Have you recently received a letter that left you feeling confused and in a state of panic? If you’ve been on the receiving end of a Reservation of Rights letter lately, the first and most crucial step is to stay calm.
It’s understandable how this type of situation can be alarming and leave you wondering about the potential implications relating to your claim. In this article, we’ll discuss what it’s all about, ease your worries, and provide you with the insights you need to deal with this situation with confidence and a positive attitude.
Understanding A ‘Reservation Of Rights’ Letter
Your insurance company serves you a Reservation of Rights letter when it finds that a claim may not be covered under your policy. However, it’s important to note that this is not an outright denial of your claim.
However, the letter indicates that the insurer is investigating the claim and reserves the right to deny the claim after it completes its investigation.
Is It The Same As A ‘Denial Of Coverage’ Letter?
Insurance companies may issue this letter as part of their standard procedure, but it may also be issued if coverage is in doubt. Some examples include:
- The claim was reported late;
- There wasn’t enough information provided to the insurance company to meet the definition of a claim; or
- The insurance company suspects fraud.
Fortunately, it’s not the same as a “Denial of Coverage” letter. The latter entails that an insurance company had already completed its investigation, and it concluded that there are no grounds in your policy to grant your requested coverage.
Consequently, it would mean that your claim is unsuccessful, and it will not pay your loss. When this happens, it’s best to talk with an attorney to plan a legal action.
How Does A Reservation Of Rights Letter Work?
When you file a claim, you only submit a limited amount of information about the incident, the cause of the damage, and who was responsible for the loss. By giving you this letter, an insurer notifies you that they’re not waiving their legal rights to take action at a later date.
Essentially, it means that it’s “reserving its rights,” and if it decides to deny coverage later on, it can cite its original Reservation of Rights letter as a warning. You should be open to the possibility that they will deny your claim or that they may decide to defend the insured against a claim made against them.
A Reservation of Rights letter contains the following information;
- Specifics of the claim made by an insured party.
- The type of policy the policyholder has.
- The exact claim laid against such a policy.
- Information that the claim would be investigated or that investigation is in process.
How Does It Benefit My Insurance Company?
Insurance companies send this letter out so they don’t waive their legal rights. According to the International Risk Management Institute, Inc. (IRMI), this process allows an insurer to investigate (or even defend) a claim to determine whether coverage applies (in whole or in part) without waiving its right to deny coverage later based on information revealed by the investigation.
In many claim situations, all the insurer has when you file your claim are various unsubstantiated allegations and, at best, a few confirmed facts.
In reserving its rights to deny coverage later, the insurer is merely telling the insured of its concerns that the claim, in whole or in part, may not be covered under the policy, pending further investigation.
IRMI explained that although a Reservation of Rights protects an insurer’s interests, it also alerts an insured to the fact that some elements of a claim may not be covered, thereby allowing the insured to take necessary steps to protect its potentially uninsured interests.
What Are The Requirements Of A Reservation Of Rights Letter?
Now that you know what this letter is for and what benefits it can bring to your insurance company, you should also know how to check if it’s compliant when it comes to the required form.
The Reservation of Rights letter should contain specific information about your claim, including:
- Your policy’s information;
- The claim made against the policy;
- The part of the claim that may not be covered.
It must be unambiguous in referring to the part of the coverage that’s under investigation. The insurance company may also provide some information about the nature of the process and the aspects of the claim that are being scrutinized.
Keep in mind that even though an insurer may send a reservation of rights letter, it’s still responsible for replying to lawsuits that are related to your claim.
Steps To Take After Receiving A Reservation Of Rights Letter
Here are the crucial steps that you need to do after receiving a Reservation of Rights Letter:
Follow-up With The Insurance Company
It cannot be overstated enough that an insurance company must be transparent with its letter. Don’t settle for an explanation that’s too general or vague.
If it fails to give you specific details about your claim or the grounds that it may not be covered, you should follow up with your insurance company or your assigned agent to clarify on the matter.
Consult With An Insurance Lawyer
When your insurance company refuses to be direct or starts to dodge its responsibility to provide a thorough answer, you should consider consulting with an experienced insurance lawyer because it might be showing signs of bad faith.
A seasoned attorney can provide you with an initial assessment of your claim and invaluable guidance so you can handle the process with grace and competence.
Defend Your Claim With Desai Law
After filing a claim to recover from a devastating loss or injury, you begin to hope that things will run smoothly and you can get your rightful compensation. Unfortunately, sometimes, things don’t go according to plan.
There’s no worse feeling than being underprepared to face a challenge from your insurance provider, but with Desai Law, you can rest easy knowing that we’ll prioritize your needs so we can find better legal solutions for your case.
In our long years of practice, we have fearlessly guided countless clients to face uncertainties with the utmost professionalism and excellence. You can trust us to navigate through the delaying tactics of your insurance company so that you can be prepared to defend your claim.
Call (304) 974-1974 now for a free consultation.