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General Insurance Tips

Innocent Insureds


Insurance policies are meant to protect against accidental and, typically, spontaneous events. Intentional or deliberate actions that cause damage or injury do not usually qualify for coverage. While an insured having control over an act which causes loss or injury usually is grounds for exclusion, there are exceptions such as:

  • Actions of a minor or other entity considered to be legally incompetent
  • Damage or injury involving self-defense or protecting another party or property
  • The existence of innocent insureds

Exceptions exist in order to make fair allowances for permitting an insurance policy to respond to losses when justified by circumstances.

Innocent Insureds

Innocent insured situations exist when, under a given insurance policy, coverage may be allowed because a guilty party is accompanied by at least one other party who is free of involvement with the injury or damage.

Innocent insureds are usually spouses, resident relatives, co-owners, partners, employees and/or other parties who have an insurable interest in some covered property or share a legal responsibility with a guilty party. The relationship between the guilty and innocent parties tends to be very close.

One issue that is vitally important regarding innocent insureds is that, generally, any compensation usually is due to judicial decisions rather than how an insurance policy is applied. This is the case because insurance companies rely on “imputing.”

Imputing

Simply put, imputing means that no consideration is provided to uninvolved parties. Insurance companies typically attribute actions involving one insured person to all other insured persons affected by a policy. This assumption ignores the question of individual innocence. However, courts often review particular loss circumstances and rule upon whether such assumptions of guilt are fair. There are many instances of decisions where an insurance company is ruled to have a separate payment obligation to innocent insureds.

It is important that both insurance companies and insurance consumers be aware of the intent to provide coverage. Policies are obligated to protect persons who suffer legitimate claims, even when determining the coverage obligation is complicated.


COPYRIGHT: Insurance Publishing Plus, Inc., 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Insurance – A Matter of Trust

Insurance policies involve trust. Insurance policies are written agreements that involve at least two parties. One is the insurance company that provides the applicable form of protection. The other is the party who is protected by the policy. These two parties have a contractual relationship with each other. The insurer agrees to protect the insured if the insured agrees to pay for the protection.

The trusting relationship begins before any policy is issued. Insurers want to provide policies to persons who meet their qualifications. Qualified persons are discovered by using applications. Besides collecting identifying information, applications also gather details that determine if a person is eligible for a given policy. The information also helps the insurer decide how much to charge for the coverage, what level of coverage it should agree to grant and the conditions for providing the protection.

The insured should also to be able to trust the insurer. He, she (or a business entity) has to rely on the company actually issuing the type of coverage it promises. The insured also trusts the company to pay for a loss (that is eligible under the coverage) and to handle any loss fairly and efficiently. Both parties must approach the contractual agreement honestly and fairly. The contract is affected if either party fails to act in good faith.

When an insurance company refuses to cover an eligible loss without a valid reason or when an insured refuses to pay for the policy; these are instances of breaking the contract. An insured may also break the contract if he or she either withheld information or intentionally supplied false information. Of course, the information must involve some significant item that would have affected the company's decision to accept the insured. Breaching a contract may allow an insured to sue a company for coverage or allow a company to void the policy it issued.

Whenever policies are not handled in good faith, there are consequences that impact more than just the two parties. Third parties, such as other businesses or persons, may also be harmed by insurance contracts that turn out to be invalid. Modern economies depend upon the role played by insurance contracts. It would be impossible to handle large transactions without a way to protect all parties against possible losses. Further, many parties would not even attempt certain types of transactions without the support of insurance, such as large building projects, major equipment sales, vehicle rentals, and numerous other transactions.

Certainly, there are many times when one party fails to handle their insurance obligations in good faith. However, such instances are the exception. Our economy and standard of living are made possible because most parties deal with each other honestly and we all benefit when that happens.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Duties To Preserve Property – Part 1


Most insurance policies contain specific references to a duty to protect property from further harm. It may be called a Neglect provision or Preservation of Property; regardless, insurance companies rely on their policyholders to comply with the obligation. A policyholder’s duty can be categorized broadly in two areas. First, we’ll discuss aggravating a loss.

