Say your business is being sued and you submit the claim to your liability insurance company. If you receive a Reservation of Rights (ROR) letter from the insurer, this is a warning sign. While the letter does not equate to a claim denial, it is a clear indication that the insurer is questioning whether your policy fully covers the claim. Understanding what an ROR letter means – and how to respond strategically – can help protect your legal and financial interests.
What is a reservation of rights (ROR) letter?
An ROR letter is a formal notice from an insurance company stating it is investigating a claim while reserving the right to later deny coverage, either partially or entirely. In other words, the insurer may continue handling or defending the claim for now, but it has not committed to ultimately paying for settlements or judgments – and it may even withdraw its defense if the investigation reveals that the insurer does not owe you a duty to defend under the terms of the policy.
Insurance companies issue ROR letters to preserve their legal defenses. If an insurer begins defending a claim without properly reserving its rights, courts may later determine that the insurer waived its right to deny coverage. In liability claims, an insurer’s duty to defend is generally broader than its duty to indemnify. As a result, the insurer may pay for legal defense costs, but later refuse to cover settlements or judgments if it concludes these losses fall outside policy coverage.
What should an ROR letter include?
In insurance disputes, courts scrutinize ROR letters to ensure they are sufficiently specific and detailed. A properly drafted ROR letter should include a statement that the insurer is investigating the claim. The letter should identify the specific policy provisions or exclusions that may apply while explaining how coverage could be affected. It should also provide notice that the insurer reserves the right to deny coverage later, while recommending that the insured seek independent legal counsel. Courts have rejected letters that merely state the insurer “reserves all rights” without clearly explaining the coverage concerns.
Insurers are generally required to issue ROR letters promptly after discovering facts that may support a denial of coverage.
What to do if you receive an ROR letter?
If you receive an ROR letter, do not put it in a drawer and forget about it. Taking proactive steps can help protect your position.
Carefully read the letter and note the specific policy exclusions cited, any factual allegations the insurer references, any statements regarding indemnity or the defense itself, and any requests for follow-up information. Examine your policy carefully, as well, to understand the coverage, exclusions, conditions and endorsements.
Preserve all documentation, including the ROR letter, claim-related documents and details of your correspondence with the insurance company.
Continue cooperating with the insurer as required under the policy, but avoid making statements that could unintentionally harm your claim. For instance, statements you make about fault, intent or timelines may later be used against you in a coverage dispute.
Consider consulting an experienced insurance law attorney to review the ROR letter, your policy and your claim. Your attorney can analyze whether the insurer’s reservation is legally valid, evaluate whether exclusions truly apply and communicate with the insurer on your behalf. Early legal guidance is especially important when substantial liability or large financial exposure is involved.
The takeaway
An ROR letter is not the end of your insurance claim, but it is a significant warning that the insurer may contest coverage. By carefully reviewing the letter and your policy, preserving documentation, communicating strategically, and seeking experienced legal counsel, you can help protect your rights and your position throughout the claims process.
If you receive an ROR letter from your business insurance company, or if your insurer has denied or is challenging your claim, contact Schwartz, Conroy and Hack, PC for assistance. We have the expertise and tenacity to make insurance companies keep the promises they make to you and your business.
