What notification might an insurer provide to inform the insured about potential non-coverage of a reported loss?

• A. Exclusion Notice
• B. Reservation of Rights
• C. Declination Notice
• D. Coverage Confirmation

Answer: (B)

A Reservation of Rights is a notification that an insurer issues to inform the insured that while their claim is being investigated, there may be potential exclusions or conditions under the policy that could affect coverage for the reported loss. This communication is crucial because it makes the insured aware that the insurer is not denying the claim outright, but it is reserving the right to deny coverage based on specific policy terms.

By using a Reservation of Rights, the insurer protects itself from later claims that it denied coverage without fully considering the circumstances. It ensures the insured understands that certain issues may lead to a lack of coverage under the policy, enabling them to respond or gather additional information if necessary.

In contrast, other notices have different implications. An Exclusion Notice typically details specific circumstances or incidents not covered by the policy but does not address ongoing claims. A Declination Notice outright denies the claim, indicating that the insurer will not provide coverage for the reported loss. Coverage Confirmation on the other hand, affirms that coverage is indeed in place for the loss being claimed, which is contrary to the situation of informing about potential non-coverage.