Duty (and Opportunity) to Read an Insurance Policy

This article originally published on Bill Wilson’s awesome Insurance Commentary. Republished here with the author’s permission.

Who reads rental agreements at the counter when renting a car? Pretty much no one. Who reads 78-page software or phone app licensing agreements? Almost certainly no one. Who reads insurance policies? Virtually no insureds and far too few insurance professionals like agents, underwriters, and adjusters. Why? In the case of insureds, one reason might be that the actual policy forms are not provided for days or weeks after coverage is bound. A presumption of an insured might be that, if the insurer doesn’t see a need for the insured to read the policy before entering into the insurance contract and perhaps weeks afterwards, is there really any need to read it when received? Would whether or not an insured reads the policy make any difference in how a claim is resolved?


Opportunity to Read the Policy

Three times in the last few years, I’ve conducted research on the danger of purchasing insurance online. Most recently, it involved getting online quotes for auto and homeowners insurance directly from an insurer’s website or through several of many websites that allow you to get multiple premium quotes. In each instance, I communicated through the website or via email, asking for a copy of the insurance contract (i.e., policy forms) to review in order to make a purchasing decision. In every single instance, as was my experience in my prior two experiments, the insurer refused to give me a copy of the policy forms.

Can you think of any other type of written contract you enter into (financing or leasing an auto, buying or renting a home or apartment, etc.) where the party that wrote the contract REFUSED to allow you to read it before signing? For years I have had a standing $100 offer to the first person who can explain this rationale in a reasonable way. This bizarre approach is dangerous in many ways, the most important one for the purpose of this book being that it conditions consumers (along with incessant price-focused industry advertising) to believe that insurance is a commodity distinguished only by price. By the time you finish this book, we will have dispelled that dangerous myth.

Each door is a different policy, but all you can see until after you sign is the price!

What do the courts have to say about the ability of insurers to enforce exclusionary or restrictive policy provisions if the insured has never been given the opportunity to read the policy? In one case, Miller v. Safeco Ins. Co. of America, 683 F. 3d 805 (U.S. Court of Appeals, 7th District, 2012), the court said the “…insurer may not deny coverage based on an exclusion in the policy.” In its decision, it explained that an insurer should not be able to accept a premium “…and then deny liability based on an exclusion of which the insured was not aware because the insurance company had not informed him or her of the exclusion or given him or her the means to ascertain its existence.”

In the state of Wisconsin, other cases include Kozlik v. Gulf ins. Co., 268 Wis.2d 491, 673 N.W.2d 343, 348 (Wis. Ct. App., 2003) and Gross v. Lloyds of London Ins. Co., 121 Wis.2d 78, 358 N.W.2d 266, 271 (Wis. Ct. App., 1984). The Kozlik case also references decisions in Alabama, Florida, Kentucky, Michigan, North Dakota, Utah, and Washington, but I have not done an exhaustive review to determine how widespread this position actually is in the judiciary.

To answer a prior question, would an insured reading or not reading the policy prior to a claim make any difference in how that claim is resolved? Probably not. However, it might make a BIG difference in whether an insured engages in certain activities, purchases (and uses) certain property, etc. Knowing the likelihood and adequacy of coverage, whether learned by reading the policy or asking a representative of the insurer, is a critical aid to decision making that involves the assumption of risk.


Duty to Read the Policy

What do the courts say about an insured’s responsibility to read the policy? As part of a decade-long project on insurance agents’ errors and omissions (E&O) loss control, I researched and monitored case law dealing with an insured’s duty to read insurance policies. Over that period, the case law ran about 50/50 as to whether insureds were responsible to read. In many cases that held that the insured was not responsible, the logic of the court was that, even if they read it, they were unlikely to understand it. Rather than print pages of case law on this subject, I’d simply direct you to the often-cited West Virginia Supreme Court “Broadnax” case that discusses this issue and links to other cases (e.g., Kelly v. Painter) that link to other cases addressing an insured’s obligation to read the insurance contract.

