What is a notification of reservation of rights?
When you file an insurance claim, the first information you receive may be a notification of reservation of rights. This may be a bit confusing, and you may not be sure what exactly it means. While you shouldn’t be too anxious, it’s always best to be educated about your rights and the rights of your insurance company.
This notification covers your insurance company’s bases
First, receiving this letter does not necessarily mean anything about your insurance claim, nor do you need to respond to it. Put simply, your insurance company is obligated to inform you that there may be a reason why coverage regarding your claim may be barred. This document should provide you with a variety of exclusions, and these exclusions may or may not necessarily apply to your claim.
This letter is sent out as soon as is practical and is meant to protect your insurance company from any lawsuits from you regarding these exclusions. According to Florida law, a reservation of rights letter must do several things:
- Include the policy language in play
- State the purpose of the letter
- Summarize the facts leading to the reservation
- Quote the exclusionary language
In very simple terms, a reservation of rights letter serves the insurance company by saying, “We are looking into your claim, but it may not be covered.” Thus, they are seeking to limit any argument later that their conduct created a basis for insurance coverage for an otherwise excluded claim.
Does this mean your claim will be denied?
The short answer to your question is no, the reservation of rights letter for a sinkhole claim is not the same as a denial letter. Instead, the insurance company is telling you that its continued investigation into your claim, by hiring an engineering firm, cannot be construed as a waiver of any policy defense. Settlement damage to a home is excluded unless it is sinkhole activity. If it is something else, it may be excluded, based upon the language quoted in your letter.
When you should contact your lawyer
Sometimes reservation letters get a bit carried away, and if your notification of reservation of rights includes statements about your conduct or your failure to act, you should respond and request further information as to why they included your actions. This letter should be a reminder of the exclusions stated in your insurance policy, not a collection of potential ways to get out of paying your claim.