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General Discussion of
Reservation of Rights in Construction

A sample General Reservation of Rights Clause is as follows:

"The impacts and costs noted above include only those items which can presently be determined. We reserve our right to request compensation for any future impacts and costs which might arise or be caused by this change."

This RoR statement is not specific and falls short of containing all ten content items.

In a white paper titled "Reservation of Rights to Make a Cumulative Impact Claim, by Richard J. Long, P.E. in 2015, Mr. Long States:

"Courts and boards have found that such language [accord and satisfaction] may bar the contractor from additional recovery. If there is concern that productivity impacts, cumulative impacts of multiple changes, and delay-related costs cannot be quantified for individual changes, the contractor should consider reserving its right to make a claim for such impacts separate from individual change orders.

In some cases, the interpretation of "full accord and satisfaction" language is so broad that the contractor's cumulative impact claim is barred in total or in part because such impacts are claimed to arise from the change orders containing such exculpatory language."

If the owner rejects the contractor's right to make a cumulative claim later, then:

  • Increase the cost of the change order to cover later impact costs, or
  • Reserve your rights in a separate letter (Don't make this a habit!)

Get your attorney to prepare this letter, but participate so the correct scope is included.

10 Must Haves In Your Reservation of Rights Letter/Statement

Inclusions

Identifies the policy or spec. section at issue.

quotes, or at least refers to, the relevant policy/contract provisions and identify any terms, conditions, or exclusions which may bar coverage

refers to specific, relevant allegations in the complaint

identifies which claims may not be covered

explains in detail the basis for the insurer’s coverage position

sets forth the proposed arrangement for providing a defense and, depending on the law of the jurisdiction, advises the insured of its right to independent defense counsel

advises the insured of any actual or potential conflicts of interest between the insurer and the insured

reserves the right to withdraw from the defense

contains a general reservation of rights, including the right to assert other defenses the insurer may subsequently learn to exist during further investigation

uses the words ‘reservation of rights

Above bullets stated by Randy Maniloff is Counsel at White and Williams, LLP at http://www.lexisnexis.com/legalnewsroom/ insurance/b/badfaithdutydefend/archive/ 2014/07/10/federal-court-lists-10- requirements-for-a-reservation-of- rights-letter.aspx

A General RoR letter
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A Specific Letter or Clause

A carefull misture of both general and specific should be considered.

Remember that you needed to write this letter for a specific reason and you need to make sure your reason and its full scope are clearly and succunctly spelled-out in the letter

Since you are unsure of the exact scope you also need to be sure you make clear that the scope could expand.

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Contributor

James G. Zack, Jr.
Executive Director
Navigant Construction Forum,
Navigant Consulting, Inc.
Website

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Contributor

Richard J. Long, P.E.
Founder and Chief Executive Officer
Long International, Inc.
rlong@long-intl.com
Website

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OSHA Standards
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