Glossary of Terms

The definition of accident begins with the generic reference to an unanticipated event. Dep’t of Evironmental Protection v. Cumerland coal Res., LP, 628 Pa. 17 (2014). An accident is a “ ‘sudden, fortuitous mischance, unexpected, out of the ordinary, and injurious in impact.” Leary v. New York City Employees’ Retirement System, 872 N.Y.S.2d 554, 556 (2009). “Accidental” in an insurance policy typically means “unintended and unexpected by the insured.” MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co., 187 Cal.App.4th 766 (2010); quoting American Alternative Ins. Corp. v. Superior Court, 135 Cal.App.4th 1239, 1249 (2006) . “Accidental means ‘arising from extrinsic causes, occurring unexpectedly or by chance, or happening without intent or through carelessness’ ”; thus, “purposeful” conduct is not “an unintentional, unexpected, chance occurrence” under a policy. St. Paul Fire & Marine Ins. Co. v. Superior Court, 161 Cal.App.3d 1199, 1202 (1984). Accordingly, “[a]n accident … is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage.” Merced Mutual Ins. Co. v. Mendez, 213 Cal.App.3d 41, 50 (1989). Moreover, “an injury-producing event is not an ‘accident’ within the policy’s coverage language when all of the acts, the manner in which they were done, and the objective accomplished occurred as intended by the actor.” Delgado v. Interinsurance Exchange of Automobile Club of Southern California, 47 Cal.4th 302, 311–12 (2009).

Replacement cost less depreciation equals the Actual Cash Value. This is typically the aggregate amount the insurer will not surpass for indemnification at the time of damage or loss of insured property.

As used in a property insurance policy, the phrase “actual cash value” is a limitation on the amount of recovery for the protection of the insurer and not a substantive measure of damages. Lee R. Russ & Thomas F. Segalla, 12 Couch on Insurance 3d § 175:26 (1998). Most often, actual cash value is construed to mean replacement cost minus depreciation. LaBrier v. State Farm Fire & Cas. Co., 147 F.Supp.3d 839 (W.D. Mo. 2015). Where the policy does not include a specific definition, it has been noted that there is a priority of rules to determine actual cash value as follows, (1) where market value is easily determined, actual cash value is market value, (2) if there is no market value, replacement or reproduction cost may be used, (3) failing the other two tests, any evidence tending to formulate a correct estimate of value may be used. Olson v. Le Mars Mut. Ins. Co. of Iowa, 269 Neb. 800 (2005).

A business professional who analyzes probabilities of risk using statistics to calculate insurance risks, premiums, dividends and other applicable insurance industry standards.

A business professional whose duty is to the hiring entity or person for which the professional assesses loss or damages and recommends settlement options based on the estimate and insurance policy(ies) held.

When interpreting an insurance policy, unclear or vague concepts should be read in accordance with the reasonable expectations of the purchaser and construed in favor of the insured.

Ambiguity does not arise simply because the parties offer conflicting interpretations; rather, ambiguity exists only when the contract is susceptible of two or more reasonable interpretations. Essex Ins. Co. v. Eldridge Land, L.L.C., 442 S.W.3d 366 (Tex. App. 14th 2010). Usually, if language in an insurance policy is deemed susceptible to more than one reasonable interpretation, the reasonable construction most favorable to the insured will be imposed.  Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991). Consequently, ambiguity in an insurance policy is construed “strictly against the insurer and liberally in favor of the insured.” Essex Ins. Co. v. Eldridge Land, L.L.C., 442 S.W.3d 366 (2010). See Vardanyan v. AMCO Ins. Co., 243 Cal.App.4th 779 (2015) (“Any ambiguous terms are resolved in the insureds’ favor, consistent with the insureds’ reasonable expectations”).

A policy exclusion of losses where a combination of covered and uncovered causes is to blame for the event. This exclusion applies to simultaneous perils or when a peril, not covered by the policy, is a factor in the chain of events causing a loss that would otherwise be covered.

This clause typically excludes coverage entirely for damage caused by the combination of an excluded loss, such as water damage, and a covered loss, such as wind damage. Insurance companies started putting anticoncurrent-causation clauses in their policies in response to concurrent-causation controversies. Concurrent-causation controversies arise where more than one cause contributes to a loss, some of which are covered and some of which are excluded. Bozek v. Erie Ins. Group, 46 N.E.3d 362 (Il. App. 2d. 2015).

Many coverage cases have sought to determine, in the absence of specific policy language, exactly how substantial or sufficient a given causal nexus needs to be in order to provide coverage. Id. at 31. There are four basic stops on the causal spectrum of insurance coverage: (1) most broadly, but-for or minimally sufficient causation, providing coverage if a covered cause contributes to the loss, regardless of its dominance or order in a chain of events; (2) in the middle, efficient or dominant proximate causation, providing coverage “if a risk of loss that is specifically insured against in the insurance policy sets in motion, in an unbroken causal sequence, the events that cause the ultimate loss, even though the immediate cause in the chain of causation is an excluded cause,” or if it is simply the dominant cause; (3) more narrowly, immediate causation, providing coverage only where the covered cause is the last, immediate cause in the chain of causation; and (4) most narrowly, regardless of order, if any excluded cause contributes to the loss, there is no coverage. Requirements in Tort and Insurance Law Practice: Demystifying Some Legal Causation “Riddles,” 43 Tort Trial & Ins. Prac. L.J. 1, 22-27 (2007).

In practice, the immediate-cause rule can result in claim denials that are contrary to the intent and reasonable expectations of the contracting parties. Id. at 24. As such, the majority of jurisdictions now favor the middle-ground, efficient-or-dominant-proximate-cause rule. Only a minority of jurisdictions favor the broad, but-for-causation rule. Bozek v. Erie Ins. Group, 46 N.E.3d at 368.

A fraudulent, negligent, incomplete or accidental misstatement that occurred during the application process. 

Under Illinois law, an application for insurance is a statement of something as a fact which is untrue and affects the risk undertaken by the insurer; incomplete answers or a failure to disclose material information on an application for insurance may constitute a misrepresentation when the omission prevents the insurer from adequately assessing the risk involved. Western World Ins. Co. v. Majercak, 490 F.Supp.2d 937 (N.D. Ill. 2007). “Incomplete answers or failure to disclose material information on an application for insurance may constitute a misrepresentation when the omission prevents the insurer from adequately assessing the risk involved.” Green v. Massachusetts Cas. Co., 269 B.R. 782 (N.D. Ill. 2001).

“[T]he misrepresentation, whether it be accomplished by stating facts or withholding facts, need not be made with intent to deceive if it materially affects the risk, nor need the misrepresentation be one with regard to a matter upon which a claim is later predicated.” Unger v. Metropolitan Life Ins. Co., 103 Ill.App.2d 150, (1968). Despite harsh results that may ensue, courts have held that insurers can cancel the policy and deny benefits on the basis of their insured’s material representations.

