What does the term "Reservation of Rights" (ROR) refer to in insurance?

The term "Reservation of Rights" (ROR) in the context of insurance specifically refers to a notice issued by an insurer that indicates its intention to potentially deny coverage for a claim while still proceeding with its investigation or handling of the claim. This is an important concept because it allows insurers to protect their rights to contest coverage based on the specifics of the policy and the circumstances of the claim.

By issuing an ROR, the insurer communicates to the insured that there may be reasons, such as exclusions or policy limitations, that could ultimately lead to a denial of the claim. This practice ensures that the insured is aware that the insurer is not conceding coverage but is still fulfilling its duty to investigate the claim fully. It's a method for the insurance company to maintain its legal rights while also engaging in the claims process, often aiming to avoid future disputes over coverage.

In contrast, other options relate to different aspects of insurance operations: notification of policy renewal pertains to the continuation of coverage; assessment of risk during underwriting involves evaluating the applicant’s risk profile before issuing a policy; and communication of claim approval indicates a successful claim outcome, which does not align with the meaning of Reservation of Rights. Thus, the identification of ROR as a notice reserving the right to deny