Reservation of Rights Agreement

A reservation of rights agreement puts policyholders on notice the insurance provider may deny the claim.

A reservation of rights agreement is an agreement between an insurance company and its insured. Typically, the insured is asked to sign a reservation of rights agreement after having filed a claim and before the insurance company conducts an investigation into the claim.

Notice

If an insurance company asks an insured to sign a reservation of rights agreement it is putting the insured on notice that the insurance company believes there may be grounds on which to deny insurance coverage for the claim.

Effects

A reservation of rights agreement has the effect of keeping the provisions of the underlying insurance policy in force throughout the investigation into the claim. In particular, the agreement will indicate the insurance company is reserving its right to deny coverage by asserting a defense to liability.

Example

An example of reserving a right under an insurance policy is when an automobile insurance provider is presented with a claim for damages that it suspects was a result of unlawful street racing. Most automobile insurance policies excluded coverage for claims that are a result of racing. A reservation of rights agreement would allow the insurance company, after investigation, to deny liability and coverage under its policy.

References

• IRMI.com: reservation of rights

Resources

• Reservation of Rights Agreement