While courts regret any hardship that may be caused  by way of the arguably harsh results, such misrepresentations provide a sufficient basis under the law to justify an inurer’s decision to rescind. See Jackson v. Hartford Life and Annuity Ins. Co., 201 F.Supp.2d 506 (2002). “Because Gray made a material misrepresentation with respect to the $100,000 term rider on Jackson’s policy, Hartford was within its rights to cancel the policy and deny benefits to Jackson.” Id. at 516. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with application misrepresentation. The information contained herein shall not be taken or construed as legal advice.

An Insurance Dispute Resolution process contained in most property insurance policies in which the value of loss sustained under the insured’s policy is determined by two impartial, disinterested parties and an umpire.

In the insurance context, appraisal is used to determine the amount of the loss sustained under a property insurance policy. Couch, Insurance 3d. § 209:4 Purpose and Types of Arbitration. 

In regards to appraiser’s qualifications, a minority opinion based on the plain meaning of the word “impartial,” has emerged, as some courts are holding that the policy requires the appraisers to be unbiased, disinterested, and unswayed by personal interest. Following this interpretation, appraisers must not favor one side more than another, so they may not advocate for either party. Owners Ins. v. Dakota Station II Condo. Ass’n, 443 P.3d 47 (Colo. 2019).

An appraisal award made under the terms of an insurance policy is binding and enforceable, and every reasonable presumption will be indulged to sustain it. Pounds v. Libery Lloyds of Texas Ins. Co., 528 S.W.3d 222 (Tx. Ct. App. 2017). 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with appraisal. The information contained herein shall not be taken or construed as legal advice.

A binding dispute resolution approach whereby neutral persons with no interest in the outcome referee the dispute. It is often a cheaper alternative to litigation.

The object of arbitration is the final disposition of differences between parties in a faster, less expensive, more expeditious, and perhaps less formal manner than is available in ordinary court proceedings. There are two different forms of arbitration: private (also known as “contractual”), and judicial.

In contractual arbitration, the arbitrator is not necessarily a judge or government official. Because the arbitrator’s power over the parties stems from his appointment, it follows that the parties can fashion the arbitration as they wish. For example, in a contractual arbitration the parties may agree to limit the issues to be arbitrated. It is also the case that in a private arbitration, discovery is more limited, and evidentiary rules more relaxed than in judicial arbitration. Couch – Insurance 3d. § 209:4.

Judicial arbitration is distinguished by the fact that the arbitrator is a judge or government official whose decision is binding only if the parties make it binding. Where the parties do not agree to be bound by the arbiter’s decision, they have a right to a trial de novo. Couch – Insurance 3d. § 209:4.

The decision of the arbitrators is called the “award.” It is binding on the parties to the arbitration as to all matters properly submitted and properly investigated by the arbitrators. The award is enforced as an ordinary contract at common law, by a decree of specific performance, or, under the statutes of many states, the award may be entered summarily as a judgment and enforced as any other judgment. Couch – Insurance 3d. § 209:4.

Intentionally damaging property by the use of fire.

In the criminal context, the crime of arson involves first degree arson and second degree arson. First degree arson involves: (1) the willful and malicious burning (2) of the dwelling (i.e., inhabited) house of another; (3) which is occupied at the time of the burning. The elements of second-degree arson are: (1) the willful and malicious burning (2) of the dwelling (i.e., inhabited) house of another; (3) which is unoccupied at the time of the burning. State v. Scott, 150 N.C.App. 442 (2002).

The typical Homeowner’s insurance policy excludes coverage for intentional loss, meaning, “any loss arising out of any act an “insured” commits or conspires to commit with the intent to cause a loss. In the event of such loss, no “insured” is enti- tled to coverage, even “insureds” who did not commit or conspire to commit the act causing the loss.” HO 03. Arson would therefore fall under this exclusion.

Courts have also handled arson within the policy’s vacancy exclusion, which typically excludes from all-risk coverage to the structure losses caused by “intentional act, vandalism and malicious mischief” if structure had been vacant or unoccupied for more than 30 days prior to loss. See MDW Enterprises, Inc. v. CAN Ins. Co., 4 A.D.3d 338 (N.Y. App. Div. 2004). “This provision includes included “arson,” even if the policy provided named perils coverage for loss to personal property caused by“fire or lightning” because the fire was set after it had been vacant for more than 30 days prior to fire.” Id. at 340.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with arson. The information contained herein shall not be taken or construed as legal advice. 

An agreement between the insured and a third party. This contract grants the rights or remunerations of the policy to the third party.

Often defined as inadequate fulfillment of contractual obligations done willfully or deceitfully by the insurer. This can occur when there is a conscious effort to do wrong.

Under Oklahoma law, “an insurer has an implied duty to deal fairly and act in good faith with its insured.” Christian v. Am. Home Assurance Co., 577 P.2d 899, 904 (Okla.1977). Violation of this duty gives rise to an action in tort. Id. “The essence of the tort of bad faith, as it is recognized in Oklahoma, is the unreasonableness of the insurer’s actions.” Conti v. Republic Underwriters Ins. Co., 782 P.2d 1357, 1360 (Okla.1989). The Oklahoma Supreme Court and the Tenth Circuit have made clear that an insurer does not subject itself to a claim of bad faith merely by disputing coverage. “The insurer does not breach the duty of good faith by refusing to pay a claim or by litigating a dispute with its insured if there is a ‘legitimate dispute’ as to coverage or amount of the claim, and the insurer’s position is ‘reasonable and legitimate.’ ” Barre v. State Farm Fire and Cas. Co. United States District Court, 982 F.Supp.2d 1267 (N.D. Okla. 2013). 

Under Alabama law, the tort of bad-faith refusal to pay a first party claim has four elements—(a) a breach of insurance contract, (b) the refusal to pay claim, (c) the absence of arguable reason, (d) the insurer’s knowledge of such absence—with a conditional fifth element in the event of an abnormal bad-faith refusal to pay a claim: “(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer’s intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.” National Sec. Fire & Cas. Co. v. Bowen, 417 So.2d 179 (Ala. 1982).

Regardless of whether the claim is a bad-faith refusal to pay or a bad-faith refusal to investigate, the tort of bad faith requires proof of the third element, absence of legitimate reason for denial. State Farm Fire & Cas. Co. v. Brechbill, 144 So.3d 248 (Ala. 2013). “Of course, if a lawful basis for denial actually exists, the insurer, as a matter of law, cannot be held liable in an action based upon the tort of bad faith.” Gulf Atlantic Life Ins. Co. v. Barnes, 405 So.2d 916, 924 (Ala. 1981). 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with bad faith claims. The information contained herein shall not be taken or construed as legal advice.

The individual who receives payment or advantage(s) from a life insurance policy, a will, annuity, trust or other written contract. 

