What is the value of an insurance agent? Direct sales insurers and many of the current insurtech startups would like consumers and businesses to think that the agent is simply a middleman that adds nothing to the insurance product and certainly doesn’t merit those mythical outrageous commissions. However, people who understand what agents do to earn their commissions are very familiar with situations like the following claim that came to my attention just last week through the Big “I” Virtual University’s “Ask an Expert” service….

An agent insures a tree removal service on the current ISO CGL policy. They were using a power crane mounted on the back of a truck to lift a downed tree. The boom broke and the tree fell on a structure. The adjuster denied the claim, citing this provision in the CGL definition of “mobile equipment”:

However. “mobile equipment” does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

The problem here is that the adjuster is not familiar with the concept of “entirety of contract.” Coverage in this claim does not lie strictly within the definition…you have to read the entire policy, including the “auto” exclusion which says [EMPHASIS added]:

This exclusion does not apply to…”Bodily injury” or “property damage” arising out of…The operation of machinery or equipment that is attached to, or part of, a land vehicle that would qualify under the definition of “mobile equipment” IF it were NOT subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged;

An exception to the “auto” exclusion is made for the OPERATION of equipment that is attached to a land vehicle that would qualify as “mobile equipment” IF it were NOT subject to a motor vehicle insurance law. Yes, the vehicle is, by definition an “auto,” but the “auto” exclusion doesn’t apply to the operation of the equipment on the “auto.” In other words, the crane vehicle is an “auto” when being driven on the road, but “mobile equipment” when being operated.

This is a good lesson. While the CGL generally does not cover the use of “autos,” that generalization does not always hold up when the contract language is carefully parsed. There are situations where the CGL policy will respond to “auto” claims but in order to determine that, the policy language must be read very, very carefully and in its entirety. RTFP!

Perhaps the bigger lesson here is the fact that the agent was astute enough to realize that the adjuster’s interpretation was quite possibly incorrect and sought expert opinions in order to contest the claim denial. I’ve spent the last 30 years assisting independent insurance agents who advocate for their customers when claims are improperly denied. If this account was written through a direct sales insurer, who would represent the customer in challenging such denials? No one. Good agents earn their commissions in many ways. This is just one example of one way.

Photo by mobilkranföraren.se

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information

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