Short answer: A reservation-of-rights letter tells you the carrier is handling your claim but reserves the right to later deny coverage on specified grounds. It's not a denial, but it's an early warning that coverage is contested. Respond carefully, preserve evidence, and consider retaining representation.
What the letter typically says
- The carrier acknowledges the claim
- Identifies specific policy provisions being investigated
- Reserves the right to deny coverage or apply limitations later
- Requests information or documentation
- Preserves the carrier's position
What it means practically
The carrier is investigating whether to cover the claim. They're protecting their right to deny, even after investigating or paying partially, if facts develop that support denial.
What to do
- Read it carefully. Identify the specific coverage issues being reserved.
- Respond in writing. Acknowledge receipt; provide requested information; preserve all your rights.
- Don't admit anything. Don't agree with the carrier's characterization of facts.
- Document everything. Every response, every communication, every inspection.
- Consider representation. A reservation-of-rights letter often signals a claim that will require a public adjuster or attorney.
What NOT to do
- Don't ignore the letter
- Don't assume your coverage is secure
- Don't sign anything without review
- Don't cooperate blindly with EUO or other requests: prepare first