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 couple of case he misplaced, and his insurer consumer later re-wrote the insurance coverage coverage so it might not pay for a declare below comparable circumstances:
What was your first large insurance coverage protection case, Doug?
Houser: In 1962, there was an enormous windstorm on Columbus Day with 110 mile-per-hour winds that did a number of harm 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 at the present time that I acquired 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 altered my profession. Because it seems, purchasers considered me as a “large case” lawyer. In any occasion, we later rewrote the coverage, and it has withstood quite a few exams since. 1
Insurance coverage corporations writing the phrases of the insurance coverage contract is a crucial level relating 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, notably “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 should not negotiated like many different contracts the place the events commute with modifications, duly acknowledged and initialed by each. Most insurance coverage insurance policies, wanting 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.
Because of this, because the insured had no important 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 normal rule, however they’re few and much between. We’ll focus on a few of them later.
Within the case of decoding ambiguities, the that means of some coverage phrases could be ascertained by coverage definitions (not that such definitions should 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 that means or, as one courtroom put it, “plain, peculiar and well-liked sense.” Dictionaries are sometimes the device utilized by jurists to find out the plain and peculiar that means of a phrase or phrase. 2
State insurance coverage regulators, particularly employees of legislators concerned with insurance coverage and everyone with the Nationwide Affiliation of Insurance coverage Commissioners, ought to rigorously think about these implications within the trendy period of insurance coverage underwriting and coverage drafting. Many insurance coverage corporations re-write their merchandise at this time to achieve 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 situation over a decade in the past in Are State Insurance coverage Commissioners and Legal professional Generals Failing to Defend Insurance coverage Customers:
An insurance coverage transaction is exclusive. The precise product, the coverage, will not be supplied to the policyholder on the level of sale. Certainly, the power to review, 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 person studying this weblog can actually say they learn three or 4 insurance policies to check the accessible 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 necessary insurance coverage merchandise despite the fact that they price considerably extra and probably decide whether or not we’ll financially recuperate from a catastrophe. It’s unattainable generally as a result of most carriers don’t present a duplicate 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, partly, to guard customers and forestall issues ensuing when insurance coverage corporations bought fireplace insurance coverage however considerably minimized the protection with boilerplate phrases. Till just lately, most insurance coverage corporations adopted ISO commonplace varieties. That is not the case.
Because of this, for these concerned within the day-to-day evaluation of insurance coverage losses, the teachings within the publish, 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 have to cease kicking the can down the street and do one thing about all danger property insurance coverage insurance policies missing a minimal commonplace, as known as for in The Customary Fireplace Coverage—Do We Want a Customary All Threat 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 way in which 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 corporations are licensed and we will make these solicitations and practices unlawful if our legislators care extra for his or her voters 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 necessary and shouldn’t be missed when analyzing at this time’s advanced problems with insurance coverage.
Thought For The Day
“We act as if easy trigger and impact is at work. We push to seek out the one easy purpose issues have gone incorrect. We search for the one motion, or the one particular person, 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).
