The resolution process after an insurance company receives a plaintiff’s claim for damages can take a few different directions. The simplest path is a settlement, wherein the insurance company issues a check to their client or the plaintiff that covers their damages. The second, more protracted path, is litigation, meaning that the claim will up be decided in court or perhaps later in a mediation process.

But there is a third path that leaves the claim in a temporary state of limbo. If you are the claimant, you could receive a reservation of rights letter.

What this letter means

It’s important to note that a reservation of rights letter is not an immediate denial. However, it could lead to a denial, but at this point only serves as notification to the claimant that their claim is under further investigation. The insurance company has not waived their right to take action but is reserving their future right to deny the claim pending their findings.

What this could mean for your claim

If this is your own insurance company or that of an allegedly liable third-party, receiving a reservation of rights letter might mean that the circumstances surrounding the claim indicate the incident is not covered under the terms of the claimant’s policy.

At this point, the claim still could be successfully resolved in the claimant’s favor. But time is not on the claimant’s side since claims proscribe if the statutory time limits run out the clock.

What to do upon receipt of reservation of rights letters

Insurance companies may stall when resolving claims. But they are not able to delay claims indefinitely by sending these letters. If you are the insured party, you can insist they either pay or deny your legitimate claim. At this juncture, it is prudent to learn more about your legal rights when an insurer denies your legitimate claim.