Most courts have held that if a life insurance policy reserves to the insured the right to change the beneficiary, the beneficiary first designated does not take a vested interest, but has only an expectancy during the life of the insured, contingent upon being the beneficiary at the time of the insured’s death. Kats v. Ohio Nat. Bank, 191 N.E. 782 (Ohio 1937). “If, however, no change is made during the life of the insured, the interest of the beneficiary designated becomes vested on insured’s death.” 7 Cooley’s Briefs on Insurance, (2d) 6409.

Generally, it refers to the property and all of its contents as one, instead of accounting for each separate entity’s cash value.

The middleman between the insurer and the insured. This person obtains commissions from the sale and service of insurance policies. These individuals are not confined to selling policies for a specific company. However, commissions are typically paid by the company with which the sale was made.

Property insurance that protects the financial interests of a person or organization while their building or structure is under construction with the potential to suffer a multitude of losses or damages covered in the policy.

“Builder’s risk” insurance policies are designed to protect insureds against damage and loss to work in progress before the contract work is finally accepted and delivered to the owner. Most modern builder’s risk policies are so-called “all-risk” policies. For this reason, all physical loss and damage to the contract work during the contract period is covered, unless expressly excluded by the builder’s risk policy.

In addition to the costs of repairing damaged work, builder’s risk policies also typically cover debris removal and clean up expenses, unmitigated cessation of work costs for field,and home office expenses, expenses incurred to expedite repairs and, in the case of flood, dewatering expenses. A developer who obtains a construction loan from a bank may be required to maintain builder’s risk insurance, i.e. a construction policy, on the property and to identify the bank, and its successors and assigns, as loss payee. Travelers Property Casualty Company of America v. Superior Court, 215 Cal. App. 4th 561, 565, (2d Dist. 2013).

A builder’s risk policy does not contain liability insurance coverage. Id. A builder’s risk policy also normally contains a vacancy exclusion clause, but expressly excepts out property under construction. Id.

Upon completion of a construction project such as condominium complex, it is advisable for a contractor to provide commercial general liability coverage for the homeowner’s association. The general liability coverage will have coverages and exclusions that differ from the first party builder’s risk policy. Such differences include: (a) The policy will be an occurrence-based commercial general liability policy; (b) Under first party coverages contained in the general liability policy, theft and vandalism provisions will not apply where the property has been “vacant” for more than 60 days before the loss or damage occurs. See Standard Fire Ins. Co. v. Spectrum Community Ass’n, 141 Cal. App. 4th 1117 (2006).

The responsibility to show causation by one of the competing parties. The insured is usually responsible for proving the validity of the need for coverage under the policy. On the other hand, it is the insurer’s responsibility for showing causation needed to deny coverage.

An insured bears the initial burden of proving that the claimed loss falls within the coverage of the insurance policy. Boazova v. Safety Ins. Co., 462 Mass. 346, 351 (2012).Once the insured does this, the burden then shifts to the insurer to show that a separate exclusion to coverage is applicable to the particular circumstances of the case. Id. Finally, where the insured seeks to establish coverage through an exception contained within an exclusion to coverage, the burden shifts back to the insured to prove coverage for the claimed loss. Id.

Other significant shifts in the burden of proof in an insured-insurer relationship include:

• Named Peril Policy, in which the insured “bears the initial burden of showing that the insurance contract covers the loss,” i.e., that the loss resulted from a covered peril. Potoff v. Chubb Indem. Ins. Co., 874 N.Y.S.2d 124 (2009);
• Insurer’s Duty to Defend, in which the insurer bears the burden of proving that the allegations in a complaint asserting a claim against the insured clearly fall outside policy coverage, and therefore, that there is no duty to defend; however, if the insurer meets that burden, and the insured alleges that an exception applies, the insured bears the burden of proving that coverage exists through the exception. Demaray v. De Smet Mut. Ins. Co., 801 N.W.2d 284 (S.D. 2011);
• Bad Faith Claim Against Insurer, in which the plaintiff/insured has the burden of proof on each element of a bad faith claim against an insurer. Barre v. State Farm Fire and Cas. Co., 982 F.Supp.2d 1267 (N.D. Okla. 2013).

Criminal offense covered under an insurance policy as the loss of monies or securities through the disappearance or destruction by means of breaking and entering the insured’s premises.

Depending on the jurisdiction the policy holder is located in, damage sustained during a theft could be excluded from coverage under a policy that covers vandalism. The Fifth Circuit has held that damage done in furtherance of a theft or an attempted theft is damage that falls within theft exclusion of the instant policy. Certain Underwriters at Lloyds, London v. Law, 570 F.3d 574 (5th Cir. 2009). The U.S. District Court in Connecticut more recently declined to follow this ruling, as they held that an Insurer could not defeat a claim for coverage under policy’s vandalism/theft clause simply by establishing that intruder who caused damage entered building initially intending to steal. Mercedes Zee Corp., LLC v. Seneca Ins. Co., Inc., 151 F.Supp.3d 255 (D. Conn. 2015). 

A policy for commercial property to cover the expenses the insured incurs as a result of an accident, including the loss of revenue during the setback caused by the property being damaged or destroyed.

Business Income and Extra Expense Coverage is typically defined in an insurance policy as coverage for net income (net profit or loss before income taxes) that would have been earned or incurred, and continuing normal operating expenses incurred, including payroll, if the loss never occurred. Generally speaking, an extra expense is an amount that needs to be spent in order to accomplish some other purpose.

As a general rule, the purpose to be accomplished through  business income and extra expense coverage is to avoid states of affairs which would trigger or increase coverage the insurer would have to pay. Michael Sean Quinn and Pamella A. Hopper, Extra Expenses and Business Interruption Coverages, 26 No. 3 Ins. Litig. Rep. 97 (2004). “[E]xtra expenses are typically incurred either to reduce loss of sales or to shorten the restoration period.” David A. Borghesi, Business Interruption Insurance-A Business Perspective, 17 NOVA L. REV. 1147, 1160 (1993).

Extra expense coverage is for eliminating or reducing losses only. Other things being equal, extra expenses coverage is generally only for expenses actually incurred. This is true even though an insured’s entitlement to business interruption and related extra expense losses often must be estimated. Quinn, supra.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with business income and extra expense coverage. The information contained herein shall not be taken or construed as legal advice.

A type of commercial insurance package to protect against property and financial consequences that can ensue from a business loss.

A form of liability insurance providing accidental injury coverage for both persons and to property. It covers a broad category of bodily injury or death claims.

As a general rule, “casualty insurance” covers accidental injury both to persons and to property and has been defined as insurance against loss through accidents or casualties resulting in bodily injury or death. Couch on Insurance, Third Edition § 1:28 (2019). Casualty insurance is “that type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to the property of others”. McCarthy v. Bainbridge, 739 A.2d 200, 203 (Pa. Super. Ct. 1999), aff’d, 565 Pa. 464 (2001). The term is also used to embrace coverages under various liability policies.

