(Every Tuesday, we will discuss elements of insurance through the lens of Terms & Conditions. In this article, we go into Bill Wilson’s book, When Words Collide to look at the deeper and more profound elements of policy wording and implications for coverage and claims disputes)
Legendary industry author, consultant and expert witness Don Malecki, CPCU, ARM did not like to answer coverage questions from anyone who had not read the entire policy. He was adamant that, no matter how many times you’ve reviewed a policy form, with each new claim, you must reexamine the facts within the context of the entire policy. This includes the primary coverage form(s), endorsements, and sometimes related documents. Sometimes it requires reviewing policy forms that, at first glance, one might not think are relevant to a claim.
Subsequent contractual agreements such as endorsements may modify the rights of the parties under the original policy form. They may modify the policy provisions or create rights at variance with them:
“An insurance contract, like any other contract, may be modified, after it is made, by the express words of the parties or by their acts evincing a meeting of their minds in agreement to modify its terms upon any particular point.” — De Rossett Hat Co. v. London Lancashire Fire Ins. Co., 134 Tenn. 199, 183 S.W. 720 (1915)
In the last chapter, I told the tale of my experience in getting quotes to have 19 trees removed from my property. One of the bidding tree service companies had a fine ISO CGL policy BUT it included 42 endorsements, two of which pretty much removed coverage for anything they did. Therefore, it is essential that the entire contract as a whole must be considered.
You’ve heard the expression, “It’s not only a good idea, it’s the law.” The following is an example of a statutory requirement that policies contain the entire contract [citation omitted]:
“Every policy of insurance, issued to or for the benefit of any citizen or resident of this state on or after July 1, 1907, by any insurance company or association doing business in this state, except fraternal beneficiary associations and mutual insurance companies or associations operating on the assessment plan, or policies of industrial insurance, shall contain the entire contract of insurance between the parties to the contract, and every such contract so issued shall be held as made in this state and construed solely according to the laws of this state.”
While extrinsic evidence might be admissible in some cases, in general, the insurance contract is viewed as complete and, as such, must be reviewed in its entirety. This is often expressed in the policy itself. For example, to repeat a reference from the Parol Evidence and Extrinsic Evidence section earlier in this chapter, the ISO IL 00 17 Common Conditions form says:
“This policy contains all the agreements between you and us concerning the insurance afforded…This policy’s terms can be amended or waived only by endorsement issued by us and made a part of this policy.”
Tim Wahl, CIC, an agent “who gets it” that I’ve worked with over the years was seeking coverage for a plastic game piece manufacturer. The premium on one of the package quotes he received was much lower than others. When he compared the policy forms, he found many more exclusions in the cheaper package (often the case in the E&S marketplace), including four specific exclusions related to plastic products containing certain types of plastic resins. Needless to say, this prospect’s products contained these resins. The price of this product would have been a bargain for his customer…as long as the customer had no claims involving his products. Once again, before a claim — in fact, before policy inception — is when policy coverages should be determined. This critically important point is mentioned several times in this book and drilled into the reader in the Resolving Insurance Coverage and Claims Disputes chapter. Be like Tim.
<excerpt from When Words Collide – Resolving Insurance Coverage and Claims Disputes p136-138>
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