If You've Received a Reservation of Rights Letter, Don't Panic

When you file a claim with your malpractice insurance company, it is standard practice for your insurer to send a “reservation of rights” letter to protect its right to deny coverage if your claim isn’t covered by your policy. It’s understandable that this can sometimes cause a bit of panic. It’s important to understand, however, that receiving this letter does not mean that your insurer is denying coverage.

Why is a reservation of rights letter necessary?

When a professional liability claim is filed, it typically takes time to understand the relevant facts sufficiently to determine whether the claim is covered by the accountant’s insurance policy. By issuing a reservation of rights letter, your insurer acknowledges that it has been notified of the claim.

The company will typically begin providing defense after sending this letter, protecting its own interests in the likely event that the claim is covered. However, sending this notice to the insured reserves the insurer’s right to discontinue defense and ultimately deny coverage if facts discovered later show that the claim isn’t covered by the policy. By issuing a reservation of rights letter, an insurance company avoids being legally bound to continue defense and provide indemnification once it begins working on your claim.

What should I do when I receive a reservation of rights letter?

A reservation of rights letter may or may not contain specific information about what aspects of your claim may not be covered and why. In either case, it’s a good idea to follow up with your insurer to get answers to any questions you have. Your agent or underwriter may tell you that they have merely sent you a general form letter, or they may tell you that they have specific concerns about your claim. They also may be able to give you some idea of how strong your case is likely to be in addition to whether it’s likely to be covered by your policy.

A reservation of rights letter gives your insurance company time to investigate and begin defending your claim as relevant facts come to light, protecting your interests as well as your insurer’s rights. A good insurance company will communicate openly with you about the claims process and let you know about any specific issues that may prevent coverage.

The knowledgeable agents and underwriters at ProDefender can help you understand your coverage and how it may apply to any potential claims you may be facing. If you’d like a quote on accountants professional liability insurance, click the link below or contact us at (866) 434-8557.