Insurance Company Reservation of Rights Letter is Explained

by Jerry
(Rockville, MD)

An automobile insurance policy is a contract between the insurance company and the policy holder. It outlines the insurance company’s obligations, but also makes the policy holder responsible for certain duties. For example, the insurance policy will state that if the policy holder is involved in an accident he or she is responsible for reporting the accident to the insurance company as soon as possible and must cooperate with the accident investigation.



A Reservation of Rights letter is sent to a policy holder or other insured person by their insurance company when certain policy requirements are not being met by that person. Most often it is for a real or perceived late accident report to the company, or for lack of cooperation with investigation, but can be for anything that the insured person does that jeopardizes the company’s ability to defend against the claim. A policy holder might refuse to give a recorded statement as to how the accident happened, or might never contact the insurance company about the accident at all.

A Reservation of Rights letter means, in a nutshell, that the insurance company is reserving its right to refuse coverage for the accident because the insured person has not fulfilled policy requirements, therefore making the insurance company unable to properly defend the case. If an insured person continues to fail to cooperate after receiving this letter, the next step may be a denial of insurance coverage. If that happens, the policy holder becomes uninsured for the accident and is unprotected by insurance.

This article is written for informational purposes and is not intended to take the place of competent local legal counsel.

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