We’ve received a few questions lately through our Ask an Expert service that motivated this post.
Wait. You don’t know about Ask an Expert? It’s a benefit of the new subscription service through Insurance Journal, called IJPro. You hadn’t heard of IJPro? Take a look.
We received some coverage questions yesterday which are great. If you have a coverage question, send it in. We love that stuff. There’s nothing like digging into policy forms to find the answer. It’s extra cool when the answer is hiding somewhere in the minutiae, like that snake that is hiding in my back yard.
The questions that we received reminded me that sometimes we think about insurance policies like going to the cereal aisle at the grocery store. You can buy Cheerios, or you can buy the store brand of Cheerios, or even the bag Cheerios (you know what I’m talking about). The only real difference is the price.
The problem is that insurance policies just aren’t like that. Two different policies are different. Two editions of the same form are different. Two carriers with identical looking forms are different. The same policy issued in two different states is different. Things that are different are not the same. Things that are similar are not the same.
In light of all of this, let’s establish some ground rules about when we speak about insurance policies, especially when we need to know about coverage or analyzing two different policies.
Don’t ask about “a” policy’s details.
Here’s the question that I get. “Does a homeowners’ policy cover…” If I’m feeling a little snarky, I could answer, “Yes, I believe that a homeowners’ policy somewhere covers…” and leave it at that. There must be at least one policy somewhere that you can get that will cover it. I’m just not sure if the policy you’re asking about covers it.
As insurance people, it’s best that we ask specific questions. The most specific, the better. Let me show you the difference.
GENERAL QUESTION: “Does a homeowners’ policy cover sinkhole loss?”
ANSWER: Maybe. Some do. Some don’t.
MORE SPECIFIC: “Does an ISO HO-3 homeowners’ policy cover sinkhole loss?”
ANSWER: Usually. Depending on the state and the carrier, it may not.
VERY SPECIFIC: “Does this (attached) ISO HO-3 homeowners’ policy issued in Florida cover sinkhole loss?”
ANSWER: Only if endorsed properly. Florida statute requires that homeowners’ policies provide coverage for Catastrophic Ground Cover Collapse (CGCC) and makes sinkhole loss coverage optional. I see the amendatory endorsement that removed sinkhole and added CGCC. I don’t see the sinkhole loss endorsement. This policy doesn’t include sinkhole, but it does include CGCC and your should read that part of the policy to understand it.
Know the difference between an ISO form and a custom form
Here’s a good reminder when it comes to policy forms. Every form publisher has a different numbering convention. ISO uses a specific convention for all of its forms (thankfully), and everyone else seems to use some variation on that convention. Here’s a quick primer on how you can tell an ISO form.
WARNING: It’s possible that some carriers will use the ISO numbering convention for a customized version of the ISO form. Reading the policy helps a lot.
ISO uses a ten-digit letter and number combination to identify forms. It looks generally like this LL ## ## mm yy.
- LL – refers to a two-letter code the represents the line of business (CG, CA, CP, PA, etc.) (e.g. CP = Commercial Property)
- ## ## – refers to a four-number identifier for the form. The first two numbers identify the type of form (00 – coverage form). The second two numbers identify the specific form. (e.g. CP 00 10 = Commercial Property, Building and Business Personal Property Coverage Form)
- mm yy – refers to the month and year of the initial publication of the current edition. It may not be the effective date in all jurisdictions. (e.g. CP 00 10 09 17 = Commercial Property, Building and Building and Business Personal Property Coverage form, Sep 2017 edition)
You need more information about this topic and I recommend that you search for John Eubanks’ great article, “Policy Form Edition Dates and Why They Are Important”.
It you see more than ten digits, or you see more than two letters used, or a combination that you don’t recognize, you’re looking at a custom form belonging to a carrier.
Read the actual policy
There are two thou shalt nots here and one major thou shalt and must.
Thou shalt not rely on your memory. Friend, this is as kindly as I know how to write this, but your memory is unreliable. Where are your keys? Exactly. Do not ever try and remember what you think the policy says. At best, you’ll only remember the last policy that you read six months ago. At worst, you’ll make something up because your brain wants to protect you from looking silly so it’ll make something up.
There are so many policies that you can’t remember them all. I was on a webinar a couple of weeks ago and tried to remember a policy provision off the top of my head. A friend (you know who you are) kindly corrected me. That’s just my latest reminder not to rely on what I think I remember.
Thou shalt not read a policy. I choose my words on purpose. Don’t just grab any policy and read it. You can’t read the carriers’ sample policies. You can’t download and read the policy forms that you can find on the internet. You can’t just grab a file and read that policy. Be very specific.
Thou shalt (and must) read the policy. If you have a question about a specific policy, read that policy. It does your customer no good to read just any policy when they’re asking about their policy. Read it. Read it front to back. Read it with all the attached endorsements and notices. Make a copy that you can write on and make notes right on the policy. Use sticky notes. Write out your questions. Point to different parts of the policy.
Asking for help
There is no shame in asking for help reading policies. We all do it. I can’t tell you how many times I took an insured’s policy to a colleague and asked a question about something I read. Sometimes, in asking a question, I begin to talk out what’s confusing me and work it out myself. I just need a sounding board. A few times, the answer seemed so simple that I was sure that I was wrong, so I asked anyway.
We all ask questions and debate. One of the things that I miss about being an underwriter in an office is gathering around and discussing some finer point of coverage with the team. I like arguing about what the policy is saying. I like when we disagree honestly. I also like being right, so there’s that.
We should be asking each other for help in reading insurance policies. They aren’t easy to read. They’re kind of hard to read. That’s why the customers don’t read them. That’s why some of our peers in the business don’t read them. You know who you are. Read the policy. Read the specific policy that you have questions about. If that doesn’t do it, ask someone else. Show the actual policy that you have questions about.
Remember that insurance policies might be similar, but things that are similar are not the same.
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