Source: https://www.norrisinsurance.com/insurance-tips/general-insurance-tips-4
Timestamp: 2020-07-12 18:23:05
Document Index: 329757571

Matched Legal Cases: ['art 1', 'art 2', 'art 1', 'art 2', 'art 1', 'art 1', 'art 2', 'art 1']

Actions of a minor or other entity considered to be legally incompetent
Exceptions exist in order to make fair allowances for permitting an insurance policy to respond to losses when justified by circumstances.
When an insurance company refuses to cover an eligible loss without a valid reason or when an insured refuses to pay for the policy; these are instances of breaking the contract. An insured may also break the contract if he or she either withheld information or intentionally supplied false information. Of course, the information must involve some significant item that would have affected the company's decision to accept the insured. Breaching a contract may allow an insured to sue a company for coverage or allow a company to void the policy it issued.
Whenever policies are not handled in good faith, there are consequences that impact more than just the two parties. Third parties, such as other businesses or persons, may also be harmed by insurance contracts that turn out to be invalid. Modern economies depend upon the role played by insurance contracts. It would be impossible to handle large transactions without a way to protect all parties against possible losses. Further, many parties would not even attempt certain types of transactions without the support of insurance, such as large building projects, major equipment sales, vehicle rentals, and numerous other transactions.
Certainly, there are many times when one party fails to handle their insurance obligations in good faith. However, such instances are the exception. Our economy and standard of living are made possible because most parties deal with each other honestly and we all benefit when that happens.
Duties To Preserve Property – Part 1
Most insurance policies contain specific references to a duty to protect property from further harm. It may be called a Neglect provision or Preservation of Property; regardless, insurance companies rely on their policyholders to comply with the obligation. A policyholder’s duty can be categorized broadly in two areas. First, we’ll discuss aggravating a loss.
Loss Aggravation
In both scenarios a failure to preserve the property after the initial loss created additional damage. However, it is only in the first scenario that the policyholder may suffer a consequence.
See part two of this article for another aspect of this duty, Spoliation of Evidence.
Duties To Preserve Property – Part 2
Part one of this discussion focused on actions that policyholders might take during a loss that could aggravate a loss and possible consequences. There is another, related obligation regarding the handling of property and that’s spoliation of evidence
A policyholder’s duty to protect property extends beyond the occurrence of a loss. The duty may become more important for property involved in a liability claim. Insurers may take adverse action if their rights are significantly harmed (prejudiced) by policy holder decisions.
Example: a theft occurs and valuable property belonging to guests is among the items lost. The policyholders lose documents given to them by their guests that would’ve assisted in establishing the lost property’s value
Example: A home and its contents are severely damaged during a windstorm. The policyholders, in a hurry to set things to order, have a salvage company clean the area and haul away damaged property before the insurer can inspect it.
Actions such as the above may seriously affect an insurer’s ability to adjust losses or defend claims. How? It is because their handling spoiled the ability of the property to serve in either establishing a proper loss amount and/or in the ability to establish liability for a loss. Taking the proper post-loss steps in handling property is an important duty.
If you need more help in understanding your responsibility after a loss, be sure to discuss your concern with an insurance professional.
While storms, diminishing shorelines and their impact are mass events, they are still suffered on, ultimately, an individual level. Therefore, individual decisions are important. In other words, what do you do with regard to the danger of storms? What decisions do you make with regard to property on degrading shores? Some experts have begun to question the sanity and viability of continuing to live in areas which face a near certainty of significant storm activity and eroding shores. We may have reached a point where, rather than trying to deal with rebuilding communities, restoring beach fronts and trying to mitigate damage that we do something extreme….move!
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Emerging and Silent Insurance – Part 1
Insurance, even after centuries of substantially aiding economies to grow and thrive, still maintains a perception that it is conservative and slow to change. That’s a gross simplification. As is the case with any complex situation, it’s a mixture. Insurance tends to be conservative for a variety of reasons, chief among them is regulations.
Insurance companies must comply with rigid state requirements regarding every aspect of their operations. Naturally, the regulatory situation becomes increasingly complex when operations include more than one state. Changes in premiums, coverage forms and rules for handling business are all scrutinized for compliance. No matter how agile or proactive an insurer may wish to be, its regulatory environment places restraints on its operations.