Of course, the specific definition in a statute must be given effect if the term is defined, and some statutes did distinguish between accident and casualty insurance, the former being held to relate to accidents resulting in bodily injury or death, and the latter to property losses resulting from accident or casualty, such as boiler, plate glass, injury to property by strikes, and similar causes. Couch on Insurance, Third Edition § 1:28 (2019); See Bankers’ Mut. Casualty Co. v. First Nat. Bank, 131 Iowa 456, 108 (1906) (Explaining that while“casualty insurance” is said to have “a well-defined meaning as insurance against loss through accidents resulting in bodily injury or death,” it is perfectly apparent that the “casualty insurance” provided in the state statute has no reference whatever to injuries or losses of this class, for it is expressly treating of property losses as distinguished from losses by personal injury).

The process whereby the claimant sends a timely notification of the loss and requesting remittance of payment which was caused by a covered event under the insurance policy agreement to the insurer.

The justified or unjustified refusal on the behalf of the insurer to honor an insured’s request to provide coverage for the claim being outside of the policy’s coverage, resulting in a personal financial burden.

Generally, an Insurer is required either to pay or deny an Insured’s claims “[w]ithin 30 calendar days after proof of claim [was]  received.” Nyack Hosp. v. State Farm Mut. Auto. Ins. Co., 11A.D..3d 664, 664-65 (2004). A proper denial of claim must include the information called for in the prescribed denial of claim form and must  “promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.” Id. However, “[a] timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law.” Id. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with claim denial. The information contained herein shall not be taken or construed as legal advice.

Physical evidence kept as a record in the claims handling process. Although policies differ in their requirements, it is common that the insurance carrier will require a statement of claim, contract documents, correspondences, an itemized statement, photographs if applicable, receipts of expenses, payment history, and more depending on each individual circumstance.

A claims-made policy covers claims that are made during the policy period. As requested in the insurance policy, it is a type of liability insurance document that will reimburse the insured if both the causational event and the claim itself are filed and sent to the insurance company within the same policy term or within a specific time period following its expiration.

A policy coverage or exclusion often defined as the loss of a building’s structural integrity or sudden dilapidation, or an abrupt falling down or caving in of a building or part of a building. This type of loss can be the result of faulty design, lack of maintenance, extreme weather or other means by weakening of the buildings structural uprightness.

A collapse, within the meaning of an insurance policy, is a perceptible event or state caused by a specific degenerative process. There are no degrees of collapse. Depending on the jurisdiction you are in, the term collapse could mean the sudden, complete disintegration of a structure, or a substantial impairment that makes collapse imminent if not for the mitigating efforts of the insured.

Under the traditional definition, a “collapse” is limited to an event that occurs suddenly and results in complete disintegration. 44 Am. Jur. 2d Insurance § 1275. This definition typically disallows coverage under an insurance policy where only a “part of a part” of a building falls. Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d968 (Ind. 2005).

Some courts have held that policies do not typically cover “imminent” collapse; it only covers the actual collapse. Clendenning v. Worcester Ins. Co., 45 Mass.App.Ct. 658 (1998). However, “[m]any courts have found that use of the word “collapse” in an insurance policy does not require the total destruction of a building because to require a party to await complete destruction before losses will be covered frustrates an insured’s understanding of the insurance agreement and subverts his or her duty to mitigate damages and to avoid economic waste.” Campbell v. Norfolk& Dedham Mut. Fire Ins. Co., 682 A.2d 933 (R.I. 1996).

The Connecticut Federal District Court has more recently stated that such a policy “does not unambiguously limit [the insurer’s] liability to a ‘collapse’ of a sudden and catastrophic nature,” therefore broadening the traditional definition. Roberts v. Liberty Mutual fire Insurance Co., 264 F.Supp.3d 394 (D. Conn. 2017). Therefore,—in the absence of a contrary policy definition —a building has “collapsed” by suffering a “substantial impairment of structural integrity” if it “would have caved in had the plaintiffs not acted to repair the damage.” Id. at 409. See also Beach v. Middlesex Mut. Assur. Co., 205 Conn. 246, 252 (1987). 

In the first of a trilogy of cases, the Connecticut Supreme Court in Karas v. Liberty Insurance Corp., 2019 WL 5955947 (Conn. 2019), answered the federal certification questions; whether “substantial impairment of structural integrity” is the applicable standard for “collapse” under the subject homeowner’s insurance policy; what constitutes “substantial impairment of structural integrity” in applying the policy’s “collapse” provision; and whether the term “foundation” unambiguously includes basement walls. Plaintiffs filed suit against the defendant after denial of their claim for “collapse” of their basement walls. The plaintiffs argued that a collapse pursuant to Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987) had occurred. In Beach, the Court held that the term “collapse”, when undefined, is “sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building.” The Court concluded: 1) that the Beach standard applies to the plaintiffs’ policy, 2) that the ‘‘substantial impairment of structural integrity’’ standard requires proof that the home is in imminent danger of falling down and, and 3) that the term ‘‘foundation’’ unambiguously encompasses the home’s basement walls.

In Vera v. Liberty Mutual Fire Insurance Co., 2019 WL 5955936 (Conn. 2019), the Connecticut Supreme Court answered the federal certification question; what constitutes “substantial impairment of structural integrity” for purposes of applying the “collapse” provision of the plaintiffs’ homeowner’s insurance policy. As an initial matter, the issues raised and the merits of the underlying arguments in Karas and Vera are substantially identical, and the Court’s examination of those issues and the conclusions reached are the same. Plaintiffs filed suit against defendant after denial of their claim for “collapse” of their basement walls. The U.S. District Court determined that “collapse” was defined as a “substantial impairment of structural integrity” pursuant to the Supreme Court’s decision in Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987) and certified the above question for review by the Supreme Court. The Court, as in Karas, held that “to meet the substantial impairment standard, an insured whose home has not actually collapsed must present evidence demonstrating that the home nevertheless is in imminent danger of such a collapse.”

In Jemiola v. Hartford Casualty Insurance Co., 2019 WL 5955904 (Conn. 2019), the Connecticut Supreme Court, in determining whether cracking to plaintiff’s foundation constituted a “collapse” as defined by plaintiff’s homeowners insurance policy, affirmed the judgment of the trial court granting summary judgment to the defendant. The plaintiff claimed defendant breached the policy in denying coverage for cracking of foundation, alleging a substantial impairment of the structural integrity of the foundation constituted a “collapse” under the policy. The trial court granted defendant’s motion for summary judgment, finding the policy’s definition of “collapse” was unambiguous and that there was no genuine issue of material fact regarding a “collapse” under the policy to the foundation of the home. The plaintiff appealed. The Supreme Court held that the trial court properly ruled that the plaintiff failed to provide a factual basis that the structural integrity of her basement walls suffered from a substantial impairment prior to 2006, and that the “collapse” provision of the applicable policy unambiguously excludes coverage for a “home, such as the plaintiff’s, that is still standing and capable of being safely lived in for many years – if not decades – to come.”

