A common theme of the Property Insurance Coverage Blog is to teach policyholders about the ins and outs of their own insurance contract. Before setting up a new iPhone, a customer is required to read through the terms and conditions before accepting them. How often does someone actually read through every word and clause of their terms and conditions? I get it. Long agreements such as terms and conditions and insurance policies are not exactly “fun” to read. But they are important. As a matter of fact, every single word is important.
In his book, When Words Collide: Resolving Insurance Coverage and Claims Disputes, author Bill Wilson describes the “10 Commandments of Policy Interpretation.” These 10 doctrines are vital for anyone—from policyholders to attorneys to adjusters. Understanding these 10 commandments will ensure that you, the policyholder, are ready and knowledgeable if ever faced with a claim situation.
The 10 Doctrines described in When Words Collide are:
- Insurance is NOT a Commodity
- RTFP! (Read the FULL Policy)
- Don’t accept a claim denial as gospel
- The purpose of insurance is to insure
- All parties have a duty of utmost good faith
- Most insurance policies are contracts of adhesion, so insuring agreements are interpreted broadly, exclusions narrowly and ambiguities in favor of the insured
- The burden of proof in determining coverage rests with both parties in the insurance contract
- Exclusions must be clear and conspicuous
- The duty to defend is broader than the duty to indemnify
- Folklore is not a fact1
If there is any one individual’s advice to take in the insurance industry, Bill is a top candidate. After being in the insurance industry for pretty much his entire career, Bill Wilson has seen and worked on both sides of insurance disputes, and can attest to the fact that these doctrines encompass the most common areas of issue he has witnessed throughout his many years in the industry.
While going in-depth on all 10 of these doctrines would take far too long for one single blog post, today I emphasize what I believe is the most important of the commandments: Read. The. Full. Policy.
While this doctrine sounds so simple and obvious, Bill reiterates just how often coverage disputes and questions arise due to one of the parties just simply not reading the policy.
One classic “Read the Full Policy” illustration Bill gives in his book is in the form of the following scenario:
A customer’s car was damaged while at an auto repair shop. The damage to the vehicle was covered under the shop’s garagekeepers liability coverage, but the customer wanted reimbursement for renting a vehicle while the damaged auto was being repaired. The adjuster said only direct damage was covered, not indirect rental car costs. The applicable provisions of the policy said:
We will pay all sums the ‘insured’ legally must pay as damages for ‘loss’ to a ‘customer’s auto’ . . .
‘Loss’ means direct and accidental loss or damage. But for garagekeepers coverage only, ‘loss’ also includes any resulting loss of use2
The adjuster in the above example must have missed the second commandment of policy interpretation basics because he clearly did not read the policy, as the “loss of use” was plainly covered. This one simple strategy of reading the insurance policy, no matter which party you are in the insurance relationship, is vital to a proper conclusion or resolution of an insurance claim. As demonstrated from the example above: words matter.
Keeping these 10 doctrines in mind will almost certainly ensure that you, the policyholder, have a better understanding of your insurance claim, if you are ever to file one. While I only briefly discussed the 2nd commandment, “RTFP,” in this blogpost, I will follow up by diving into the rest of the commandments in future blog posts.
1 Bill Wilson, When Words Collide: Resolving Insurance Coverage and Claim Disputes, 75 (2018).
2 Id. at 78.