The bigger issue, in the context of this book, is whether those in the insurance industry ¾ agents, brokers, underwriters, adjusters, consultants, educators, and others ¾ have an obligation to read the policies they sell, service, underwrite, adjust, and consult and educate on. The obvious response to that question is, “Duh, of course they do.” The reality, though, is that far, far too many do not. I base that contention on a career spanning the past four decades where I’ve worked with many hundreds (if not thousands) agents on literally tens of thousands of coverage and claims issues.

There are many outstanding P&C insurance agents in the industry. These are people with an historical perspective of the industry, that understand that our industry’s primary mission is to assist consumers and organizations in minimizing their exposure to serious or catastrophic financial loss. These are men and women who engage in life-long, quality education and abide by the highest professional and ethical standards. They read and understand the insurance policies they sell and service. Sadly, they represent a minority of agents. There are far too many who:

  • Don’t read policy forms because either they don’t care (apathy or price focus) or they don’t think there’s really any difference (the “Insurance is a Commodity” myth);
  • Can’t read policy forms (due to functional illiteracy?);
  • Read but can’t or don’t understand policy forms;
  • Read and THINK they understand policy forms but are not adequately tested by traditional educational and training approaches; or
  • Read and perhaps understand policy forms but can’t apply them to real-life coverage or claims scenarios.

By far, the worst class of agent is the one that doesn’t read the forms they sell or service. In many cases, they simply enter information into a comparative rating system that spits out a list of insurers and premiums with a total disregard to the differences in coverages between the products and the standards of service provided by the insurers. Worse are those that are simply apathetic and likely working in the wrong industry:

“The fact you don’t know

“Is enough of a curse;

“Not to want to know

“Is a fate that’s much worse.”  – Rolf B. White

These agents offer little more than a professional liability (E&O) insurance backstop for their incompetence compared to the “caveat emptor” do-it-yourself web sites that provide the same type of service. Why don’t they read the policy forms they sell? Many share the mistaken consumer view that insurance is a commodity, that all auto or renters or homeowners policies are essentially the same. As we will discover in this book, that is far from the truth. Others imply don’t care and their apathy imperils the financial solvency of individuals and families.

You might ask, how do I know this? Again, from the tens of thousands of questions I’ve received from agents, I can tell by the very nature of their questions. For example, the following are all real questions:

  • I’ve always heard that insurers must provide 60 days notice of policy nonrenewal. Is that correct?”
  • “What is the rule of thumb for cancelling a homeowners policy?”
  • “Does ‘an auto policy’ cover….”
  • “Does ‘a CGL policy” cover….”
  • “Does ‘a’ renter’s/D&O/umbrella/etc. policy cover….”

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, “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.

Cancellation and nonrenewal of insurance contracts is something always addressed by insurance policies, often based on permissible reasons and timing prescribed by statutes. When it comes to policy rights, there is no “rule of thumb” or generalization based on hearsay. It’s impossible to answer coverage questions based on “an” auto policy or “a” CGL policy. To answer coverage questions and resolve claims, one must read and interpret the exact language in the insurance contract in question.


This article is an excerpt from Bill’s upcoming book When Words Collide: Resolving Insurance Claims and Coverage Disputes, published by Insurance Nerds which is now available for pre-order and will ship out May 15th!