Be sure to check the state and federal court rulings within the relevant jurisdiction when determining what constitutes a collapse under a policy.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with collapse. The information contained herein shall not be taken or construed as legal advice.

When the preliminary negotiations are complete and the contract has been issued, this is the first day that the carrier is obligated to insure any risk via the issuance of policies and/or beginning a reinsurance agreement. It is common that the effective date does not begin until a premium has also been paid. In a group policy, the master policy determines the third party’s eligibility requirements to begin their protection plan.

An insurance policy that provides standardized insurance to cover common business risks. These policies can cover operations on and off the premises.

Commercial general liability insurance (CGL) policies are intended to provide coverage only for events which are fortuitous, unforeseeable events, and not for the foreseeable results of an insured’s deliberate conduct, which would include a claim for breach of contract. Couch on Insurance Third Edition § 129:5. A CGL is designed and intended to provide coverage to the insured for tort liability for physical injury to the person or property of others. Id. A CGL is not intended to provide coverage for the insured’s contractual liability which merely causes economic losses. Id.

Claims for negligent supervision, negligent hiring, negligent retention, and similar causes of action made where the underlying injury causing conduct is intentional are more problematic in determining whether there is an occurrence under a CGL. Consequently, jurisdictions are divided over whether such claims will be considered an occurrence. Some jurisdictions have held that where the underlying conduct by an employee which directly causes the injury is intentional, the claim for negligence against the employer is also not an occurrence because the employer’s negligence is entirely derived from the underlying intentional act. See Sears, Roebuck and Co. v. National Union, 331 Ill. App. 3d 347 (1st Dist. 2002).

Two or more perils occurring instantaneously or when a uncovered peril is a factor in the chain of events resulting in property loss or damage. In these instances, only one loss is covered but both are paid by the insurer due to the covered peril being the main cause.

Generally, if the liability of an insured arises from concurrent but separate negligent acts, and one of the acts is an included risk under the insured’s homeowner’s policy, coverage exists even though the policy contains an exclusion that includes the other act. In other words, if an occurrence is caused by a risk included within the policy, coverage may not be denied merely because a separate excluded risk was an additional cause of the accident. Mailhiot v. Nationwide Mut. Fire Ins. Co., 169 Vt. 498, 500-01 (1999). However, the majority of jurisdictions have adopted the view that if the two acts are so inextricably intertwined, then there is no independent act that would take the claim outside the scope of the exclusionary clause. An example of an inextricably intertwined events that would fit within an automobile exclusion, for example, would be the act of unloading a motor vehicle and the negligent act of placing a ramp on an icy part of the floor. See State Farm Mutual Automobile Insurance Co. v. Roberts, 166 Vt. 452, 697 A.2d 667 (1997). In contrast, an example of two events that are concurrent but separate, and therefore still covered within a homeowners policy with the same motor vehicle exclusion, would be when an insured modified a pistol to create a hair trigger, which then discharged and injured his friend when the insured drove over a bump. See State Farm Mutual Automobile Insurance Co. v. Partridge, 10 Cal.3d 94, 109 (1973). The difference between the two cases is that, in Roberts, the alleged negligent act was entirely dependent upon the excluded act, while in Partridge, the relationship between the two was entirely circumstantial. Mailhiot v. Nationwide Mut. Fire Ins. Co., 169 Vt. 498, 501 (1999).

Keeping with the example of a motor vehicle exclusion in a homeowner’s policy, it does not matter if the concurrent cause in a given case is “simply the medium by which the insured’s negligent supervision manifested harm.” Taylor v. American Fire & Cas. Co., 925 P.2d 1279, 1282–83 (Utah Ct.App.1996). This is precisely what the motor vehicle exclusion is meant to address: the motor vehicle as medium. Id. at 502-03. See Salem Group v. Oliver, 128 N.J. 1, 6-10  (1992) (Clifford, J., dissenting) (in insurance cases, concern is not with question of culpability or why injury occurred, but only with nature of injury and how it happened).

When there is a loss caused by concurrent causes, or a combination of a covered and specifically exluded risk, the efficient proximate cuase doctrine applies. Brown v. Mid-Century Insurance Company, 215 Cal. App. 4th 841 (2d Dist. 2013). See Efficient Proximate Cause

A group of people who have each purchased a unit of a housing development and agree to abide by the terms and conditions set forward by the association. Fees are scheduled to be paid by each owner to uphold the insurance, governance and maintenance of the association.

“A homeowners’ or condominium association, after control of such association is obtained by homeowners or unit owners other than the developer, may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all association members concerning matters of common interest to the members, including, but not limited to: (1) the common property, area, or elements; (2) the roof or structural components of a building, or other improvements (in the case of homeowners’ associations, being specifically limited to those improvements for which the association is responsible); (3) mechanical, electrical, or plumbing elements serving a property or an improvement or building (in the case of homeowners’ associations, being specifically limited to those elements for which the association is responsible); (4) representations of the developer pertaining to any existing or proposed commonly used facility; (5) protests of ad valorem taxes on commonly used facilities; and, in the case of homeowners’ associations, (6) defense of actions in eminent domain or prosecution of inverse condemnation actions. If an association has the authority to maintain a class action under this rule, the association may be joined in an action as representative of that class with reference to litigation and disputes involving the matters for which the association could bring a class action under this rule.”

F.L. R. Civ. P. 1.221.

The insurer’s refusal to pay the insured for a claim.

Denial of coverage, words “deny coverage” refer to denial of liability predicated upon exclusion set forth in policy which, without the exclusion, would provide coverage for the liability in question. Zappone v. Home Ins. Co., 432 N.E.2d 783 (1982). An insurance carrier seeking to deny coverage or liability must “give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant”. Progressive Cas. Ins. Co. v. Conklin, 123 A.D.2d 6 (1986). A failure to timely disclaim coverage, however, cannot serve to create insurance coverage which the insured’s policy was not written to provide. Id. A failure by the insurer to give such notice as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability or denial of coverage, precludes effective disclaimer of denial. Hartford Ins. Co. v. Nassau County, 389 N.E.2d 1061 (1979).

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with coverage denial. The information contained herein shall not be taken or construed as legal advice.

An attorney’s judgment as to whether a particular event is covered by a given insurance policy or not.

Insurance to cover the cost of cleanup of property damaged or destroyed from an insured peril.

A typical homeowner’s policy defines “Debris Removal” as: “1. Debris of covered property if a Peril Insured Against that applies to the damaged property causes the loss; or 2. Ash, dust or particles from a volcanic eruption that has caused direct loss to a building or property contained in a building. This expense is included in the limit of liability that applies to the damaged property. If the amount to be paid for the actual damage to the property plus the debris removal expense is more than the limit of liability for the damaged property, an additional 5% of that limit is available for such expense.” HO 00 03.

