Reservation Of Rights
What Does Reservation Of Rights Mean?
A Reservation of Rights (ROR) letter is sent by the insurer to the insured, informing them that the company may not cover a claim. The letter also notifies the insured that the insurer will investigate the validity of the claim and may advise the insured to consider alternative defense options in the event that the insurer does not provide coverage for legal action against them.
Insuranceopedia Explains Reservation Of Rights
An insurer may not provide coverage for several reasons, including:
- The nature of the loss may not be covered under the policy.
- The policy may have already been exhausted after the insurer honored previous claims.
- The loss may be considered an exclusion.
Regardless of the reason, the insurer must explain in the Reservation of Rights (ROR) why coverage may not be provided. If the insurer determines, after investigating the facts of the claim, that coverage will not be provided, it must send the ROR within a specified time frame for the court to consider the action valid.
