Let's assume insurance company in California agreed to defend its insured and picked a legal counsel to represent their insured. But at a later date sent a reservation of rights letter with following language:
By this letter we are advising you that we will investigate the claim(s) being made against you subject to a reservation of rights under your Business. A reservation of rights places an insured on notice of the fact that the insurer may ultimately decline to defend or indemnify for some or all of the damages that might be awarded in an action. A reservation of rights also advises the insured as to the reasons why there might not be an obligation to defend or indemnify. The terms of this particular reservation of rights are explained below. Although insurance company is agreeing to investigate the claim under the policy, we are reserving our right to deny coverage to you (or anyone claiming coverage) at any time.
Since that paragraph talks not only about duty to indemnify, but also about duty to defend, then does it mean that insurance company may once they establish that all claims fall outside the policy scope:
- ask for reimbursement of any legal defense costs they paid? OR
- merely just decline future legal defense?