What is a 'reservation of rights' letter and when should it be sent?

RESERVATION OF RIGHTS (ROR) LETTER: WHEN TO SEND: Any time there is a coverage question or potential policy defence — do NOT wait until investigation is complete; sending late may result in a court finding that coverage defences were waived by the delay; CONTENT: Identifies the specific policy provisions being reviewed; states the insurer is investigating the coverage issue while continuing to handle the claim; states the insurer does not waive any policy defences by participating; may identify specific coverage concerns without final determination; IMPORTANCE: Protects the insurer from waiver and estoppel arguments — if you handle a claim for months without ROR and then deny for a coverage issue, courts may find you waived that defence; INSURED'S RIGHT: The ROR puts the insured on notice they may want independent counsel (Cumis counsel in some states) if the insurer may deny; ADJUSTER ACTION: Identify coverage issues early; send ROR promptly; consult coverage counsel; do not make coverage promises before ROR/investigation is complete.