Loss Aggravation

Here’s an example. After closing time, a small fire breaks out in Jenny’s restaurant. The fire started in the kitchen’s storage area. First Jenny orders her entire staff out of the building. Then, she arranges a roll call to be certain that everyone is safely accounted for. Finally, she makes a call to the Fire Department. All the while, she stops anyone from reentering the restaurant to attempt to extinguish the fire. As it turns out, the fire spreads from the storage area and into the kitchen, severely damaging the heart of her restaurant. After investigating the loss, Jenny’s insurer reduces her claim payment by $10,000. The lower payment is justified by their finding that the loss would not have been nearly as severe if Jenny had allowed her staff to use the available fire extinguishers and had made the emergency call more quickly.

Policy wording with regard to the duty to protect property typically notifies the policyholder that he or she is expected to take any and all available measures to save or preserve property in the midst of a loss. This does leave room for interpretation, but the obligation does fall comfortably in between the extremes of using heroic measures and failing to make any effort to protect property. A failure to meet the obligation can result in either a partial or, in extreme instances, a total denial of coverage for a given loss.

Here’s another example. The Laggleson family goes outside to check for any damage to their home after a violent windstorm. Besides a lot of scattered debris and an overturned patio set, they notice that a large limb from their Chinese Elm was blown onto their roof, creating a large gash. Several hours later a rainstorm comes through the area. The rain that pours through the hole damages expensive furniture stored in the attic as well as ruins the drywall belonging to the bedroom located beneath the compromised attic.

Scenario One – the initial damage occurred early on a Thursday morning with the storm occurring in the afternoon. The Lagglesons decided to go on to work and school and to handle things after returning home.

Scenario Two – the initial damage occurred on a Sunday morning, around 3 a.m. with the storm occurring around 6 a.m. The Lagglesons made several frantic calls but could not find anyone willing to come out to their home to deal with the open roof until Monday morning.

In both scenarios a failure to preserve the property after the initial loss created additional damage. However, it is only in the first scenario that the policyholder may suffer a consequence.

See part two of this article for another aspect of this duty, Spoliation of Evidence.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Duties To Preserve Property – Part 2


Part one of this discussion focused on actions that policyholders might take during a loss that could aggravate a loss and possible consequences. There is another, related obligation regarding the handling of property and that’s spoliation of evidence

A policyholder’s duty to protect property extends beyond the occurrence of a loss. The duty may become more important for property involved in a liability claim. Insurers may take adverse action if their rights are significantly harmed (prejudiced) by policy holder decisions.

Example: a theft occurs and valuable property belonging to guests is among the items lost. The policyholders lose documents given to them by their guests that would’ve assisted in establishing the lost property’s value

Example: A home and its contents are severely damaged during a windstorm. The policyholders, in a hurry to set things to order, have a salvage company clean the area and haul away damaged property before the insurer can inspect it.

Actions such as the above may seriously affect an insurer’s ability to adjust losses or defend claims. How? It is because their handling spoiled the ability of the property to serve in either establishing a proper loss amount and/or in the ability to establish liability for a loss. Taking the proper post-loss steps in handling property is an important duty.

If you need more help in understanding your responsibility after a loss, be sure to discuss your concern with an insurance professional.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Lords of Land


Being fortunate enough to own property beyond one’s personal residence is both a blessing and a huge responsibility. When you rent out your property to others, in the form of an apartment, townhouse, condo, home or other structure, that responsibility increases and so does your chance to suffer either a property or liability loss.

It is very important that you consider buying insurance that will properly protect you. Landlord insurance can be barebones or quite comprehensive. The amount and scope of coverage will vary according to what you wish to protect, the circumstances of the rental situation and the value of the applicable property.

