Dissecting Reservation of Rights Agreements
Insurance is a vast world of technical claims that come with official documentation letters. One of the most common letters that you might encounter during your claims journey is that of a reservation of rights letter. This letter can overwhelm most policy holders which is why we are here to shed light on it and reveal what some of your options may be.
A reservation of rights letter is a document from your insurance company that explains the reasons why your insurer won’t cover a particular claim. When homeowners insurance is purchased, it is expected that the insurance company will cover certain situations. After paying a premium, the insurance company guarantees coverages for situations.
But we live in a time when many companies will try to remove themselves from the liability by sending you a “reservation of rights” letter before any more investigations in the event that they suspect some coverage may not apply. Oftentimes the insurer presents a non-waiver agreement that would be signed by the insured policyholder. If this letter is refused to be signed, what would follow is a reservation of rights letter.
A reservation of rights letter gives the insurance company a protection if they then decide not to cover their claim. They are basically reserving the right to deny the claim.
These days, it is common for an insurance company to want to further investigate and cover the claim which is subject to a reservation of rights, whose conditions are listed in the fine print of the letter. This includes suspicion of fraud, negligence of the insured, failure to uphold duties of the policyholder, or any other reasons that they may deny coverage.
One should not get too panicky when receiving such a letter because it is only a legal document meant to protect the insurance company and not meant to damage you in any way. It gives them the legal right to investigate your claim without the confirmation that coverage will apply.
In the event that you sense malicious intent on behalf of the insurance company, it is recommended to hire an experienced public adjuster who can be the ultimate guidance during this complex chapter. Under the Administrative Code of Ethics, an insurance company or adjuster may notice with prejudice to an insured. Call a licensed public adjuster right away if you receive a reservation of rights letter. They can help you navigate through the process.