Sometimes you will hear an insurance adjuster tell you that he/she is going to send you a reservation of rights letter. It is a fancy name for a really long letter (at least the well written ones are good!). But what does it mean?
A reservation of rights letter is a way of the insurance company telling you that your claim may not be covered. They are letting you know that they are reserving their rights to deny the claim. In other words, they have an obligation to investigate the claim. Just because they are investigating the claim does not mean that the claim is covered.
Let me give you some examples. If you have a theft claim, and they think you may not actually have had a theft, they will reserve their rights. They can then investigate the theft and if it turns out that you did not have a theft, they can still deny the claim. Or maybe someone drove your car and got into an accident. But, the person who was driving your car was excluded from your policy. They will send out a reservation of rights letter and then investigate the accident.
In California, if you receive a reservation of rights letter and the case is in litigation (you have been sued for injuring someone else), you may be entitled to Cumis counsel. Cumis is the name of the case that first determined you may be able to have a private attorney represent you during the case because the attorney provided by the insurance company may have conflict of interest.
Any time you receive a reservation of rights letter and you are being sued, you should immediately demand Cumis counsel. Heck, any time you receive a reservation of rights letter, you should talk to an attorney to make sure someone is looking out for you!