Here are the types of coverage you should consider when deciding upon securing or adjusting your current coverage:

Landlord Building Insurance–coverage for the structure being rented including, if applicable, other structures such as sheds. Be sure that you purchase enough coverage to replace the property if it is seriously damaged.

Landlord Contents Insurance–Many landlords rent out partially or fully furnished property. Those furnishings, from appliances, to dining sets, dishes to televisions must be protected.

Legal Expenses–Sometimes rental situations deteriorate. This coverage is for the legal costs of having to deal with rental disputes, evictions, contract issues and similar, expensive problems with a tenant.

Loss of Rental Income Coverage–A loss that damages rental property usually makes that property unusable, so you need coverage for rental income that is lost while the property is replaced or repaired.

Landlord Liability Insurance–Consider a tenant who injures another person or damages another person’s property. Consider some situation on your property that causes an injury to a tenant, tenant’s guest or some other person. Landlord liability insurance can protect you against any lawsuits that such situations may create.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

 

Back Off The Beach


In recent years, major storms in the U.S. have created massive amounts of damage to property, particularly along coastal areas. Hurricanes Katrina and Sandy continue to affect the lives and economies of entire regions. In the future, whether due to historic trends or the effect of global warming, forecasts indicate that similar, huge and powerful storms may become fairly common. That means more catastrophes that will injure or kill residents and cause economic havoc.

The problems caused by coastal storms are substantially compounded by a long-term weather trend. Largely our population continues to grow along our coasts, meaning that more people, more homes, more businesses, and more infrastructures will become possible storm victims. Besides storm activity, there is also the significant issue of rising sea-levels. Construction in low-lying areas today may be underwater in the future.

While storms, diminishing shorelines and their impact are mass events, they are still suffered on, ultimately, an individual level. Therefore, individual decisions are important. In other words, what do you do with regard to the danger of storms? What decisions do you make with regard to property on degrading shores? Some experts have begun to question the sanity and viability of continuing to live in areas which face a near certainty of significant storm activity and eroding shores. We may have reached a point where, rather than trying to deal with rebuilding communities, restoring beach fronts and trying to mitigate damage that we do something extreme….move!

Individual residence and businessowners may need to make different decisions about property that is constantly endangered by storms and seas. When such property is destroyed, rather than rebuild in the same manner as before, the optimum options may be to either rebuild on an elevated, reinforced basis or to build elsewhere, in a place less prone to such dangers.

Increasingly our country’s and insurance industry’s resources will be drained by the challenge of handling massive damage in vulnerable, coastal areas. Increasingly, individual decisions, market forces and public resources may force a significant retreat from the beach.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, In

 

Anti-Concurrent Causation


Anti-Concurrent Causation. Yes, the term actually means something, even though it looks and sounds like something from the mind of Dr. Seuss or from out of Alice in Wonderland. Anti-Concurrent Causation is a policy provision that bolsters certain exclusions.

Damage to homes, related structures, businesses, etc.; often involve causes of loss that are traditionally covered by insurance policies, such as fire, wind, hail, freezing, falling objects, lightning and others. On the opposite end, there are causes that, traditionally, are not covered, such as flood, earthquake, nuclear activity, and military actions.

Things are clear cut when a single cause creates a loss .But a situation becomes complicated when more than one cause contributes to a loss at, essentially, the same time (concurrent). Consider the following situations:

Scenario A – A factory that is heavily damaged by a windstorm. This is clearly a covered situation.

Scenario B – A factory that is heavily damaged by flooding. This is clearly a non-covered situation.

Scenario C – A factory that is heavily damaged by flooding, but the floodwaters driven onto the premises by a windstorm. Now the situation becomes uncertain. Storms are covered, flooding isn’t and both circumstances created the loss.

