What must Atlas Insurance send to the insured while it continues its investigation of a claim that may be excluded from coverage?

When an insurance company, such as Atlas Insurance, is investigating a claim that might be excluded from coverage, it is essential for them to communicate with the insured about the status and nature of that investigation. A reservation of rights letter serves this purpose by informing the insured that although the insurer is proceeding with the investigation of the claim, there may be potential reasons related to the policy that could lead to a denial of coverage.

This type of letter is particularly important because it protects the insurer's right to deny the claim based on policy exclusions while still conducting a thorough investigation. It preserves the insurer's options and provides transparency to the insured regarding the claims process. By sending a reservation of rights letter, the insurer ensures that the insured is aware of the possibility of denial if it invokes certain policy exclusions later on.

Other options do not fulfill this communication need under the circumstances. A notice of claim denial would imply that the claim has already been decided against the insured, which is premature during an ongoing investigation. A claim approval letter would inaccurately suggest that the claim has been accepted when it certainly has not been finalized. An exclusion notice may not be suitable at this point in the claims process, as it could imply an outright denial without the due process of investigation that the insurer