What is a 'reservation of rights' letter, and why might an adjuster issue one?

A reservation of rights letter is a notice an insurer sends to an insured when there is a question about whether a claim is covered. It informs the insured that the insurer will investigate and may proceed to handle or defend the claim, but is reserving its right to deny coverage later if the investigation establishes that the loss is not covered under the policy. This prevents the insurer from accidentally waiving coverage defenses by acting on the claim, and it keeps the insured informed rather than misled into assuming coverage is admitted. Issuing a reservation of rights when coverage is uncertain is an important claims-handling practice. Understanding its purpose is standard adjuster content.