way Insurance Co. (“Selective Way”), finding that Selective Way’s failure to invoke a policy exclusion in its initial reservation of rights letter—or for eighteen months thereafter—estopped the insurer from relying on that exclusion to disclaim coverage. 2020 Pa. Super. 103, 232 A.3d 762, 764 (2020).
In 2011, Selective Way issued a commercial general liability policy to MAK Services, Inc., a snow and ice removal company. Pursuant to a provision entitled Snow and Ice Removal Exclusion, Selective Way’s policy excluded “‘bodily injury’, ‘property damage’, or ‘personal and advertising injury’ arising out of snow and ice removal activities that are performed for others by the insured or by any contractors or subcontractors working on the insured[‘]s behalf.” 232 A.3d at 764.
In October 2011, Oscar Gordon slipped and fell while walking through a parking lot on the premises of the Valley Forge Marketplace, a client of MAK Services. Gordon sued MAK Services, among others, alleging that MAK had been negligent in removing snow and ice from the Marketplace’s premises. MAK Services tendered the claim to Selective Way under its commercial general liability policy. Id. at 765.
In response to the claim, Selective Way issued a letter stating it would defend MAK Services, subject to a reservation of its rights. Selective Way’s letter stated, in relevant part:
In the meantime, please be aware that Selective Way will be handling this matter under a reservation of rights. This means that Selective Way reserves all rights reserved to it under applicable law, insurance regulations and policy provisions that may become relevant as this matter continues to develop. Those rights include, but are not limited to, the rights to decline coverage for this claim and to withdraw assigned defense counsel.
Id. After issuing the reservation of rights letter, Selective Way provided MAK Services with defense counsel for eighteen months. Selective Way then filed declaratory judgment action, seeking a finding that the CGL policy’s Snow and Ice...
