Legal Translation of ROR (Reservation of Rights) Letters
We’ve blogged about the need for legal document translation services for insurance claims adjusters dealing with non-English-speaking claimants. In any professional relationship you need to learn how to manage expectations. In fact, that skill is vital in personal relationships as well. When it comes to the relationship between an insurance company and its insured, managing expectations is – beyond all else – the name of the game.
Indeed, at the outset of any insurance relationship there is a careful discussion about what is covered and what is not covered under the insurance policy being purchased. Voluminous pages of an insurance policy are proof of how hard insurance companies try to make clear what they will cover in the event of a triggering accident or occurrence.
Then, when there is a triggering event, the insurance company will typically kick into high gear to figure out what is, and what is not, the insurance company’s responsibility. If you are an experienced insurance professional, you know all too well the disputes that can arise from the interpretation of an insurance policy.
Because of the potential for disputes on policy coverage following a triggering event, insurance companies will typically send the policyholder a “reservation of rights” (ROR) letter. The purpose of that letter is to inform the policyholder that the insurance company will do what is required to investigate an insurance claim, or provide litigation defense in response to a lawsuit. However, the letter also indicates to the policyholder that it is reserving the right to claim that it is not responsible to pay for whatever results from the triggering event.
The Need for Some Specificity in the ROR Letter for the Non-English-Speaking Insureds
The contents of an ROR letter are, needless to say, very important. The letter needs to provide some notice to the policyholder indicating that it is not agreeing to cover everything simply because it is investigating a claim or providing a legal defense. As a federal court in New York succinctly put it, a “reservation of rights letter must give fair notice to the insured that the insurer intends to assert defenses to coverage or to pursue a declaratory relief action at a later date.” United Nat’l Ins. Co. v. Waterfront N.Y. Realty Corp.
The ROR letter has dual purposes. It protects the insurer’s interest by managing the policyholder’s expectations. Also, it benefits the policyholder by alerting the policyholder to the chance that (i) coverage may not be applicable for a loss, (ii) conflicts may exist between the policyholder and the insurer as to what is covered; and (iii) the policyholder should be prepared if something is determined not to be covered.
Given the purposes of the ROR letter, it is key that the policyholder understands the reservation of rights letter such that he or she is properly put on notice. In fact, the specificity of the ROR letter is a tough needle to thread, because what one court believes is specific enough may not be specific enough for another court. Here are two cases in point.
Cases Demonstrating How Fluid the Specificity Expectation is for ROR Letters
• Harleysville Group Insurance v. Heritage Communities, Inc.
In a recent case before the Supreme Court of South Carolina, Harleysville Group Insurance v. Heritage Communities, Inc., the specificity of an ROR letter was front and center in the case.
In the case, Heritage Communities built two condominium complexes in Myrtle Beach between 1997 and 2000. Shortly after completion, residents of the complexes began to complain of construction defects, including structural deficiencies and significant water-intrusion problems.
Eventually, the residents filed several lawsuits against Heritage and its insurer – Harleysville. Harleysville agreed to defend Heritage in court. However, Harleysville also was sure to provide Heritage with an ROR letter. The letter was simply a cut-and-paste of the insurance policy language. With regard to the possibility of punitive damages, Harleysville’s ROR letter was a bit more specific about disclaiming any liability for those types of damages.
Following a jury trial, Heritage was found to be responsible for both actual and punitive damages in the millions of dollars. Harleysville then issued its own lawsuit seeking a declaration that it was not responsible for actual or punitive damages.
The South Carolina Supreme Court, however, disagreed. The court noted that simply cutting and pasting policy language into an ROR letter is not sufficient to inform a policyholder as to why the insurance company may not provide coverage. The court then found that because Harleysville did not clearly or specifically reserve its rights, it is deemed to have waived them.
As for the punitive damages, the court noted that Harleysville’s ROR letter was sufficiently clear on its reservation of rights. However, Harleysville’s policy does, in actuality, cover punitive damages, and therefore the company cannot avoid covering that loss.
• Nutmeg Insurance Co. v. Clear Lake Water Authority
In contrast to Harleysville, there is the Texas case of Nutmeg Insurance Co. v. Clear Lake Water Authority. In that case, a policyholder argued that an ROR letter was not adequate and therefore the insurance company did not reserve its rights. The Texas court, however, said that even though the letter could have been more specific, the policyholder has failed to show any particular requirements for an ROR letter such that it can be deemed to be too general.
Why Legal Translation Should be Your First Order of Business with ROR Letters
As the comparison of cases above shows, ROR letters need to be specific and, more importantly, there is no telling which way a court will go as to whether the letter is specific enough.
Of course, if you are an insurance company that provides policies to policyholders inside and outside of the United States, then you need to make sure that your ROR letters are properly translated from English to the languages spoken by your foreign-born policyholders. Given that specificity is always an issue, an ROR letter to a foreign policyholder that is not in the policyholder’s native language will likely be hard proof that the ROR letter did sufficiently put the policyholder on notice that there may not be insurance coverage for a particular loss.
The way to avoid this problem is to hire a reliable, professional legal translation service to translate ROR letters for your company. All Language Alliance, Inc. is the premier legal translation service around, providing multilingual document translation services throughout the U.S. and the globe. A non-legal translator would not be able to do the job when it comes to your ROR letter. Because there is highly legal and technical information in those letters, All Language Alliance, Inc. should be your next call. Email us to find out more about how we can help you with legal translation of ROR letter from English to Simplified Chinese, Korean, Russian, Portuguese, Spanish, Vietnamese, French, and other languages.