Coverage and position
Partial Denial Letter Template & Example
Last updated 2026-08-03
A partial denial is harder to write than a full one and almost nothing is published about it. The full denial has one job. This letter has three at once: it has to be unmistakable about what is being paid, unmistakable about what is not and why, and honest about anything that is still open — without the three bleeding into each other. Get that wrong and the insured reads a payment and hears acceptance of everything, or reads a declined line item and hears a denial of the claim.
The fix is structural rather than stylistic. Separate the letter into three explicitly labeled parts, put the payment first, itemize the declined portion in the same units the estimate uses, and give every declined item its own facts and its own provision. The reader should be able to reconcile the check against the estimate without calling you. Where a portion is still under investigation, it goes in its own part and is described as open rather than being folded into either of the other two.
The worked example is a fictional water loss where the dwelling repairs and the damaged contents are being paid, two line items are declined, and one question — how long the leak ran — is neither paid nor denied because it is not resolved. That third state is the whole reason this document is difficult, and it is the reason the example does not tie off neatly. As with every example on this site, the conclusions reached inside it illustrate a structure. They are not a statement about what any real policy covers: that turns on the form, the endorsements, the facts and the state, and a template supplies none of those.
Jurisdiction
Written primarily against US first-party property practice. Claim handling is regulated state by state — acknowledgment and response deadlines, prompt-payment requirements, adjuster licensing and unfair claims practices standards all differ — and the policy actually issued governs the claim. Where a page cites a statute, model act or regulation, confirm what applies in the state where the loss occurred. Outside the US, treat the structure as transferable and the legal references as not.
Partial Denial Letter template
Free Word download, no email required. Or open it in Professional Drafter — it lands in your template library, ready to draft against.
When to use this document
- Part of the claim is being paid and part is not, and the two can be stated in the same units the estimate uses.
- A component is being declined on a discrete provision — a carve-out for the failed part, a sublimit, an excluded category of property — while the balance of the loss is not in question.
- You are paying an undisputed portion while a separate coverage question remains genuinely open. The letter then has to reserve on that question rather than resolve it.
Worked example
Fictional scenario: a water loss where the dwelling repairs and the damaged contents are being paid, two line items are declined on a discrete provision, and the duration of the leak remains undetermined. The letter pays, declines and reserves in the same document, and the reserved question is left open because the file has not answered it.
Identifiers and date
24 July 2026
Mr D. Okonjo
118 Harbour Lane
- RE:
- Claim no. PC-2026-11482
- Date of loss:
- reported 14 July 2026
- Loss location:
- 118 Harbour Lane
Policy no. HO-4471903, term 1 March 2026 to 1 March 2027
This letter is written against estimate revision 2, dated 22 July 2026, a copy of which is enclosed.
Summary: what is paid, what is declined, what remains open
Paid. A payment of $14,800.00 is enclosed. It covers the dwelling repairs on revision 2 of the estimate, other than the two lines identified below, and the fourteen cartons of water-damaged books, on an actual cash value basis, after your $2,500 deductible. The arithmetic is at part A.
Declined. Two items totaling $1,900.00 are not being paid: replacement of the water heater itself and replacement of its supply line. The reasons are at part B, with the facts and the policy wording each rests on.
Still open. One question is neither paid nor denied: how long water was escaping from the failed fitting before you discovered it on 14 July. We have not been able to determine it. That question, and what we are doing about it, is at part C. The payment enclosed does not resolve it in either direction.
Part A — the portion being paid
Dwelling, per estimate revision 2 dated 22 July 2026. The estimate as written totals:
Replacement cost value $18,340.00
Less depreciation $450.00
Actual cash value $17,890.00
The two declined lines at part B are inside that total, so they are taken out here:
Less lines 31 and 32, replacement cost $1,900.00
Less depreciation on those lines $190.00
Declined actual cash value $1,710.00
Dwelling replacement cost payable $16,440.00
Less depreciation $260.00
Dwelling actual cash value $16,180.00
Unscheduled personal property - fourteen cartons of books, priced from the inventory you provided on 18 July and returned priced on 23 July:
Actual cash value $1,120.00
Total actual cash value $17,300.00
Less deductible $2,500.00
Net payment enclosed $14,800.00
The $260.00 of depreciation withheld on the covered dwelling lines is recoverable under Section I - Conditions, Loss Settlement, on the terms stated in that provision. In short, it becomes claimable when the repairs are actually completed and you send us the contractor's invoices; read the provision itself for the conditions and the time limit, because both are stated there and neither is set by this letter.
