What Is a Reservation of Rights Letter?

After receiving a reservation of rights letter from the homeowner’s insurance company, you may fear you’ve lost coverage. It sounds like the insurance company is threatening to deny or limit coverage for your claim. This can be a confusing and alarming experience for many homeowners who may not fully understand what a reservation of rights letter is for.

Insurance Claim HQ’s homeowners insurance claim attorneys can help homeowners like you protect a claim if the insurer is trying to protect itself from paying you what you’re owed. Contact us to get started.

What is a Reservation of Rights Letter?

A reservation of rights letter from an insurance company serves to notify a policyholder that while the company is investigating the claim, it reserves the right to deny coverage or limit its obligation to pay for the damages or losses.

In other words, the insurance company is not admitting liability or committing to cover the claim. Instead, it is informing the policyholder that there are circumstances that could potentially exclude them from coverage.

Why Would an Insurance Company Send a Reservation of Rights Letter?

An insurance company may send a policyholder a reservation of rights letter for the following reasons:

• The policy language does not clearly cover the loss or damage incurred.
• The claim involves a potential exclusion or limitation in the policy.
• The policyholder failed to fulfill their obligations under the policy, such as reporting the claim promptly or cooperating with the investigation.
• The insurance company believes the loss or damage was caused by intentional acts, which are occasionally not covered by insurance policies.

How Can a Homeowner Respond to a Reservation of Rights Letter?

The first step to initiating the process should be to carefully read the letter, then contact an insurance claims attorney for advice.

Homeowners should also:

• Respond to the letter promptly to avoid potential waiver of rights.
• Cooperate with the investigation and provide any requested documentation or information.
• Record and document all communications from the company, including phone calls and emails.
• Document the damages or losses with photographs, videos, or receipts.

What is the Difference Between a Reservation of Rights and a Non-Waiver?

Non-waiver agreements and reservation of rights letters differ in their nature, as the former is a mutual agreement between the insurer and the policyholder. By accepting a non-waiver agreement, the policyholder is essentially giving consent to the terms of the insurance company’s commitment to defend.

However, the decision to enter into a non-waiver agreement lies entirely with the policyholder, and the insurance company cannot coerce the policyholder into signing such an agreement as a precondition for providing a defense.

What is the Difference Between a Reservation of Rights and an Outright Denial?

An outright denial of a claim means that the insurance company has determined that the claim is not covered by the policy and will not provide coverage or payment for the damages or losses. In contrast, a reservation of rights letter means that the insurance company is still investigating the claim and has not made a final determination about coverage.

While a reservation of rights is not an outright denial, it does indicate that there are potential issues or exclusions that could affect coverage.

Insurance Claim HQ Can Help

As representatives for homeowners during initial insurance claims and appeals, Insurance Claim HQ is here to answer any questions you have. Our insurance claim services can help policyholders navigate the process and respond to a reservation of rights letter with confidence. We can advise you as to which steps you should take to protect your interests and ensure your claim is properly handled.

If you have received a reservation of rights letter, contact us to request the guidance of an insurance claims attorney. For more information on insurance claims or to schedule your consultation, use our online form or call us today.

FAQs About Reservation of Rights Letters