Reservation of Rights Letter
A letter an insurer sends a policyholder after a claim is filed, stating that the insurer will investigate and handle the claim while explicitly reserving the right to later deny coverage, in whole or in part, if the investigation shows the loss isn't actually covered.
Why it matters
The letter doesn't mean the claim is denied, it means it's still genuinely open, and a policyholder who misreads it as a denial and stops cooperating can accidentally hand the insurer real grounds to deny the claim later.
On a real project
A homeowner files a water damage claim and receives a reservation of rights letter noting the insurer needs to confirm whether the source was a covered plumbing failure or an excluded long-term seepage issue before paying anything.
Who this matters most to
An Insurance Adjuster sends the letter as a standard part of investigating a claim with an open coverage question, while a Public Adjuster explains to the policyholder what it actually means and what to do next.
Where this goes wrong
A policyholder receives a reservation of rights letter, assumes their claim has effectively been denied, and stops returning the adjuster's calls or providing requested documentation. That lack of cooperation is itself a policy violation the insurer can later cite to support an actual denial.