“It is my view that this court could, and should, when such an ambiguous policy is before it, hold without equivocation that the provisions which are confusing and ambiguous as to the liability covered will be resolved in favor of the insured. If a few such forthright decisions were rendered by this court in this field it would not be long before insurance policies were more clearly and understandably written to express the true intent of the parties and there would be less litigation involving insurance policies.” — Geddes & Smith, Inc. v. St. Paul Mercury Indem. Co., 51 Cal. 2d 558, 47 Cal. Rptr. 564, 334 P.2d 881 (1959) [emphasis added]
Needless to say, the findings of ambiguity in thousands of court cases since 1959 have not resulted in less litigation. This lead me to write the following article for a recent edition of the CPCU CLEW newsletter that focused on issues related to successful litigation on the part of insurance consultants, expert witnesses, and attorneys. However, unlike most of the other articles, mine focused on avoiding litigation altogether, a point I stress in my recently published book.
No one really wants to go to court to decide an insurance coverage issue. That is evidenced by the tiny fraction of insurance claims that are litigated to final judgment. Insureds don’t want to go to court because of the time, uncertainty, and stress involved in what could take several years to resolve. Insurers don’t want to go to court because of the expense and, in the case of alleged ambiguities, the potential impact of adverse decisions on past and future claims. Policyholder attorneys may not be interested in low-value claims where the contingencies involved do not make good business sense.
The best course of action for all involved is to equitably resolve claim disputes without litigation, at least beyond declaratory or summary judgment actions if absolutely necessary. In May 2018, I published a book titled “When Words Collide: Resolving Insurance Coverage and Claims Disputes.” As illustrated throughout the book, the best way to avoid coverage and claims disputes is to prevent them. This involves assisting the customer in exposure analysis to identify the likely causes of loss, selecting the right package of insurance products (and/or risk management techniques) to minimize the likelihood of an uncovered loss, and discussing questionable policy provisions with the insured and, if necessary, the insurer. For example, consider this agent inquiry:
“I have a coverage question about boat docks that has been answered inconsistently by several insurers even though the language is identical in their ISO commercial property policies. Included under Property Not Covered are ‘Bulkheads, pilings, piers, wharves or docks.’ We believe this to mean permanent, non-removable docks. However, in Minnesota, we have many portable docks that are removed in the winter. Some insurers consider these to be personal property not real property, while others don’t. According to some insurers, the exclusion applies to buildings and structures, not personal property, but others say it doesn’t matter. Who is correct?”
This is a case where we could argue, following a claim, a legal principle called noscitur a sociis that is discussed extensively in the book or apply other logic to determine whether the exclusionary language applies. But there’s no need to do that nor, if an alternative exists, should we wait until claim time to resolve a coverage issue. An Insurance Services Office, Inc. endorsement exists called Additional Property Coverage (ISO form CP 14 10) which says:
“The following is withdrawn from Property Not Covered and added to Covered Property….”
In other words, you define the class of property before a claim occurs and insure it so there is no need to resolve anything at claim time other than perhaps value.
Another example is whether an auto rented by an employee in his or her own name on a business trip creates a Symbol 8 or Symbol 9 commercial auto exposure. The importance of this issue is that only Symbol 8 is normally used to cover physical damage to nonowned autos. The answer to this question lies in the ISO CA 20 54 – Employee Hired Auto form. This endorsement effectively establishes that this is a Symbol 8 exposure (making physical damage coverage available) and that coverage provided by the CA 00 01 Business Auto Coverage Form is primary (a good thing since the employee’s own personal auto policy might otherwise become involved in the claim). In this case, we’re using a readily available (and FREE) endorsements to resolve a potential claim dispute under two different policies.
So, how can you dramatically improve your litigation success? Easy…don’t litigate. Resolve the coverage issue before a claim arises.
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The complete way to resolve insurance coverage and claims disputes:
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