Another factor is that insurance is based upon contractual obligations. Insurers, legally acting as an insurance contract’s Second Party, owe duties to their policyholders (First Party) and, when coverage involves legal liability to others, then financial obligation also exist to others (Third Party) who may have suffered loss or injury caused by policyholders. Maintaining these relationships in a consistent manner is important and the need for stability also creates a pressure to be conservative.
Lawsuits also contribute to insurance’s conservative bent. Disputes often take years to resolve and arguments are often based upon how policy language and processes are interpreted. Once certain elements are established, changes in language and operations introduce uncertainty that may have unwanted financial consequences.
All the above contribute to insurance companies operating both more slowly and deliberately than many other service sectors. However, there are still dynamic elements within a changing regulatory environment, such as standardization of laws, introduction of new laws and the appearance of new sources of loss. Besides reacting to these changes, insurers also make changes due to other important forces such as competition from sectors outside of insurance, technological advances that affect the areas that they insure and technology that affects how it processes business.
Please see part two which discusses two factors that arise out of the ecosystem in which insurance companies operate, emerging and silent insurance.
Emerging and Silent Insurance– Part 2
Part 1 discussed that insurance operates in an environment that contributes to it being a conservative service sector that is somewhat resistant to change. This part is about elements that arise from the other fact, which is that insurance often faces and responds to evolving circumstances.
Insurance companies provide a dizzying array of products that address private and commercial needs for coverage. Along with continuously maintaining traditional protection against age-old sources of loss such as fire, windstorm, weight of ice/snow, collision, theft, vandalism and many others, insurers must also monitor the development of new sources of loss such as the following:
Coverage for Digital Assets
Internet of Things Product Liability
Driverless Vehicles/Deliveries
While insurers attempt to handle such challenges, adjustment is uneven and takes time. A typical arc involves recognition of a newer loss exposure being followed closely by creating exclusions to bar coverage. As such exposures mature, showing patterns of claims, forms or modified exclusions arise that provide limited protection. As time passes, additional experience accumulates and available coverage often becomes broader and, eventually, wider spread.
However, the process of dealing with emerging-to-maturing exposures can create instances of silent coverage. The latter occurs when a given policy neither expressly mentions a source of loss as covered nor does it appear among specific exclusions; therefore a policy is silent. Disputes arise as parties who suffer loss by such exposures will argue that silence equates to coverage. Silent situations once discovered are eventually resolved by including reference to them that results in either deliberate coverage or exclusion.
In any case, the insurance sector, while inherently conservative, constantly faces and addresses change from a variety of sources. Constant communication with an insurance professional is a prudent move for monitoring changes in available insurance protection.
Insurance, War and Terrorism – Part 1
Terrorism and military activity continue to be a major concern to us all; even affecting the, normally, mundane world of insurance. It would be natural to wonder about items such as:
Most policies prohibit coverage for causes of loss that are considered "uninsurable." Not surprisingly, coverage for war is one cause of loss that is excluded. Typically, auto and homeowner policy wording not only excludes war, but any military actions like war such as rebellions, large-scale civil disturbances, and revolutions. Further, coverage is excluded regardless whether the government has formally declared a state of war. On the other hand, acts of terrorism are distinct from war and, as we have learned to our sorrow, involve individuals committing acts against other individuals rather than against governments or military personnel. At one time, losses caused by such acts were covered, but that was when their likelihood of occurring was rare.
Since the danger of terrorist acts has risen, more policies have begun to exclude this cause of loss. However, it is always in your best interest to look at exactly what is stated in your policies. It would also be helpful to contact an insurance professional to discuss any of your concerns in enough detail so that you understand your situation and your coverage needs.
The coverage situation is quite different for policies that cover businesses. Please see part two of this discussion.
Insurance, War and Terrorism – Part 2
Part 1 of our discussion focused on the protection situation for non-commercial risks (homes, personal autos, etc.) The situation is different for commercial property owners. The heightened concern created by major acts of terrorism that has occurred in the 21st Century exposed the need for higher levels of protection from such acts. The private market was very reluctant to consider offering this protection with public assistance. That support was created under The Terrorism Risk Insurance Act (TRIA).
