In one of my last blog posts of 2017, I mentioned that my blogging might be a little sparse into March because I was working on a book targeted for publication late this spring with the tentative title of “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” I’ve completed the first draft of the introductory sections and the opening chapter called “Policy Interpretation Basics.”
In that chapter, I discuss an insured’s duty to read the policy. Even more important is the agent’s (or underwriter’s or adjuster’s) duty to read the policy. I share this story in the book:
Several years ago, I got an inquiry from an insurance agency’s commercial lines manager who also had the Certified Insurance Counselor (CIC) professional designation. She wanted to know if a liquor store needed liquor liability coverage. According to her email [emphasis added], “I was always told that unless you were in the business of selling liquor for consumption on your premises, you did not need to purchase liquor liability.”
Just recently I viewed some agent professional liability statistics and noted a very similar claim that arose from the failure to provide liquor liability coverage for a liquor store. “Knowledge by Folklore” (aka, “I’ve always heard that…”) is not how coverage determinations should be made.
Later in this chapter in the book, I provide my “10 Commandments” of insurance policy interpretation in the form of 10 “doctrines” that govern, or should govern, how coverage is determined or a claim is resolved, including:
Doctrine #10: Folklore is not Fact.
As the liquor liability anecdote I shared earlier in this chapter demonstrates, you don’t make insurance policy coverage determinations on the basis of “I’ve always heard that….” The same goes for making generalizations about coverage and applying “rules of thumb.” Words matter, specifically, the words in the insurance contract. And there are rules of construction and interpretation that must be followed. In the following chapter on “Legal and Contractual Principles,” we’ll explore many of those principles, precepts and practices.
The only antidote to this anecdote is Doctrine #2: RTFP! Read The…Policy!
Thanks to Mike Edwards, CPCU for the connection.
Photo by David Holmes2 
Bill Wilson
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Bill, we tell all our clients, as instructed in our Big I E&O courses, to read their policy. We then cringe when we get the phone call that begins with “I was reading my policy…..” wondering whatever prompted them to do such a crazy thing!
We always enjoy your articles.
The downside to suggesting that insureds read their policies is that they might read their policies! But, as you say, from an E&O standpoint, documenting such inquiries could work in your favor because it’s evidence that they did read the policy and should have asked questions about any provisions they didn’t understand. I wrote an article once about whether it was a good idea to send additional insureds copies of policies or at least the AI endorsement. I cited case law where the court ruled that insureds have an obligation to read the policies, including AIs, if given the opportunity. Depends I’m sure on the jurisdiction.
Can’t wait for your next book! You are a busy man for being “retired”!
I too look forward to your book.
Sure agree there is a lot of folklore in our industry. Sometimes this results from poor training but more often not keeping up with the “whys” we do things. Of course, the failure to read policy language and the inability to analyze fact / claim scenarios are other examples where our collective training seems lacking. Also, faulty assumptions can also interfere with our learning and our ability to make informed decisions.