Purpose
A Reservation of Rights (ROR) letter is one of the most critical pieces of claim correspondence. It serves a dual purpose: it notifies the insured that their claim is being investigated, and it preserves the carrier's right to later deny coverage based on specific policy provisions, conditions, or exclusions.
When to Send
An ROR letter should be sent as soon as the carrier identifies a potential coverage issue during the investigation. Delay in sending an ROR may result in waiver of coverage defenses or estoppel in many jurisdictions.
Typical triggers include:
- Policy-exclusion questions (e.g., earth movement, flood, intentional acts)
- Late-notice issues
- Cooperation-clause concerns
- Questions about whether the loss falls within the policy period
- Potential misrepresentation in the application
Required Components
Policy Identification
Clearly identify the policy number, named insured, policy period, and the type of coverage at issue. This prevents ambiguity about which policy applies.
Claim Description
Describe the claim or occurrence factually, without characterizing it in a way that could be viewed as a coverage determination.
Specific Policy Provisions
Cite the exact policy provisions, conditions, or exclusions that may affect coverage. Avoid generic statements like "all policy provisions" — specificity is essential.
Continuation of Investigation
State that the carrier will continue to investigate the claim and that the reservation does not constitute a denial of coverage.
Rights Reservation
Clearly state that the carrier reserves all rights and defenses under the policy and applicable law, and that the investigation and any payments do not constitute a waiver of those rights.
Jurisdiction Notes
California
California's Fair Claims Settlement Practices Regulations require that any reservation of rights be communicated clearly and specifically. Vague or overbroad reservations may be challenged as unfair claims practices.
Texas
Under Texas law, an insurer that fails to timely reserve its rights may be estopped from asserting coverage defenses. The ROR should be sent promptly after the coverage question is identified.
Adjuster Guidance
- Send the ROR as early as possible once a coverage question is identified
- Be specific — cite exact policy provisions, not generic "all rights" language
- Do not combine the ROR with a denial — they serve different purposes
- Follow up in writing if additional coverage issues emerge during investigation
- Keep a copy in the claim file with proof of delivery