Reservation of rights
A written notice from an insurer saying it is handling or defending a claim while reserving the right to later deny coverage over specific issues.
Collision Bureau is not a law firm and this is not legal or medical advice. It is general information about what happens after a crash. For advice on your situation, talk to an attorney licensed in your state or a treating clinician.
What it means
A reservation of rights is a letter from an insurer to its policyholder. The letter says, in effect, we are going to handle this claim and defend you against it, and we are not giving up our right to decide later that the policy does not actually cover it. The insurer is doing two things at the same time: moving forward with the file and keeping its options open on coverage.
The letter usually names the specific policy provisions the insurer is reserving on. That might be an exclusion that could apply if certain facts turn out to be true, or a notice provision, or a question about who was driving. Naming the issues matters, because the position the insurer stakes out in the letter is the position it preserves.
How it works
The letter arrives early in the claim, often soon after the insurer gets its first look at the file. The policyholder keeps the letter. The insurer continues to handle the claim under the policy, usually including hiring defense counsel if a suit has been filed. Investigation continues on both the facts and the coverage questions. At some point, the insurer either confirms coverage, denies coverage based on the issues it reserved, or files a separate action asking a court to decide the coverage question. The claim itself moves on its own track until the coverage question gets answered.
Why it comes up
Reservation of rights letters appear when an insurer has reason to think coverage might not apply, but is not ready to deny the claim outright. Late notice, intentional conduct exclusions, use that was not permitted under the policy, and questions about who was driving are common triggers. The letter preserves the insurer's position while the facts get developed, which is why it often lands at the same time an insurer first opens a case or receives a complaint in a lawsuit.
What it is not
A reservation of rights is not a denial. The claim is still being handled, bills can still be paid, and defense is still being provided. It is also not a request for an examination under oath, which is a different procedure under the policy with its own rules. A reservation is a statement about the insurer's position, not a step the policyholder is being asked to take.
Questions people actually ask
01Does a reservation of rights letter mean my claim will be denied?
Not on its own. The letter is a notice, not a decision. It identifies issues the insurer has flagged and preserves the insurer's position on those issues while the file moves forward. Many claims that opened under a reservation of rights still resolve with coverage in place. What the letter actually means for your file is a question that depends on which policy provisions were cited and what the facts turn out to be, which is why it belongs with an attorney.
02Should I keep the letter?
Yes. The letter is the record of what the insurer told you and when, and the specific coverage issues it named. If a coverage dispute later develops, the letter is a key document. Keeping a dated copy of correspondence from an insurer is a reasonable practice on any claim, and it matters more when the insurer has issued a reservation of rights, because the letter will be read closely later.
03Can I have my own attorney while the insurer defends me under a reservation?
In some states and some situations, yes, and the insurer may be required to pay for independent counsel for the policyholder when a conflict of interest exists between the insurer and the insured. The rules vary by state and by the specific issues the insurer has reserved. This is one of the clearest examples of a scenario where an insured person benefits from asking an attorney licensed in the state what the law provides.