This is the title of an article of mine published in the Tennessee Bar Journal and a subsequent Bar Association webcast. With the permission of the TBA, I would like to share with you in the next few newsletters. This completes the list of ten (10) items.
Having invested over a half century of my professional career in the Property and Casualty insurance business, the last decade being involved as a consultant and expert witness, I feel an urgency to mention a few areas that can be of help to attorneys.
- Are all application questions of equal significance to underwriters? From decades as an underwriter and later underwriting vice-president of an insurance company writing business in most jurisdictions of the United States, it seems to me that not all questions on an insurance application are of equal significance. Sure, the prospective insurance carrier prepares the application, and must feel that the questions have some underwriting significance. However, whether or not their company should, or will, accept coverage is determined by their underwriters who invariably put different weight of decision on various items. This gets into the legal question of “materiality.” For example, whether or not a prospective insured had a small electrical fire six years ago does not carry the same weight in the decision making process as whether or not the prospective insured is a convicted arsonist and asking for an amount of insurance twice the property’s value!
- What are some special insurance terms that should be understood? Many insurance related terms are peculiar to the Industry…..some attorneys contending that the terms are peculiar to the English language! None-the-less, these unique phrases must be understood as insurance cases are analyzed and processed. In addition to those items discussed in this article, there are several other terms that attorneys need to understand. These include such terms as “occurrence” vs. “claims-made” forms; “double recovery”; “loss of income”; “all risk” vs. “named peril”; “reporting forms”; “audit provisions”; “equity clauses”; “depreciation” vs. “replacement cost”; etc. Access to a hard copy and/or web site dictionary of insurance terms is a must for attorneys and their staff when handling insurance cases. These sources may be enhanced by the use of persons with “hands on” insurance experience.
- What is a “reservation of rights”? Under a Duty-to-Defend policy, insurers are sometimes asked to provide a defense for lawsuits that include both non-covered and covered claims. Insurers usually provide a defense to their insured for the entire lawsuit, pursuant to a “Reservation of Rights” letter. This letter normally seeks reimbursement for defense cost that an insurer pays for claims encompassed within a lawsuit that are determined not to be covered under the policy. The specific provision(s) giving an insurer the privilege of issuing a “Reservation of Rights” letter might vary from policy to policy. Without a “Reservations of Rights” statement, an insurer would normally assume payment of their legal costs and claim payment.
With what might be termed a “disclaimer,” let me mention that these remarks are made with the realization that there are many exceptions to general rules and principles in the Insurance Industry. These thoughts are expressed in generalities, based on my past training and experience, and deal more with “Standard of Care” as well as “Custom and Practice” issues rather statutes and legal precedent.
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Note: Information in these blogs is not intended to replace any legal or financial professional information.