This payment covers the 31 linear feet of drywall removal and replacement, base trim, slab cleaning and drying, the utility closet surround, and detaching and resetting the affected shelving. It does not cover the two items at part B.
Part B — the portion being declined, itemized
Both of the items below appear on estimate revision 2 and have been removed from the payment at part A, as the arithmetic there shows.
Item 1. Replacement of the water heater. Claimed at $1,860.00, estimate line 31.
Facts. (1) On inspection of 18 July 2026 the writer observed that the braided stainless supply line serving the water heater had separated at the crimped fitting at the heater end. (2) The heater tank and its controls were undamaged; there was no observed corrosion, no distortion of the jacket, and the unit was operating when tested on 18 July. (3) The failure was at the fitting, not within the heater.
Provision. Form HO-3, Section I - Perils Insured Against, provides in the accidental discharge or overflow of water provision that this peril does not include loss to the system or appliance from which the water or steam escaped.
Application. The water escaped from the supply line at its connection to the heater. The heater is the appliance from which the water escaped, and the water heater itself was in any event undamaged on inspection, per fact 2. This item is not being paid.
Item 2. Replacement of the supply line and fitting. Claimed at $40.00, estimate line 32.
Facts. (4) The supply line and the failed fitting are the components that separated, per fact 1. (5) They were retained by us on 18 July 2026, tagged and photographed, and remain in our possession in connection with the recovery referral described at part C.
Provision. As quoted at item 1.
Application. The line and fitting are the part of the system from which the water escaped. This item is not being paid. Separately, and so that you are not surprised by it: because those components have been retained for the recovery investigation, we can arrange for you to inspect them or have them examined on notice to us.
These two items total $1,900.00. Nothing else on estimate revision 2 is being declined.
Part C — what remains open
The question that remains open is how long water was escaping from the fitting before discovery.
What we know. You told us the dwelling was last occupied at approximately 18:00 on Friday 11 July, and that you found standing water at approximately 07:15 on 14 July. That is an interval of roughly 61 hours, but it is an outer bound and not a measurement. Moisture readings taken on 18 July with a Delmhorst BD-2100 on the slab at 4, 8, 12 and 16 feet from the utility closet were 18.4%, 16.1%, 14.8% and 11.2%, against a baseline of 9.6% in the far bedroom. That gradient is consistent with a release lasting many hours. It does not distinguish twelve hours from sixty.
What we have done. There is no water sub-meter at the property. Municipal supply is billed quarterly and the next read is due in September, so the consumption record will not isolate the period. There is no leak alarm and no occupancy log. We asked you on 22 July for any record covering 11 to 14 July — a utility or smart-home app history, a security system entry log, or an observation by a neighbor. Nothing further has been identified.
Why it matters. Your policy excludes loss caused by constant or repeated seepage or leakage of water over a period of weeks, months or years from within a plumbing system or a household appliance. The question is factual: how long. We are recording it as undetermined rather than estimating it, because an estimate offered here would be treated as a finding later.
We reserve our rights under that provision. The payment at part A is not an acceptance on that question and the declines at part B are not a decision on it. We will write to you again about it no later than 5 September 2026.
Separately, we have referred the failed components to our recovery unit, which is looking at the installation carried out by Feldstrom Plumbing under invoice 20941 dated 3 August 2025. That is a matter between us and the installer and does not affect the payment enclosed.
How the deductible and any limits were applied
Your all-peril deductible of $2,500.00 has been applied once to this occurrence, against the combined actual cash value of the dwelling and personal property portions shown at part A - that is, against $17,300.00, not against the estimate total before the declined lines were removed. It has not been applied separately to each coverage.
No sublimit affected these figures. The dwelling limit of $310,000 and the unscheduled personal property limit of $155,000 are both well above the amounts in question. No additional living expense has been claimed or paid, as the dwelling has remained habitable throughout.
