What Is a Reservation of Rights Letter?
A reservation of rights letter is an important legal notice from your insurer. It means they are handling your claim while preserving the right to deny coverage later based on specific policy issues.
Informational purposes only. This article is for general informational purposes only and is not legal advice. Laws vary by jurisdiction. If you need advice about your specific situation, consider speaking with a licensed attorney.
## Short Answer
A reservation of rights letter is a formal notice from an insurance company stating that while they will investigate or defend the claim, they are not waiving any grounds to deny coverage later. It preserves their right to dispute coverage while still acting on the claim.
Why Insurers Send Reservation of Rights Letters
When an insurer believes there may be grounds to deny coverage — a potential exclusion, a coverage question, a misrepresentation issue — but the claim requires immediate action like defending a lawsuit, they must act immediately to protect the insured while preserving their own defenses. The reservation of rights letter does exactly this.
What It Means for You
Receiving this letter means your insurer is not definitively agreeing to cover your claim. A coverage determination will come later. Meanwhile, they will continue to handle the claim under this reservation.
Common Triggers for This Letter
An exclusion that may apply. Late reporting of the claim. A question about whether the policy was in force at the time of loss. Potential misrepresentation in the application. A coverage limit or type of loss that may not be covered.
What You Should Do
Do not ignore this letter. Read it carefully to understand the specific coverage issue they are identifying. Keep records of all communications. Most importantly, consult an attorney who handles insurance coverage disputes. If you have a duty to cooperate, continue to do so, but be aware of your rights. You may also have the right to independent counsel in some states.
The Conflict of Interest Issue
When your insurer is defending a lawsuit against you under a reservation of rights, a conflict of interest may exist because their interests in denying coverage may diverge from your interests in being defended. Many states require the insurer to pay for independent counsel for you in this situation.
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*This article is for general informational purposes only and is not legal advice. Consult a licensed attorney for advice specific to your situation.*
Informational purposes only. This article is for general informational purposes only and is not legal advice. Laws vary by jurisdiction. If you need advice about your specific situation, consider speaking with a licensed attorney.