It is the uncertainty created by both an excluded and a covered source of loss creating damage that is addressed by anti-concurrent causation wording. When a policy includes such language, such losses are still excluded. Such language is subject to frequent dispute under lawsuits, especially since such situations are often severe and catastrophic. Often courts and state laws have the final say on how given losses are handled. This creates another instance where you may need the help of an insurance professional to have clearer understanding of your coverage.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Emerging and Silent Insurance – Part 1


Insurance, even after centuries of substantially aiding economies to grow and thrive, still maintains a perception that it is conservative and slow to change. That’s a gross simplification. As is the case with any complex situation, it’s a mixture. Insurance tends to be conservative for a variety of reasons, chief among them is regulations.

Insurance companies must comply with rigid state requirements regarding every aspect of their operations. Naturally, the regulatory situation becomes increasingly complex when operations include more than one state. Changes in premiums, coverage forms and rules for handling business are all scrutinized for compliance. No matter how agile or proactive an insurer may wish to be, its regulatory environment places restraints on its operations.

Another factor is that insurance is based upon contractual obligations. Insurers, legally acting as an insurance contract’s Second Party, owe duties to their policyholders (First Party) and, when coverage involves legal liability to others, then financial obligation also exist to others (Third Party) who may have suffered loss or injury caused by policyholders. Maintaining these relationships in a consistent manner is important and the need for stability also creates a pressure to be conservative.

Lawsuits also contribute to insurance’s conservative bent. Disputes often take years to resolve and arguments are often based upon how policy language and processes are interpreted. Once certain elements are established, changes in language and operations introduce uncertainty that may have unwanted financial consequences.

All the above contribute to insurance companies operating both more slowly and deliberately than many other service sectors. However, there are still dynamic elements within a changing regulatory environment, such as standardization of laws, introduction of new laws and the appearance of new sources of loss. Besides reacting to these changes, insurers also make changes due to other important forces such as competition from sectors outside of insurance, technological advances that affect the areas that they insure and technology that affects how it processes business.

Please see part two which discusses two factors that arise out of the ecosystem in which insurance companies operate, emerging and silent insurance.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019 

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.

Emerging and Silent Insurance– Part 2


Part 1 discussed that insurance operates in an environment that contributes to it being a conservative service sector that is somewhat resistant to change. This part is about elements that arise from the other fact, which is that insurance often faces and responds to evolving circumstances.

Insurance companies provide a dizzying array of products that address private and commercial needs for coverage. Along with continuously maintaining traditional protection against age-old sources of loss such as fire, windstorm, weight of ice/snow, collision, theft, vandalism and many others, insurers must also monitor the development of new sources of loss such as the following:
 

  • Terrorism
  • Nanotechnology
  • Data Privacy
  • Cyber Security
  • Coverage for Digital Assets
  • Sharing/Gig Economy
  • Climate Change Risks
  • Internet of Things Product Liability
  • Driverless Vehicles/Deliveries

While insurers attempt to handle such challenges, adjustment is uneven and takes time. A typical arc involves recognition of a newer loss exposure being followed closely by creating exclusions to bar coverage. As such exposures mature, showing patterns of claims, forms or modified exclusions arise that provide limited protection. As time passes, additional experience accumulates and available coverage often becomes broader and, eventually, wider spread.

However, the process of dealing with emerging-to-maturing exposures can create instances of silent coverage. The latter occurs when a given policy neither expressly mentions a source of loss as covered nor does it appear among specific exclusions; therefore a policy is silent. Disputes arise as parties who suffer loss by such exposures will argue that silence equates to coverage. Silent situations once discovered are eventually resolved by including reference to them that results in either deliberate coverage or exclusion.

In any case, the insurance sector, while inherently conservative, constantly faces and addresses change from a variety of sources. Constant communication with an insurance professional is a prudent move for monitoring changes in available insurance protection.


COPYRIGHT: Insurance Publishing Plus, Inc. 2019 

All rights reserved. Production or distribution, whether in whole or in part, in any form of media or language; and no matter what country, state or territory, is expressly forbidden without written consent of Insurance Publishing Plus, Inc.