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The purpose of this paper is to examine the “when, when not and how” of reservation of rights and the “how and how not” of declining coverage. First, we will look at those circumstances where a reservation of rights is appropriate and how it should be done. We will also answer the basic question-why is a reservation of rights necessary-and address the risks that a reservation of rights letter is designed to avoid, the potential rights that can be reserved, and how to actually reserve rights. We will then look at how a carrier should proceed when the reservation of rights is rejected and examine when it is appropriate to file a declaratory judgment action to determine the contract rights. Finally, we will outline what should and should not be in a denial of coverage letter.

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