Monsters Under the Bed: Insurance Coverage Gaps and Other Invisible Exclusions

By William G. Passannante | November 19, 2012

  • November 28, 2012 at 9:29 am
    George says:
    Well-loved. Like or Dislike:
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    haha…is IJ comment baiting here? I have a feeling us “insurance wonks” disagree with this ESQ’s interpretation of insurance carriers’ intent in resolving claims.

  • November 28, 2012 at 10:04 am
    ExciteBiker says:
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    George, purportedly the IJ ‘might’ be supposedly ‘baiting’ us with this one! ‘Scores of Millions’ was my favorite part…. “Your honor, Four Score, and Seven Million Dollars, Have been Unduly Denied my Client…”

  • November 28, 2012 at 3:30 pm
    bob says:
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    this should have been labled as “very slanted opinion piece” instead of letting us assume it might be a “news article”. sos, IJ must have been testing it’s readers for reactions!

  • November 28, 2012 at 9:59 pm
    James Portelli says:
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    I hope the author does not think that three points are the greatest discovery since sliced bread!

    It is sadly one of the shallowest and ill-founded articles I ever read. More specifically to the three points raised:

    1. Applicable to all points: an insurance policy is not a blank cheque. It is contract with rights and obligations on both parties. Although the principle of utmost good faith (uberrima fides) applies, it does not mean that the client (or his broker) do not have an obligation to understand what they are buying. If there are ambiguities these are decided in favour of client (contra proferentem).

    2. On purported coverage ‘gaps’: This piece seems to allude to a change from an occurrence made to a claims made basis policy. The scenario does not otherwise apply. In the case of a claims made basis policy there are endorsements specifically designed to address the situation that has been raised. Something that a broker should (and would) be able to appropriately advise a client on.

    3. Exhaustion Charade’: The fact that many courts accepted these claims if, when in the slightest doubt, they decide against insurers clearly implies that there is really no argument on this point! (Res ipsa locitur).

    4. Allocation Dodge: This is perhaps the least researched point. What is being suggested by the author is that policies go against the principle of contribution which, in itself is a branch of THE most fundamental principle of insurance: i.e. Indemnity.

    Humbly, I think there is an easy solution to all of the above ‘woes’ : employ a good broker.

    James N. Portelli MSc FCII FIRM
    Chartered Insurance Practitioner

    E-mail: portellijames@gmail.com | Profile:http://ae.linkedin.com/in/jamesportelli
    Blogs: http://www.insuranceguild.wordpress.com | http://portellijames.wordpress.com/author/portellijames/
    ‘Discover Risk’ (CII) Profile:http://www.discoverrisk.co.uk/opinion/view_case_study.aspx?ID=258

    • November 29, 2012 at 1:23 pm
      MrInsBrokerSF says:
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      IJ could’ve gotten a more interesting article from many of us. James – covered it best. Get a good Broker! And if you’re not sure how good a job your Broker has done, hire a consultant to tell you.

      • December 3, 2012 at 2:36 pm
        Douglas in Edinburgh UK says:
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        in the last two years i have been involved in broker e&o claims. in the first the broker acted as a post box failing to highlight a policy warranty that was breached. in another ongoing $2m claim the broker failed to advise material facts of which they were aware to insurers. in the uk, broker e&o claims are increasing….

  • November 29, 2012 at 2:44 am
    Chris Stockton says:
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    responsibilities is corruption of the highest level

  • November 29, 2012 at 8:42 am
    Susan says:
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    There is a very obvious slant to this article, designed to illicit a gutteral response from the general public. While some of the components are factual, it completely misses the mark as to how claims are negotiated and settled as a matter of course. Good faith in dealing with insureds is always paramount in the insurer’s mind, and if it is not, the courts do a very good job of reminding all of their respective responsibilities.

    • November 29, 2012 at 1:16 pm
      MrInsBrokerSF says:
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      There are certainly two sides to three sides to this story, and Mr. Passannante only presented one.
      1> Gaps, Exhaustion of limits, and Allocation of Liabilility are
      real potential problems. Can they be asserted improperly? Yes.
      Do plantiff attorney’s see this more often than brokers?
      Probably, since that’s why they are hired. Do they win more of
      these cases than they lose? I have no idea – we don’t read any
      stats on that in insurance trade press do we?

      2> Agents and Brokers are here to help the unsophisticated client
      deal with these issues – ie: work to avoid them in good faith,
      however, we don’t write the policies, we don’t practice law, and
      we can’t guarantee what a third party insurer will do on a
      future claim.

      3> In forty plus years my impression is that most insurers intend
      to honor their obligations, however, where money is involved,
      there always exists a temptation to find a valid reason to deny
      a claim thereby earning hero points for improving insurer
      profitability. When that happens, rather than going directly
      into full attack mode, many agents/brokers have learned that
      reading the policy yourself, and asking the claims rep if maybe
      something has been overlooked in their denial interpretation,
      often allows them the opportunity to save face, and reverse
      course before litigation is required. In the case where an
      insurer knows they owe the money, and simply plans to use
      wrongful tactics to stall off the inevitable payment, litigation
      is a necessary answer. There’s no news here is there?

      4> Specialty policies have developed out of a growing need to fill
      real coverage gaps in primary policies, because those primary
      insurers honestly don’t want to accept those particular
      exposures. Maybe that’s unfortunate, as those of us who sell
      would prefer a neat package that covers everything, and so would
      our clients, but it’s clearly not practical.

      IMO, Mr. Passannante’s article is really nothing more than a
      peronal advertisement for his law firm made to look like an informative story which it is not.

  • December 3, 2012 at 4:03 pm
    Libby says:
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    I don’t find this article slanted. It is correct in saying there could be major gaps in coverage when changing carriers or putting together a multi-layered program. The insured needs to be educated on what triggers a claim when the coverage is surplus lines or claims-made. Brokers need to spend more due diligence before changing coverage forms or triggers. You can’t just get the best price and call it a day.



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