The specified amount the insured must pay out of pocket before the insurance provider will pay any expenses.

An insured agrees to be subject to a deductible in exchange for a reduced monthly premium in their contract with an insurer; in effect, the insured agrees to self-insure for the deductible amount. Mercury Ins. Co. of Florida v. Emergency Physicians of Cent., 182 So. 3d 661 (Fla. 5th DCA 2015). Courts have not prohibited insurers from applying deductible amounts that the insured must pay as a means of reducing the amount of coverage owed to the injured party. Aarvig v. Liberty Mut. Fire Ins. Co., 287 F. Supp. 2d 1000, 1005 (D. Minn. 2003).

A reduction of an asset’s value with the passage of time, due to wear and tear.

“Depreciation in insurance law is not the type that is charged off the books of a business establishment, but rather it is the actual deterioration of a structure by reason of age, and physical wear and tear, computed at the time of the loss.” Lammert v. Auto-Owners-Mutual Co., 572 S.W.3d 170, 174-75 (Tenn. 2019), quoting Redcorn v. State Farm Fire & Cas. Co., 55 P.3d 1017, 1020 (Okla. 2002).

Depreciation is typically seen in the context of the calculation of Actual Cash Value (“ACV”), the formula for which is Replacement Cost Value less depriciation. LaBrier v. State Farm Fire & Cas. Co., 147 F.Supp.3d 839 (W.D. Mo. 2015). Most adjusters use replacement cost less depreciation to establish ACV of common, everyday real and personal property losses, but, legally speaking, only a few states follow that method. Because states apply different rules of interpretation of ACV, many insurers have added to their first party property policies a definition of ACV using either replacement cost less depreciation or Fair Market Value (“FMV”). Michael H. Boyer, Property Investigation Checklists: Uncovering Insurance Fraud, Prop. Investig. Checklists § 8:5 (12th ed. 2018).

Regardless of what method or rule of evidence is used to determine actual cash value under an insurance policy where there has been partially damaged property, depreciation is frequently included as a deduction to arrive at the value. Thus, it has been generally held to be an appropriate or requisite factor either in the determination of “cash value,” or in its representation of an amount to be subtracted from “cash value.” Wendy Evans Lehmann, Depreciation as Factor in Determining Actual Cash Value For Partial Loss Under Insurance Policy, 8 A.L.R.4th 533 (Originally published in 1981).

The amount returned to the insured after receipts and other proof of repair and replacement costs from the claim have been presented. It is the maximum amount you can recover from the insurance company after the repair or replacement work has been done. The depreciation holdback percentage is negotiable based on the insurance adjuster’s opinion of the value of the property.

The Replacement Cost has two components: the Actual Cash Value, which is the value of the property at the time of loss, or an agreed or appraised value; and the Depreciation Holdback, which is the cost of repairs that exceed the Actual Cash Value. Novogroder Companies, Inc. v. Hartford Fire Ins. Co., 528 Fed.Appx. 644 (7th Cir. 2013). Often, policies provide that the insurer will “pay on an Actual Cash Value basis until the lost or damaged property is actually repaired, rebuilt or replaced.” Id. If the insured repairs the damaged property, and the actual cost of repair exceeds the Actual Cash Value, the insurer would reimburse the insured for the depreciation holdback. But if the insured did not “repair, replace or rebuild on the same site or another site within 2 years of the date of loss,” the Seventh circuit has held that insurers can pay the insured on an Actual Cash Value basis. Id. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with depreciation holdback. The information contained herein shall not be taken or construed as legal advice.

The actual damage done to property by a covered peril.

In the context of business interruption, The Virginia case U.S. Airways v. Commonwealth Ins. Co., 64 Va. Cir. 408 (Va.Cir.Ct.2004) is on point. In U.S. Airways, the plaintiff’s insurance policy insured “against all risk of direct physical loss of or damage to property described herein.” Id. After the September 11th attacks, the federal government shut down Reagan National Airport for nearly a month. U.S. Airways filed a claim, but its insurer denied coverage because there was no physical damage to U.S. Airways’ property. The court rejected this argument, ruling that “damage to the physical property of U.S. Airways is not a condition precedent to recovery for business interruption.” Id.

The obligation of a liability insurer to cover defense of claims against the insured within the policy’s scope of coverage.

Generally speaking, what is meant when courts reference an insurer’s “duty to defend” its insured is the insurer’s “responsibility to defend the insured from all actions brought against the insured based on alleged facts or circumstances falling within the purview of coverage under the policy, regardless of the suit’s validity or invalidity.” Marks v. Houston Cas. Co., 369 Wis.2d 547 (2016). 

When an insurer receives a tender of defense from its insured, it “makes an initial determination about whether it will defend its insured.” Id. The insurer must make this determination carefully, because if it refuses to defend and is later found to have “breache[d] a duty to defend its insured, [it] is on the hook for all damages that result from that breach of its duty.” Id.; quoting Maxwell v. Hartford Union High School Dist., 341 Wis.2d 238 (2012). “[W]hen an insurance policy provides coverage for even one claim made in a lawsuit, the insurer is obligated to defend the entire suit.” Maxwell v. Hartford Union High School Dist., 341 Wis.2d at 262.

“Liability insurance coverage usually includes a duty to defend and a duty to indemnify. The duty to defend and the duty to indemnify are distinct. The duty to indemnify and the duty to defend are separate contractual obligations. A policy may provide one without providing the other. When a contract imposes a duty to defend, however, that duty is broader than the duty to indemnify.” Johnson Controls, Inc. v. London Market, 784 N.W.2d 579. (citations omitted). When an insurer breaches a duty to defend its insured, the insurer is on the hook for all damages that result from that breach of its duty. Id. 

Earth movement is a common exclusion contained in first-party property insurance policies. Earth movement is often defined as the natural, spontaneous sinking, shifting, rising, or expanding of the ground. However, specific policy language varies. The exclusion may be subject to differing causation language, which impacts the application of the exclusion.

Earth movement exclusions were historically included in insurance policies to protect insurance companies when a catastrophic event, such as an earthquake, caused damage to numerous policyholders. Powell v. Liberty Mut. Fire Ins. Co., 127 Nev. 156 (2011); citing Peters Tp. School Dist. v. Hartford Acc. & Indem., 833 F.2d 32, 35–36 (3d Cir.1987).

In considering earth movement exclusions, some jurisdictions have concluded that there is often an ambiguity as to what type of damage earth movement exclusions apply because such exclusions typically only list naturally occurring events in their definitions of what constitutes earth movement, but earth movement can be caused by unnatural events as well. Powell v. Liberty Mut. Fire Ins. Co., 127 Nev. at 163. Therefore, courts in these jurisdictions often interpret earth movement exclusions broadly and in favor of the insured party, construing earth movement exclusions as referring only to naturally occurring events because the examples included in the definitions of earth movement are only natural events. Id.

