I discussed the late Doug Houser just lately in Ice Damming Case Denied or Not Totally Paid? Eyewitness Accounts Tip the Scales in Ice Damming Insurance coverage Dispute. The Bullivant Houser regulation agency quoted Doug a few case he misplaced, and his insurer shopper later re-wrote the insurance coverage coverage so it will not pay for a declare beneath comparable circumstances:
What was your first huge insurance coverage protection case, Doug?
Houser: In 1962, there was an enormous windstorm on Columbus Day with 110 mile-per-hour winds that did numerous injury within the Portland space. An area firm named Fred Meyer misplaced electrical energy and all their refrigerated merchandise have been misplaced. We had a protection dispute over the scope of the off-premises electrical outage protection. It’s the one time to today that I obtained talked about because the shedding lawyer within the nationwide insurance coverage press for a case that I misplaced. On the time I felt like my profession had been ruined. Really, it was an enormous break for me and adjusted my profession. Because it seems, purchasers considered me as a “huge case” lawyer. In any occasion, we later rewrote the coverage, and it has withstood quite a few exams since. 1
Insurance coverage firms writing the phrases of the insurance coverage contract is a crucial level with regards to insurance coverage contract interpretation. Most courts will discover that the insurance coverage product is a “boilerplate” contract of adhesion.
In When Phrases Collide: Insurance coverage Insurance policies as Contracts of Adhesion, we analyzed this matter and referenced a guide each insurance coverage agent and public adjuster ought to personal. Invoice Wilson wrote:
Doctrine #6: Most insurance coverage insurance policies are contracts of adhesion, so insuring agreements are interpreted broadly, exclusions narrowly, and ambiguities in favor of insureds.
Most insurance coverage insurance policies, significantly “standardized” varieties are thought of by the courts to be contracts of adhesion. Whereas some phrases of the coverage could be modified by endorsement, insurance coverage insurance policies are usually not negotiated like many different contracts the place the events trip with modifications, duly acknowledged and initialed by each. Most insurance coverage insurance policies, in need of manuscripted varieties, are drafted totally by insurers or by advisory organizations like ISO or AAIS and introduced to insureds on a take-it-or-leave-it foundation.
In consequence, for the reason that insured had no vital position in drafting the contract language, coverage insuring agreements are normally interpreted broadly, exclusions and limitations narrowly, and ambiguities in favor of the insured. There are, after all, exceptions to this common rule, however they’re few and much between. We’ll focus on a few of them later.
Within the case of deciphering ambiguities, the which means of some coverage phrases could be ascertained by coverage definitions (not that such definitions are usually not as usually litigated as undefined phrases). In any other case, most coverage language is interpreted by the courts primarily based on its plain and peculiar which means or, as one court docket put it, “plain, peculiar and widespread sense.” Dictionaries are sometimes the device utilized by jurists to find out the plain and peculiar which means of a phrase or phrase. 2
State insurance coverage regulators, particularly workers of legislators concerned with insurance coverage and all people with the Nationwide Affiliation of Insurance coverage Commissioners, ought to fastidiously contemplate these implications within the trendy period of insurance coverage underwriting and coverage drafting. Many insurance coverage firms re-write their merchandise right now to realize a aggressive benefit over others who don’t deviate from industry-standard language.
I famous that insurance coverage regulation professor Daniel Schwartz sounded an alarm about this subject over a decade in the past in Are State Insurance coverage Commissioners and Lawyer Generals Failing to Defend Insurance coverage Shoppers:
An insurance coverage transaction is exclusive. The precise product, the coverage, is just not offered to the policyholder on the level of sale. Certainly, the power to check, analyze after which examine the phrases with different insurance policies earlier than buy is uncommon. Aside from insurance coverage brokers, I guess $10 that no one studying this weblog can truthfully say they learn three or 4 insurance policies to check the obtainable merchandise earlier than they bought one. Whereas we spend a number of minutes selecting which tomato is the only option for dinner, we don’t even learn or examine rather more vital insurance coverage merchandise though they value considerably extra and doubtlessly decide whether or not we are going to financially get better from a catastrophe. It’s unimaginable typically as a result of most carriers don’t present a replica of the coverage earlier than buy.
The acquisition of insurance coverage is a “pay now, phrases later” transaction. Customary insurance coverage insurance policies with minimal necessities of safety have been developed and mandated within the late nineteenth century, partially, to guard customers and forestall issues ensuing when insurance coverage firms offered fireplace insurance coverage however considerably minimized the protection with boilerplate phrases. Till just lately, most insurance coverage firms adopted ISO customary varieties. That is not the case.
In consequence, for these concerned within the day-to-day evaluation of insurance coverage losses, the teachings within the put up, Invoice Wilson Teaches How To Argue For Protection at NAPIA—What’s RTFP, are paramount.
For these which are within the insurance coverage regulatory enterprise, you must cease kicking the can down the street and do one thing about all threat property insurance coverage insurance policies missing a minimal customary, as known as for in The Customary Fireplace Coverage—Do We Want a Customary All Danger Insurance coverage Coverage:
Maybe the insurance coverage {industry} ought to cease making goofy adverts and warn what their insurance policies don’t pay earlier than the losses occur. Maybe they need to higher clarify why their merchandise work the best way they do and cease competing on hidden protection gaps cleverly written into language most wouldn’t count on as a result of all they hear is financial financial savings on low cost insurance coverage. Insurance coverage firms are licensed and we are able to make these solicitations and practices unlawful if our legislators care extra for his or her citizens than cash from the insurance coverage lobbyists.
Client safety relating to property insurance coverage protection appears to be all concerning the worth and availability. The phrases of insurance coverage protection are equally vital and shouldn’t be neglected when analyzing right now’s complicated problems with insurance coverage.
Thought For The Day
“We act as if easy trigger and impact is at work. We push to search out the one easy motive issues have gone fallacious. We search for the one motion, or the one individual, that created this mess”
—Margaret J. Wheatley
1 https://www.bullivant.com/member-spotlight-doug-houser/
2 Invoice Wilson, When Phrases Collide: Resolving Insurance coverage Protection and Declare Disputes, 75 (2018).