Insurers are generally cautious in developing these documents to ensure that these requirements are met, although in some cases it is known that insurers prepare them in a hurry and without details. A court cannot invoke an agreement if the corresponding criteria are not met. In Zurich insurance v. Crawford the court did not get the agreement and found that the agreement was reached in a way that the parties were not in the same understanding when the document was executed. The insurer`s duty to defend and its obligation to compensate is defined in the provisions of the insurance policy. The duty of defence in the defined definition arises from the charges against the insured. A non-waiver agreement will allow an insurer to defend claims while reviewing and possibly denying coverage under a policy. This may be of dramatic value because of the potential cost of not awarding a valid defence if an insurer is found to have a defence obligation. A compelling reason for an insurer to enter into a non-waiver agreement or execute a property reserve is to keep control of the process. In theory, however, insurers are only responsible for the cost of claims litigation, which is clearly part of the coverage covered by the policy. In reality, insurers are often required to bear costs that are spread over the percentage of liability.
In the event of a conflict, the insurer may bear full responsibility for the cost of litigation and may lose its ability to appoint and teach legal counsel. Although these were legitimate concerns of an insurer, the courts argued that these rights are being replaced by those of an insured. Such a decision was made, for example, by the 1989 decision of the Supreme Court of British Columbia by Carter v. Kerr. An effective agreement on non-waiver should define the incident, declare that it is investigating the coverage incident, and that it will defer an insurer`s decision on coverage. In Harrison v. Ocean Accident – Guarantee Corp. Ltd., the Tribunal defined the purpose of a non-waiver agreement as follows: see Shelby Steel Fabricators Inc. v. United States Fid.
It`s Guar. Co., 569 So.2d 309, 311 (Ala. 1990) (the language of the no waiver agreement cited in this case). In addition, it allows the insurer, in the event of a subsequent finding of non-coverage, to claim compensation from an insured for any costs or other amounts paid as part of the settlement or judgment in connection with the claim. For example, if an insurer defends the claim and pays compensation, but later finds that the claim was not covered by its policy, the insurer could recover the settlement costs from the insured.