Supplements and what to send if you disagree
If your contractor finds additional damage once the drywall is opened up — further wicking above 14 inches, damage to the bottom plate or to the electrical at the base of the wall — that is a supplement, not a dispute. Send the revised scope, photographs of what was found, and the invoice, and we will review it against revision 2. Do that before the work is closed up if you can.
If you disagree with the two declined items at part B, what would bear on it is information about where the failure occurred and the condition of the heater: a plumber's assessment of the retained components, or documentation of damage to the heater itself that we did not observe on 18 July.
If we agree on what is damaged but not on the amount, your policy provides at Section I - Conditions, Appraisal, that if you and we fail to agree on the amount of loss, either may demand an appraisal, in which case each party chooses a competent and impartial appraiser within 20 days after receiving a written request from the other. The provision sets out how the appraisers and the umpire are appointed and how the costs are shared. Read it in full before demanding appraisal.
Rights reserved, contact and next date
We reserve our rights under the seepage and leakage provision identified at part C, and under the policy generally in respect of that question. Nothing in this letter is a waiver of those rights, and equally nothing in it reopens the portion paid at part A.
R. Calloway, field adjuster, direct line and email as shown above. Examiner: C. Mendez.
We will write again about the part C question no later than 5 September 2026, and sooner if anything comes in that bears on it.
Section-by-section guide
What each section is for, what a good one contains, and where they typically go wrong.
1.Identifiers and date
The usual block, plus one addition worth making a habit: state the estimate revision number and date that the letter is written against. Partial denials are the letters most often superseded by a supplement, and a letter that does not say which version of the estimate it reconciles to becomes unusable the moment the estimate changes.
2.Summary: what is paid, what is declined, what remains open
Three short labeled paragraphs at the top, before any reasoning. Most recipients read the first hundred words and the amount of the check, so put the whole shape of the decision there. If a reader has to reach page three to learn that part of their claim is not being paid, the letter has failed regardless of what page three says.
3.Part A — the portion being paid
The arithmetic, in the order it was performed: replacement cost, depreciation, actual cash value, deductible, net payment. Say what the payment covers and what it does not include. If recoverable depreciation is available on the policy, state the amount and the conditions on which it is claimable, in the policy's own terms rather than your summary of them. Actual cash value is defined differently across states — California's insurance code defines it as repair or replacement cost less a fair and reasonable deduction for physical depreciation, with the depreciation limited to components that normally require repair within the structure's useful life, while other states apply a broad-evidence approach — so quote your form and the applicable state definition rather than describing ACV generically.
4.Part B — the portion being declined, itemized
One numbered block per declined item, each with its amount as claimed, the facts, the provision quoted, and the sentence joining them. Use the estimate's line numbers and the insured's own descriptions so the reader can match them. A declined item described only as certain plumbing components cannot be reconciled to anything, and it is the wording that produces the follow-up call.
5.Part C — what remains open
Anything under investigation, described as under investigation. Name the question, say what has been done, say what would resolve it, and give a date for the next update. Then state explicitly that the payment in part A is not an acceptance of this question and the declines in part B are not a decision on it. This is the section that keeps the letter honest, and it is the section that disappears first when someone edits for length.
6.How the deductible and any limits were applied
One paragraph. Which deductible, applied to which coverage, applied once or per-item, and whether any sublimit or coverage limit affected the figures. Deductible arithmetic is the most common source of a disputed partial payment, and the dispute is usually about method rather than amount.
7.Supplements and what to send if you disagree
Two distinct routes, and readers conflate them. A supplement is for additional damage or additional cost discovered later on the paid portion; a challenge to part B is a different thing and needs different material. Say which documents you would actually act on for each. Point to the appraisal provision by section where the disagreement would be about amount rather than coverage, and quote rather than characterize it.
8.Rights reserved, contact and next date
Short. Rights reserved on the open question in part C only, not a general reservation appended out of habit; a blanket reservation attached to a letter that has just paid half the claim is exactly the boilerplate the specific parts of this letter were written to avoid. Then a named person, a direct line, and the date of the next update. Model 902 §7(B) recommends a further status letter 45 days after the insurer's notice that more time is needed and every 45 days after that, and adopting states vary both the interval and the trigger, so set the date against your own state's text.