Similarly, in the third party context, an exclusion that contains language excluding injury arising out of “earthquake, landslide . . . or any other movement of . . . land, earth, or mud,” was held to exclude only earth movement caused by natural events, and not man-made forces. Broom v. Wilson Paving & Excavating, Inc., 356 P.3d 617 (Ok. 2015).

Some first-party policies provide coverage for earthquake and volcanic eruption by means of an endorsement. These endorsements may provide coverage for such an unpreventable event caused by the movement of tectonic plates causing the earth to shake including volcanic eruption. Endorsements providing such a coverage are often necessary because most standard policies exclude coverage for earthquake and volcanic eruption. Some of these endorsements exclude losses from resulting fires, explosions, floods, or tidal waves following the covered event.

The date at which an insurance policy starts providing coverage is the effective date. The effective date is noteworthy because most insurance policies do not always begin coverage on their date of approval or payment.

Efficient proximate cause is a causation doctrine. The efficient proximate cause if the predominant cause of the loss. The issue of causation typically arises when two or more perils combine to cause a loss. The efficient proximate cuase is the cause that sets the others in motion to bring about the loss. However, policy provisions, such as anti-concurrent causation clauses, may supercede the application of the efficient proximate cause doctrine, depending on the jurisdiction.

The test in determining efficient proximate cause was explained in the decision in Lynn Gas & Electric Co. v. Meriden Fire Ins. Co.: “When it is said that the cause to be sought is the direct and proximate cause, it is not meant that the cause or agency which is nearest in time or place to the result is necessarily to be chosen…. The active efficient cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source is the direct and proximate cause referred to in the cases….” 415 Mass. 24 (1993). A California court similarly held that, “[i]n determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause—the one that sets others in motion—is the cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster.” Garvey v. State Farm Fire & Casualty Co., 48 Cal. 3d 395, 402 (1989).

For example: there may be several causes for a loss to a building. The loss may be caused by an unstable hillside, third party negligence, earth movement, or a rise in groundwater level. If the jury determines that the efficient proximate cause is one or more covered perils in combination with specifically excluded risks, there is coverage. See State Farm Fire & Casualty Co. v. Von Der Lieth, 54 Cal. 3d 1123, 1133 (1991).

The efficient proximate cause doctrine has also been called the predominant cause or the most important cause of the loss. See Vardanyan v. AMCO Insurance Company, 243 Cal. App. 4th 779, 787 (5th Dist. 2015).

An attachment to the certificate of insurance which is thereon read together with the policy. It is an alteration to the policy to either limit or add benefits or coverage necessary. It either replaces or adds policy language. It can also be referred to as a “rider.”

Simply put, “An endorsement is an amendment to an insurance policy.” Black’s Law Dictionary, 548 (7th ed. 1999).  

“An endorsement modifies the basic insuring forms of the policy and is an integral part of the policy …. An endorsement can expand or restrict the coverage otherwise provided by the policy.” J & J Pumps, Inc. v. Star Ins. Co., 795 F.Supp.2d 1023 (E.D. Cal. 2011), quoting Frontier Oil Corp. v. RLI Ins. Co., 153 Cal.App.4th 1436, 1463 (2d Dist.2007). “Standing alone, an endorsement means nothing. Endorsements on an insurance policy form a part of the insurance contract, and the policy of insurance with the endorsements and riders thereon must be construed together as a whole.” Id. An endorsement to an insurance policy is intended to modify the portion of the policy so indicated in the endorsement, not to serve as a complete replacement of an insurance policy. Bland v. State, 230 W.Va. 263, 277 (2012). 

If an endorsement is attached to an insurance policy, and the policy and endorsement are parts of the same contract, the endorsement becomes part of the contract, and the two must be construed together. Mattingly v. Sportsline, Inc., 720 So.2d 1227, 1230 (La. Ct. App. 1998). If there is a conflict between the endorsement and the policy, the endorsement must prevail. Id. 

Environmental impairment liability (EIL) policies provide coverage for negligence or error causing contamination or pollution, the associated cleanup costs, and remediation.

A typical EIL policy defines coverage environmental impairment as, “damage to the environment caused by: “1. the emission, discharge, disposal, dispersal, release, seepage, or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants, into or upon land, the atmosphere or any watercourse or body of water, or “2. the generation or odor, noises, vibrations, light, electricity, radiation, changes in temperature, or any other sensory phenomena arising out of or in the course of the insured’s operations provided (1) and (2) are gradual and fortuitous and neither expected nor intended by the insured.”

An environmental liability impairment policy typically only provides coverage if act causing damage was gradual and fortuitous and neither expected nor intended, and does not provide coverage if the insured intended the act causing the harm, even if they did not intend the harm itself. Environmental liability policies typically do not apply to loss arising from environmental impairment which is sudden and accidental, as any environmental impairment must be gradual and fortuitous and neither expected nor intended by insured. See Masonite Corp. v. Great American Surplus Lines Ins. Co., 224 Cal.App.3d 912 (1990).

Prior to the availability of environmental impairment insurance, companies often sought to protect themselves by purchasing comprehensive general liability insurance. These policies usually specifically excluded damage caused by pollution by providing: “This policy does not apply … to bodily injury or property damage arising out of […] contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.” Id. at 916. This resulted in a potential of a gap in insurance: a company such might not be protected from liability for damage caused by gradual pollution. Insurers then stepped into this gap and created environmental impairment liability policies. Id.

Insurance providing coverage for loss due to mechanical, electrical, or other breakdown of a policy holder’s equipment.

The process by which to evaluate the cost of repair.

Estimates of repair costs are the means of proving what the repair costs will be, and estimates may, of course, vary considerably. In practical terms, resolution of inconsistent bids is a matter on which insurer and insured frequently engage in negotiation. Disputes over the amount of loss, often stemming from competing estimates, are typically resolved by the appraisal or reference process.

Insurance purchased in order to protect against financial loss due to the cancellation or postponement of an event caused by circumstances out of one’s own control.

Formal testimony, under oath, by the insured in the presence of a court reporter. At the examination under oath, the insured is questioned by the insurance company’s attorney or representative. It is similar to a deposition. It allows an insurer to obtain relevant and necessary information in order to process a specific claim. Policy holders are often represented by attorneys at their examinations under oath. An insurance company’s right to conduct an examination under oath is typically contained in the insurance policy.

Generally, during an examination under oath, an insurer is, “entitled to conduct a searching examination, though all questions should be confined to matters relevant and material to the loss.” Phillips v. Allstate Indemn. Co., 156 Md. App. 729, 743 (2004). The purpose of an examination under oath is to assist in the evaluation of a claim, so that the insurer can decide whether to pay it without the necessity of litigation. Dolan v. Kemper Independence Insurance Company, 237 Md.App. 610, 619 (2018). An examination under oath may also assist in protecting an insurer against false claims. Fineberg v. State Farm Fire & Cas. Co., 438 S.E.2d 754, 755 (1994). Courts from many states have observed that an examination under oath is not subject to the rules of civil procedure.   

