A Reservation of Rights letter from us is not a denial of coverage under the policy. When a claim is made, each coverage situation is evaluated on its own merits, based upon the facts and allegations. These allegations, when reviewed with the policy terms, conditions and exclusions, determine the nature and extent of coverage.
A plaintiff may make allegations, which if proven, would bar coverage under certain policy provisions. On the other hand, if those allegations are not proven, such provisions may not bar coverage. Other policy provisions may apply simply by virtue of the nature of the allegations against you. Thus, coverage sometimes is obvious for some allegations and not for others.
Proper insurance guidelines ― many times established by state regulations or laws ― require that an insurer advise their insured as soon as possible of any coverage issues. The Reservation of Rights letter is the vehicle used to provide you with that advice. The letter will indicate what allegations might, if proven, preclude coverage under the policy, provide you with the policy language potentially impacted, and indicate what rights you have to help protect yourself.
The letter will also point out that the activities we undertake as your insurer in connection with the claim should not be construed as a relinquishment of any rights provided by the policy contract. So, the Reservation of Rights letter is protection for us and for you. We can continue to evaluate and investigate the claim and you are alerted to any coverage issues which may be associated with your claim in the future. We refer to this process as "handling the claim under a reservation of rights."
What you should understand is that we are not agreeing with or supporting a plaintiff's allegations by issuing a Reservation of Rights letter. A plaintiff must prove the allegations. When a claim is being handled under a Reservation of Rights, the policy provides a defense "even if the charges of the claim are groundless, false or fraudulent."
When defense of a claim is provided under a Reservation of Rights, you may have the right to retain personal counsel to assist in the defense. Depending on your state law, personal counsel costs are borne by you or the insurance company. We will advise you of your rights in such an instance.