I discussed the late Doug Houser not too long ago in Ice Damming Case Denied or Not Absolutely 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 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 loads of harm within the Portland space. A neighborhood 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 this present day that I acquired talked about because the dropping 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, shoppers 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 vital 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 subject and referenced a ebook 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” types are thought-about by the courts to be contracts of adhesion. Whereas some phrases of the coverage may be modified by endorsement, insurance coverage insurance policies usually are not negotiated like many different contracts the place the events commute with modifications, duly acknowledged and initialed by each. Most insurance coverage insurance policies, in need of manuscripted types, are drafted totally by insurers or by advisory organizations like ISO or AAIS and offered 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 often interpreted broadly, exclusions and limitations narrowly, and ambiguities in favor of the insured. There are, in fact, exceptions to this basic 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 may be ascertained by coverage definitions (not that such definitions usually are not as usually litigated as undefined phrases). In any other case, most coverage language is interpreted by the courts based mostly on its plain and extraordinary which means or, as one court docket put it, “plain, extraordinary and well-liked sense.” Dictionaries are sometimes the instrument utilized by jurists to find out the plain and extraordinary which means of a phrase or phrase. 2
State insurance coverage regulators, particularly employees of legislators concerned with insurance coverage and all people with the Nationwide Affiliation of Insurance coverage Commissioners, ought to rigorously contemplate these implications within the trendy period of insurance coverage underwriting and coverage drafting. Many insurance coverage firms re-write their merchandise immediately 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 concern over a decade in the past in Are State Insurance coverage Commissioners and Lawyer Generals Failing to Shield Insurance coverage Shoppers:
An insurance coverage transaction is exclusive. The precise product, the coverage, isn’t offered 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 one studying this weblog can truthfully say they learn three or 4 insurance policies to check the out there merchandise earlier than they bought one. Whereas we spend a number of minutes selecting which tomato is your best option for dinner, we don’t even learn or examine far more necessary insurance coverage merchandise though they value considerably extra and probably decide whether or not we are going to financially get better from a catastrophe. It’s inconceivable 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. Normal insurance coverage insurance policies with minimal necessities of safety have been developed and mandated within the late nineteenth century, partially, to guard shoppers and stop issues ensuing when insurance coverage firms offered hearth insurance coverage however considerably minimized the protection with boilerplate phrases. Till not too long ago, most insurance coverage firms adopted ISO normal types. 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 should cease kicking the can down the highway and do one thing about all danger property insurance coverage insurance policies missing a minimal normal, as referred to as for in The Normal Fireplace Coverage—Do We Want a Normal 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 best way they do and cease competing on hidden protection gaps cleverly written into language most wouldn’t anticipate 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 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 neglected when analyzing immediately’s advanced 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 cause issues have gone improper. 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).