TRIA was enacted in 2002. It made available a level of federally backed reinsurance protection for losses caused by certified acts of terrorism. It did, and still does, apply for all commercial property and casualty lines of business. However, it excludes coverage for Workers Compensation.
Features of TRIA involve the following:
All applicants in eligible lines of insurance must be offered terrorism coverage when requested
Policyholders must be given an endorsement that explains what actions are covered and they must be advised of the coverage’s exact premium
Several types of coverage are excluded under TRIA such as Commercial Auto, Medical Malpractices, National Flood and surety insurance
For a loss event to be covered, it must be certified as terrorism (more on this below)
Consultation between the U.S. Treasury Secretary and the Department of Homeland Security determines whether an event receives terrorism certification. Consultation involves consideration of five guidelines including that the purpose of the event involves violence and results in tangible damage to persons, property or infrastructure. Federal reinsurance coverage is not triggered unless and until the aggregate damage faced by the insurance sector reaches an amount that varies by year, up to the year 2020. In 2016, that amount is $140 million. Further, each insurer must, first, meet a predetermined terrorism act deductible that is based on each company’s premium writings.
The U.S. Government has a formula that allows it to, later, recoup its terrorism reinsurance payments, but the potential amount is capped, depending upon the total amount that the private insurance market has paid for certified terrorism losses.
TRIA has been extended several times and the program is scheduled for termination in 2020. The federal government is, on an ongoing basis, collecting data that, it hopes, will be enough to give the private market enough confidence to provide its own reinsurance market.
The only thing that remains constant over time is change. All forms of insurance policies must deal with change. Most of them must manage how coverage is provided, including responding to developments from significant court cases and changes needed by parties covered by policies. But now, in the U.S., policy forms are facing changes in format and language and these are reflected by actions in various U.S. states. Specifically, different states are providing rules and laws regarding policies being offered in an electronic format and/or in other languages, typically Spanish.
· Insurer must make policies (as well as endorsements and promotional materials) in popular computer formats
· Insurer must exclude any data that makes it possible to identify a policyholder
· The policyholder must be notified when materials are available on-line
· The materials must be accessible throughout the time the information is in effect
· Such materials must be in a format that is approved by a given state
· Policyholders must have a free method of printing such materials
When providing forms in a different language, states again take the lead in setting parameters. The incentive for using policies in other languages is spurred by a desire to offer forms that are more readily understood. Those with little or no proficiency in English are at a serious disadvantage with policies that only appear in that language. Having a policy, as well as endorsements, brochures, etc., available in another language greatly aids the ability to evaluate different coverage options, buy insurance and understand loss situations.
States do have to cope with a particularly important and related issue. How are such policies handled when a loss occurs? Policy wording in English may have significantly different meanings when translated and issued in other languages. Many terms and phrases have special meanings that are recognized by courts. Translated insurance form language may include significantly different interpretations.
For the time being, states and courts handle the above situation by defaulting on the use of the original English version of a given form when they are subject to claims or lawsuits. While this may be confusing, this combined treatment allows non-English speaking policyholders to have a better understanding of their coverage, but still make them subject to the same handling in the courts as is faced by English-speaking policyholders.
There are several ways that Nature is capable of completely hammering us. Winds, floods, hurricanes, tornadoes, and earthquakes are commonly viewed as catastrophes. One source that is garnering greater attention is fire. Yes, fires are typically seen as losses that are localized and affecting individual properties. However, fires can occur on a catastrophic level when they consist of flames that spread very quickly over large areas.
Areas threatened by hurricanes, quakes and storms are assisted by methods of tracking and assessing the danger. Wildfires are now entering the era where fires can be assessed in a similar manner. Currently, wildfire evaluation has more to do with judging area conditions, assessing how temperatures, drought levels, and available fuel sources affect the likelihood of fire. Vulnerability is described as low, moderate, high and extreme. However, while still undergoing study and refinement, wildfires will now be classified after they occur, placed in categories that will help others better prepare a course of action such as when to clear property of possible fuel, take other mitigating action and/or when to decide to vacate property for safe areas.