The Reservation of Rights Letter 

In order to reserve its rights to refuse the claim or invoke exclusions provided for in the insurance contract, the insurer may ask the claims adjuster to give the insured a reservation of rights letter.

The reservation of rights letter is a statement from the insurer informing the insured that the facts uncovered during the claims adjuster’s investigation cast doubt on the admissibility of the claim, and that it wishes to conduct a more in-depth investigation.

The insurer can give a reservation of rights letter in situations where, for example:

• it needs to specifically analyze whether the risk or the property is covered;
• it must verify whether any exclusions apply;
• it has questions about the value of the damaged or stolen property. 

Example of a situation where a reservation of rights letter is given 

Martin’s car has been vandalized, and certain items were stolen. He had come home from a weekend with his new girlfriend who is an avid golfer. To make her happy, he had rented a set of clubs for the weekend so they could play together, and he could learn the game. The clubs were amongst the stolen items. He declares the theft to his insurer.

When he makes his statement, Martin is unable to identify either the brand or the value of the clubs. To clarify certain basic facts, such as the value of the goods, and establish whether the theft was covered by his insurance contract, the claims adjuster has to contact the store where the set of stolen clubs was rented; this prolongs the investigation.

In order to reserve its rights to refuse the claim or invoke exclusions under the insurance contract,  the insurer asks the claims adjuster to give Martin a reservation of rights letter informing him of these facts.

The non-waiver agreement

Unlike the reservation of rights letter, the non-waiver agreement requires the insured’s signature for it to come into force. The insured who signs a non-waiver agreement declares that that he has been informed of the insurer’s position. He thus recognizes that the insurer can potentially invoke exclusions or refuse to compensate, even if it continues its investigation. The insured is not obliged to sign a non-waiver agreement.

Example of a situation where a non-waiver agreement is given

The Tremblays, a couple who love to go snowmobiling, suffer a break-in and the contents of their garage are stolen. Among the items stolen, the Tremblays declare seven snowmobile suits: two had just been bought and were brand-new, and the other five were old ones. Since their new suits were bought on liquidation, with no exchange or reimbursement, they did not think it necessary to keep the proof of purchase. They also declare the theft of their two old suits, as well as the suit belonging to their daughter, who is studying away from home. They kept the old suits for friends visiting their home. In order to confirm the existence of the seven snowmobile suits, as well as their value, without leading the Tremblays to believe that their claim was allowable and without losing its right to invoke exclusions under the contract, the insurer has the claims adjuster have them sign a non-waiver agreement.

Valuable advice 

Keep an up-to-date inventory of your property, including photos and videos, bills and any other documents that will enable you to facilitate the claims process.