Month: July 2025

When a claim comes in and there are coverage issues, insurers have two key tools to protect their position: the Coverage Position Letter (CPL) and the Reservation of Rights (RoR) letter. These letters serve related but distinct purposes, and sending them promptly can help prevent miscommunication, disputes, and legal exposure.

This article explains the difference between the two, when and why they’re used, and why delay can create unnecessary risk.

What Is The Difference Between a Coverage Position Letter (CPL) and a Reservation of Rights (RoR) Letter?

The term Coverage Position Letter (CPL) is most commonly used when an insurer affirmatively denies coverage on a claim in its entirety. A Reservation of Rights (RoR) letter is issued when there is a question of whether some or all aspects of the claim may be covered under the policy. An RoR states that the insurer is investigating coverage and has the right to disclaim coverage in the future once the coverage issues have been fully investigated and analyzed. If it is clear that some aspects of a claim are not covered under the policy, but there are still questions about whether the other aspects of a claim are covered under the policy, an insurer will issue a letter that combines aspects of a CPL and an RoR.

When Should an Insurer Send a CPL or RoR—And the Risk of Delay

In short, an insurer should send a CPL or RoR as soon as possible after the insurer knew or should have known of a coverage issue. This means that an insurer should be on the lookout of potential coverage issues as soon as it receives the claim—not just, for example, when a lawsuit is filed. A common misconception is that a CPL or RoR only needs to be sent when there is a question of whether there is a duty to defend. However, as noted in a previous blog post: “Duty to Defend and Indemnify,” the duty to indemnify is a distinct and separable duty. Therefore, it is important for the insurer to determine if there are coverage issues at the outset of receiving the claim that would therefore impact if it has a duty to pay the claim (such as a pre-suit settlement).

Michigan law does not impose a fixed deadline for issuing an RoR or CPL. But the longer the delay, the greater the risk. Courts will evaluate timeliness based on the facts and circumstances, and whether the insured was prejudiced by the delay.

An RoR or CPL issued weeks—or even months—into a claim may still be legally valid if the insurer continues to investigate in good faith and communicates consistently. However, long periods of silence followed by sending a late CPL or RoR can raise estoppel concerns (an issue we’ll address in greater detail in a subsequent article).

Additionally, insurers should re-evaluate their coverage position as new information becomes available. If facts develop that change the analysis, a follow-up CPL or RoR should be issued promptly. For example, even when an insurer has already begun defending a case, it is still prudent to issue an RoR if coverage questions arise after the fact.

The Contents of a CPL or RoR

A CPL or RoR should outline the insurer’s coverage analysis under the policy and the basis for its decision. Importantly, a CPL or RoR should be specific. Vague or boilerplate summaries that fail to reference key exclusions, policy terms, or factual issues can undermine the letter’s value and create ambiguity that could give rise to future litigation. The letter should state that the insured should provide additional information that supports any disagreement with the current coverage determination, and to provide additional information in the future that may warrant the need to reconsider the current coverage determination. More details on best practices of what should be included in a CPL or RoR will be addressed in a subsequent article.

Summary and Final Thoughts

In sum, the primary reasons an insurer sends a CPL or RoR letter are:

• • • To document the insurer’s coverage analysis early in the process,
    • To preserve defenses that might otherwise be waived or challenged later,
    • And to avoid estoppel.

Timely, specific communication helps preserve legal defenses, avoid unintended estoppel, and demonstrate good faith. Whether used separately or together, these letters allow insurers to stay proactive, protect their position, and encourage a more informed dialogue with insureds.

If you have questions about CPL or RoRs, or need assistance with drafting one, our insurance team can help.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions. When it matters in Michigan, we are the trusted legal advisors for businesses and individuals.

Dakota A. Larson is an experienced attorney handling complex liability, coverage, and bad faith claims in multiple lines of insurance and in multiple jurisdictions. You can reach her at 517.377.0872 or at dlarson@fraserlawfirm.com.