About Bill Wilson

William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of InsuranceCommentary.com. He retired from the Independent Insurance Agents & Brokers of America in December 2016 where he served as Assoc. VP of Education and Research and was the founder and director of the Big “I” Virtual University for over 17 years. He is the former Director of Education & Technical Affairs for the Insurors of Tennessee and, prior to that time, he was employed by Insurance Services Office, Inc. He is a graduate of the Illinois Institute of Technology with a B.S. degree in Fire Protection & Safety Engineering. Bill was a licensed insurance and surplus lines agent, and his professional affiliations have included past president of the Middle Tennessee Chapter of CPCU, member of the board of directors of the national CPCU society, PMLG of the Honorable Order of Blue Goose, International, member of the Independent Insurance Agents & Brokers of America (IIABA) National Education Committee, member of the Certified Insurance Service Representative (CISR) National Advisory Committee, member of the National Underwriter FC&S editorial board, member of the Society of Insurance Trainers and Educators (SITE) and its SITE Journal editorial committee, member of the National Writers Association, chairman of the Tennessee Insurance Commissioner’s Education Advisory Committee, member of the Middle Tennessee State University Insurance Liaison Committee, and member of the Nashville State Technical Institute’s Business Management Advisory Committee. He has served as a trainer and speaker for various organizations, including the Independent Insurance Agents & Brokers of America and 43 of its state affiliates, the CPCU Society national convention and chapter programs, the National Association of Insurance Women (NAIW), the Southern Agents Conference (SAC), the Risk & Insurance Managers Society (RIMS), the International Risk Management Institute (IRMI), and the Society of Risk Management Consultants (SRMC). Bill has conducted hundreds of technical seminars, workshops and convention presentations—from Hawaii to Maine and Alaska to Florida—as well as programs on time management, presentation and public speaking skills, seminar development, and many others. He has been the top-rated presenter at several CPCU National Conventions and his programs are always highly rated by attendees. He has presented seminars or webinars to as many as 5,000 attendees in a single session. He was the recipient of the IIABA L.P. McCord National Education Award for having the #1 ranked state insurance education program in America and has won six other national education awards, including the George M. Gottheimer Memorial Award which is presented periodically to a CPCU Society member who has made an outstanding contribution to the field of insurance education, risk management or insurance consulting and, most recently, the Jeff Yates Lifetime Achievement Award which is the IIABA’s highest honor for nonagents. Bill has researched, developed, written, and published dozens of technical articles, manuals and CDs/audio tapes, and has authored articles in business and industry trade periodicals such as Presentations magazine, American Agent & Broker magazine, Independent Agent magazine, Tennessee Insuror magazine, Tennessee Business magazine, the CPCU Journal, CPCU Interest Group newsletters, and the SITE Journal. He has been quoted as an expert in a number of mainstream publications, including Readers Digest, Kiplinger’s, and Money magazines and the Wall Street Journal, and he has been cited as an expert resource/interviewee for local television and radio media. He has also served as an expert witness in litigation. According to Nashville NBC television affiliate WSMV, “Bill Wilson is an expert when it comes to insurance.” Dr. William T. Hold, president of the Society of Certified Insurance Counselors in Austin, Texas has said that, “Bill Wilson is recognized by his peers as one of the premier insurance educators in America.” Bob Rusbuldt, CEO of the Independent Insurance Agents & Brokers of America says, “Bill Wilson is the nation’s foremost leading expert on form, coverage, and technical issues.” Bill now blogs on insurance industry issues at InsuranceCommentary.com and delivers keynote presentations in conjunction with his consulting practice. He is also working on several book projects in addition to playing lead guitar with the band The Old Dogs. His first insurance book, tentatively titled “When Words Collide: Resolving Insurance Coverage and Claims Disputes,” is scheduled for publication in late spring or summer 2018.

3 thoughts on “Duty (and Opportunity) to Read an Insurance Policy”

  1. Cannot wait to read his book, and the statement on agents not reading policy is so true I teach CISR class and not one agent in any class has ever read the policy they are selling when I ask that question and even when I tell them it is written on a fifth grade level reading scale

  2. The article discusses the bizarre nature of insurance contracts in that most insurers will not let you review their policy forms prior to the purchase. I cite some case law from states that have prohibited insurers from enforcing exclusionary provisions in those policies. After reading the article, an attorney sent me this information for Florida:

    See Figueroa v. U.S. Sec. Ins. Co., 664 So. 2d 1130 (Fla. 3rd DCA 1995) (Reversing summary judgment for the insurer for insureds failure to comply with policy condition, because insurer failed to comply with requests for a copy of the policy which set forth condition); United Auto. Ins. Co. v. Rousseau, 682 So. 2d 1229, 1229 (Fla. 4th DCA 1996) (Rejecting insurer’s argument it was entitled to directed verdict on failure to comply with conditions precedent, where insurer failed to timely comply with providing a copy of the policy).


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