Structuring Indemnification Escrows for Executive Protection
Structure executive indemnification escrows as bankruptcy-remote grantor trusts with non-discretionary five-day advancement mandates to insulate defense funds.
Reservation of Rights
Meaning
Formal notice instruments issued by insurance carriers reserve the insurer’s right to deny coverage or recover advanced defense expenses if subsequent investigation reveals policy exclusions apply. Sending a reservation of rights allows insurers to fund initial legal defense costs while investigating whether claim facts fall outside policy coverage. The notice covers uncertain liability claims, delayed loss reporting and unverified policy exclusion applicability.
Notice effects cease when the insurer waives coverage defenses or issues formal coverage confirmation.
Notice Requirement
Insurers must inform policyholders of potential coverage defenses promptly after receiving notice of a claim. Issuing a reservation of rights creates a potential conflict of interest between insurer and insured. Detailed notices identify specific policy exclusions under investigation.
Defense Control
Insured entities manage defense strategy when coverage outcomes depend on litigation facts. Receiving a reservation of rights grants the insured authority to select independent legal counsel at the insurer’s expense. Policyholders maintain control over strategic defense choices during coverage disputes.
Coverage Audit
Insurers conduct ongoing legal evaluations to determine final indemnity coverage positions. Issuing a reservation of rights preserves corporate funds while litigation facts clarify policy obligations. Formal written communications specify all legal grounds for prospective coverage denial.