You file a claim with your insurance company. Weeks later, you get a reservation of rights (ROR) letter from them. The letter indicates they’ve received your claim and intend to investigate its merits.
The format and tone seem alarming. Should you panic?
Not necessarily. An ROR is a letter that formally notifies you of two things:
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Your insurance company is processing your claim.
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They’re investigating your claim before making a decision.
Understanding the meaning of an ROR letter and how to respond can go a long way in navigating the claims process.
What is the purpose of an ROR letter?
A ROR letter is a formal notification from your insurance company that they might not cover a claim you’ve filed. This doesn’t always mean your claim will be denied. The ROR letter covers the insurance company while they take additional time to investigate and make an informed decision. It allows them to continue the claims process without waiving their right to deny coverage later.
The letter outlines the circumstances and policy provisions that may not allow the claimed loss to be covered.
Why does an insurance company send an ROR letter?
Insurance companies issue an ROR letter to preserve their legal rights. It enables them to investigate the claim further while avoiding claims of breach in policy by the policyholder if they later decide the claim is not covered.
Examples of why an insurance company might send an ROR letter
Here are some examples of situations that might result in an ROR letter:
Trucker loses control
Let’s say you own a furniture business that makes local deliveries, a popular holiday perk. One of your drivers loses control of the truck and hits a pedestrian. The pedestrian sues your business for personal injury. You report the claim. Police did not test your driver for alcohol at the scene.
The insurance company investigates and discovers a few things:
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Your driver participated in a work holiday party before he went out on deliveries. Alcohol was served at the dispatch location.
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Telematics shows he engaged in extreme acceleration before the incident.
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A witness claims they saw him racing another vehicle. He says the other driver cut him off, causing him to lose control.
The insurance company’s findings raise questions about your driver being under the influence of alcohol and possibly engaging in reckless driving. Your policy contains a clause that excludes coverage for intoxicated driving and intentional harmful behaviors, like road rage.
The insurance company would need to prove your driver was above the legal limit for alcohol. Telematics, satellite imagery and onboard cameras could support or disprove the driver’s story.
The insurance company sends an ROR letter to inform you that they’re investigating the claim.
Guest gets injured at a house party
You have a party at your house. A friend of one of your guests slips and falls on your wet kitchen floor, resulting in an injury that requires an emergency room visit. They threaten to sue you. You report the incident to your homeowners insurance company.
Your insurance company reviews your claim. They find a clause in your policy that excludes coverage for bodily injuries arising out of incidents involving controlled substances. During the investigation, they discover that marijuana was consumed at your party.
In response, the insurance company sends you an ROR letter. The letter explains that they will continue investigating the claim, defend you against the lawsuit and negotiate a possible settlement. They also reserve the right to deny the claim based on your policy’s controlled substances exclusion clause.
Whether the insurance company will eventually pay the claim depends on the evidence. The insurance company would need to prove you served the controlled substance and it directly contributed to the injury.
A word on an insurance company’s duty to defend
Your insurance company might issue an ROR letter to preserve its legal right to deny your claim later. In the meantime, it’s still responsible for replying to lawsuits and mounting a defense.
In fact, their duty to defend you against a liability claim may be broader than their duty to pay the corresponding property damage or bodily injury claim. Using the house party example above, they could deny the bodily injury claim for the slip and fall but still defend you in court.
An ROR letter doesn’t excuse an insurance company from its duty to defend you.
What to do if you receive an ROR letter
Don’t ignore an ROR letter. Follow these tips:
Read the ROR letter carefully
The ROR letter contains important information about your claim. The insurance company will cite the parts of your policy that may be issues. They’ll specify the policy wording, conditions, exclusions or other details that may apply to how they’ll handle your claim.
Call your independent insurance agent
Your independent agent works for you, not the insurance company. They’ll help you understand the details and advise you on what to do and how to communicate with the insurance company.
Don’t confuse your insurance company with your insurance agent
Your agent works for an independent insurance agency or broker. If someone calls from the insurance company, do not make it an info dump. They’ll note everything you say and use it to decide your claim.
Answer their questions honestly but don’t offer any extra information. Be reserved and limit your conversation to the questions asked of you. It’s OK to sit with awkward pauses.
Consult a lawyer
It’s not always necessary, but talking to a lawyer specializing in insurance law can help you navigate complex policy interpretations. Advice from your independent insurance agent and an attorney can help you prepare for your position.
Consult an independent public adjuster
Public adjusters are licensed professionals who work solely on behalf of policyholders, not insurance companies. They can review your insurance policy, assess your claim and provide guidance on appropriately responding to the ROR letter.
Public adjusters specialize in interpreting insurance policies. A public adjuster will independently investigate your claim loss. They’ll submit their own documentation to the insurance company. Their findings can sometimes reveal information the insurer might have overlooked or challenge their interpretation of events. A public adjuster can help, in addition to your independent agent.
Maintain records
Keep copies of all documents, including policy forms, claim reports, statements and any other papers related to your claim. Your attorney, insurance agent or public adjuster might ask to review them.
Cooperate with the insurance company’s investigation
Always cooperate with the insurance adjuster or investigator assigned to your case. It may involve providing additional documentation, answering questions or participating in an examination under oath (EUO).
If you are required to participate in an EUO, the insurance company will notify you in a separate letter. They should give you at least two weeks’ notice before the scheduled date. Contact your agent and attorney immediately if you receive an EUO. You have the right to have your attorney present at the EUO.
Stay calm and keep your agent informed
Alert your agent immediately after receiving communications from your insurance company about your claim. Don’t assume your agent knows the details or they’ve received the same information. As mentioned above, while you should be circumspect with the insurance company, always err on the side of oversharing rather than undersharing with your agent.
Remember, an ROR letter isn’t a denial of your claim. It indicates that your insurance company is investigating your claim to see if it’s valid under the terms of your policy. Be patient and cooperate with the insurance company.
If you involve a lawyer or public adjuster, you’ll have to pay their fees out of pocket. But it might be worth the extra effort if you have a major claim.
