Insurance Academy

We Could Try to Make Insurance Easier to Read

By Patrick Wraight | May 29, 2019

Insurance policies are hard to read, and I don’t think that they necessarily need to be so.

Some would say that we need to keep policy language intact because the language that is used in many policies has come through many legal cases and the case law seems fairly well established that the intent and execution of the language is set and predictable. This may be true, on the other hand, there’s no predicting how different courts that haven’t already addressed the policy language will interpret it. There’s also no predicting if or when a court will break from established precedent to apply a new meaning to the language that’s already written.

There’s also the fact that policies continue to evolve over time. New exclusions appear. New coverages are created. Refinements to policy language are drifted to clarify what the intent of the company is. As these new and changed policy provisions are published, we now have new policy language that hasn’t been tested by courts. It may be based on other tested and tried policy language, but it isn’t the same.

I also think that you cannot totally abandon the policies as they are written today for a simplified, watered down, “simpler” policy. As the old saying goes, you can’t throw the baby out with the bath water. (Please note, that no babies or bath water were harmed in the writing of this blog.)

In an attempt to make the liability exclusions simpler to read, here are the exclusions that appear to apply to liability claims in Three.

We do not cover any occurrence(s) that start or take place outside the policy period on the Summary. To be covered by any of this policy’s Coverages, the damage, liability, or injury must be caused by or arise from an occurrence during the policy period on the Summary. For any claims that we do not cover, we will not provide legal counsel to defend those claims.

We do not cover any damage to property (or Business Interruption), nor any claim made against your business, that is caused by pollution, asbestos, or a nuclear event. Pollution means damage caused by the spreading or escape or presence of any contaminant (whether it is solid, liquid or gas), including chemicals and waste. Asbestos means the presence of escape of any asbestos at all. Nuclear means nuclear reaction or radiation or radioactive contamination, however caused.

For liability claims, we do not cover claims based on (i) damage or occurrences that were expected or intended (in other words, it was not accidental; (ii) a contract; (iii) warranty claims, or (iv) any promise of financial performance or return.

In 182 words (yes, I had Word count them), Three covers several exclusions in the ISO CGL coverage form (CG 00 01 04 13). Rather than go through all of the exclusions on the CG 00 01, let’s look at a specific exclusion that illustrates how shortening the policy may expand an exclusion.

From ISO CG 00 01:

Expected or Intended Injury

“Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.

From Three:

For liability claims, we do not cover claims based on (i) damage or occurrences that were expect or intended (in other words, it was not accidental; …)

I agree that the ISO language is clunky. It’s not exactly how I would write it. However, what’s in Three neglects a legitimate issue that a business might face. Many retail businesses have a policy that requires employees to comply with criminals in order to get them out of the store, thereby protecting life and property. It is still possible that an employee in any business might take it upon themselves to use force to injure someone that has put life or property in peril. In doing so, the employee puts the business at risk of a claim for bodily injury from someone who meant to do harm themselves.

Let’s see if we can rewrite this and make it clearer and easier to read without sacrificing coverage for a potential exposure.

Damages you should expect (PEP – Patrick Experimental Policy)

Any “bodily injury” or “property damage” that an insured expects to happen, unless that insured is acting (with or without your authority) to protect life or property.

That meets my criteria. It looks easier to read and provides the exception for injuries that could happen when taking actions to protect life and property.

It would be better for consumers if their insurance contracts were easier for them to read. That still wouldn’t guarantee that they would read them, but at least we could get rid of the excuse that they are just too hard.

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at pwraight@ijacademy.com.

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