Common mistakes
The failure modes that show up most often when this document is reviewed later.
Sending the payment and the declined portion in separate letters, days apart.
The insured banks the check and then reads a denial, and every conversation after that starts from the assumption that something was withdrawn. One letter, three labeled parts, and the reader sees the whole shape at once.
Describing declined items in different words from the estimate.
The reader cannot reconcile the check to the estimate, so they call, and the call is spent doing arithmetic instead of discussing the reason. Use the estimate line numbers and the insured's own descriptions.
Folding an open question into the declined portion because it is easier to write.
It converts an undetermined fact into a stated position, and the file then has to support a position nobody actually reached. Undetermined belongs in its own part, described as undetermined, with the steps taken.
Attaching a general reservation of rights to a letter that has just paid half the claim.
A blanket reservation with no fact attached is the boilerplate that the rest of this letter's specificity exists to avoid, and it also muddies what is genuinely reserved. Reserve on the named open question and on nothing else.
Not naming the estimate revision the letter is written against.
Partial denials are superseded by supplements more often than any other letter in the file. Without a revision number and date, a reader six weeks later cannot tell whether the letter still describes the current position.
Stating recoverable depreciation as an amount without the conditions.
The insured reads it as money owed and diaries nothing. The conditions and the time limit are in the loss settlement provision, and pointing to that provision by section is what makes the figure actionable rather than merely encouraging.
Questions
- Does a partial denial need the same factual and legal basis pairing as a full denial?
- Treat it as though it does, and check your state's own text rather than assuming either way. Model 902 §7(A) frames its requirement around denying a claim on the grounds of a specific provision, which a declined line item plainly involves, and the states that impose more detailed requirements generally frame them around each reason given rather than around whether the whole claim was rejected. As a drafting matter a declined line item is a reason that needs its facts and its provision exactly like any other. The version that fails review is the one where the paid portion is documented in detail and the declined items get a single sentence.
- Can I pay the undisputed part while a coverage question is still open?
- It is common practice, and the drafting requirement is that the letter says so unmistakably: what the payment covers, what question is still open, and that the payment is not a resolution of it. Whether the payment carries any other consequence in your state is a legal question, not a drafting one, and it is worth confirming with counsel before it becomes a habit on large files.
- How should the deductible be shown when part of the claim is declined?
- Apply it as the policy directs, then show the arithmetic in the order you performed it: replacement cost, depreciation, actual cash value, deductible, net payment. State whether it was applied once to the occurrence or separately to each coverage. Most disputes about a partial payment turn out to be about method rather than about the amount, and method is invisible unless you write it out.
- What if the insured disagrees only with the amount, not the coverage?
- That is what the appraisal provision addresses, and the letter should point to it by section and quote it rather than characterize it. Note that appraisal provisions differ between forms and some states have modified them by statute, so quote the form in front of you. The standard fire policy enacted verbatim by several states, New York and California among them, is a useful public reference for what these clauses look like when a proprietary form cannot be reproduced.
The blank template
Exactly what is in the Word download, so you can see the structure before deciding whether you want it.
Identifiers and date
Summary: what is paid, what is declined, what remains open
Part A — the portion being paid
Part B — the portion being declined, itemized
- Description as the insured or the estimate states it
- Amount claimed and estimate line reference
- Facts, then provision quoted, then the application
Part C — what remains open
How the deductible and any limits were applied
Supplements and what to send if you disagree
Rights reserved, contact and next date
Download this template
Free Word download, no email required. Or open it in Professional Drafter — it lands in your template library, ready to draft against.
Sources
- NAIC — Unfair Property/Casualty Claims Settlement Practices Model Regulation (Model 902, 1991 amendment, July 1997 print)
- NAIC — Market Conduct Record Retention and Production Model Regulation (Model 910, January 2004)
- NAIC — Market Regulation Handbook: Examination Standards Summary, 2025 Edition
- Cal. Insurance Code §2051 — actual cash value
- N.Y. Insurance Law §3404 — standard fire policy (statutory text)
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This page is a documentation aid, not legal advice and not a coverage opinion. Claim-handling requirements vary by state and by policy wording, and a template cannot tell you what your file requires. The worked example describes a fictional loss.