It has often been held that an insured breaches the insurance contract when he or she refuses to submit to an examination under oath. In Phillips v. Allstate Indemn. Co., the Maryland Appellate court held that an insured breached the contract when he appeared at an examination under oath, but refused “to answer relevant, material questions.” 156 Md. App. 729, 743. The court reasoned that the failure to answer “questions that are relevant and material to an insurer’s liability for a loss and the extent of that loss” “constitutes a failure to comply with a policy requirement to submit to an examination under oath.” Id. at 745. 

The requirement to submit to examinations is in some states cabined by the phrase, “as often as reasonably required.” See M.G.L. c. 175, § 99. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with examinations under oath. The information contained herein shall not be taken or construed as legal advice.

A separate policy or addition to a policy intended to provide coverage for an amount in excess to what is provided under your primary policy. 

The susceptibility to potential danger or peril. Insurance premiums are determined by the level of risk an individual faces. Most contracts have a provision which states the policyholder must exercise their due diligence and avoid preventable exposure(s) to remain protected by the policy.

There are almost unlimited ways that insured could be viewed as exposing themselves to danger, from owning a pool or dog, to going skydiving or driving a high speed vehicle. While insurers have long sought to raise such conduct as a defense to liability on an accident policy, they have not, by and large, been very successful unless the conduct has been so inherently dangerous that the resulting harm cannot be said to be an “accident” or to have occurred by “accidental means.” See Kennedy v. Washington Nat. Ins. Co., 136 Wis. 2d 425, 401 (Ct. App. 1987) (stating that for purposes of entitlement to proceeds of life policy for accidental death, if insured does voluntary act where natural, usual, or expected result would cause injury or death, such injury or death would not be “accidental”). However, voluntary exposure to risk does not necessarily prevent result from being “accidental.” Id.  

Coverage of peril for insured property damaged or destroyed by something landing unexpectedly.

An example of a typical homeowner’s policy provision addressing falling objects:

Falling Objects

This peril does not unclude loss to property contained in a building unless the roof or an outside wall of the building is first damaged by a falling object. Damage to the falling object itself is not included.

HO 00 03

Loss to an insured’s property caused by fire and often its immediate consequences. 

An insurance contract between an insured and the insurer for coverage of the insured’s own losses and expenses suffered in the event of a covered loss. Insurance covering an individual or entity’s own property is first-party insurance, such as insurance coverage for houses, commercial buildings and businesses, motor vehicles, and boats.

First-party coverage is a “promise by an insurer to pay its own insured, rather than a promise to pay some third party.” Maryland Auto. Ins. Fund v. Baxter, 186 Md.App. 147, 152 (2009). 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with first party insurance. The information contained herein shall not be taken or construed as legal advice.

Insurance that provides coverage for loss by flood. The National Flood Insurance Program is run by FEMA to give flood insurance to communities, while also increase floodplain management in these areas, and improve mapping of flood hazard zones. Flooding is typically excluded under other common property policies.

Flooding is typically excluded under common policies because of the difficulty of predicting floods, the frequency of flooding in some areas, and the extent of potential liability. National Flood Insurance Act of 1968, 42 U.S.C. § 4001(b) (“The Congress … finds that … many factors have made it uneconomic for the private insurance industry alone to make flood insurance available to those in need of such protection on reasonable terms and conditions”). In 1968, the federal government intervened with the National Flood Insurance Act.

The National Flood Insurance Program is administered by the Federal Emergency Management Agency. Couch on Insurance Third Edition § 153:51. Under the National Flood Insurance Program, the Federal Emergency Management Agency (FEMA) allows private insurers to issue government-backed flood insurance using FEMA’s Standard Flood Insurance Policies (SFIPs). Id. citing Lowery v. Fidelity Nat. Property and Cas. Ins. Co., 805 F.3d 204 (5th Cir. 2015). 

The principal purpose of the National Flood Insurance Program is to create a national program to reduce and avoid flood losses by making flood insurance available to property owners at reasonable prices. National Flood insurance Act of 1968, 42 U.S.C. § 4001(d). Federal law governs the interpretation of a policy issued pursuant to the National Flood Insurance Program. Suopys v. Omaha Property & Cas., 404 F.3d 805, 809 (3d Cir. 2005). 

Because the program is national in scope, courts are careful to maintain as uniform a body of law as possible throughout the country. Id. Accordingly, the Standard Flood Insurance Policy is interpreted according to its plain and unambiguous meaning. Id. 

The general coverage of the Standard Flood Insurance Policy depends on the specific definition of “flood.” The Act instructs the Director to issue regulations defining “flood.” National Flood insurance Act of 1968, 42 U.S.C. § 4121. In general, a “flood” for purposes of the National Flood Insurance Program is a general inundation of normally dry land or subsidence along a body of water caused by unusual levels of water. 44 C.F.R. § 59.1. Because the inundation must be “general,”recovery is usually excluded under a SFIP unless the insured can demonstrate the water inundation was more than a specifically localized event. See Mussoline v. Morris, 692 F. Supp. 1306, 1316 (S.D. Fla. 1987). 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with flood insurance. The information contained herein shall not be taken or construed as legal advice.

Only direct losses that are fortuitous are covered by most policies in order to prevent the insured from profiting from their own loss. A fortuitous loss is unintentional and unexpected.

Courts increasingly analogize to contract law, which defines “a fortuitous event” as one dependent on chance insofar “as the parties to the contract are aware.” Cozen & Bennett, Fortuity: The Unnamed Exclusion, XX Forum 222, 223 (Winter 1985) (quoting Restatement of Contracts, § 291, comment “a” (1932)).

A loss that has already occurred is not fortuitous—and is thus not insurable. Brown v. State Farm Fire and Cas. Co., 150 Conn.App. 405 (2014).

All-risk insurance creates a “special type of coverage extending to risks not usually covered under other insurance.” G. Couch, R. Anderson & M. Rhodes, Couch Cyclopedia of Insurance Law, § 48:141 (2d ed.rev. 1982). Regardless of its express terms, every all-risk policy “ ‘contains an unnamed exclusion—the loss must be fortuitous in nature.’ ” Underwriters Subscribing to Lloyd’s Ins. Cert. No. 80520 v. Magi, Inc., 790 F.Supp. 1043, 1046 (1991). The exclusion exists as a matter of public policy, because “it would encourage fraud to allow recovery on an insurance loss which is certain to occur.” Insurance Co. of North America v. U.S. Gypsum Co., 678 F.Supp. 138, 141 (W.D.Va.1988).

While courts continue to agree that an all-risk insurance policy covers only fortuitous losses, a new definition of the term “fortuitous” has emerged. It is now generally accepted that the term should be defined as provided in the Restatement of Contracts: (a) A loss which was certain to occur cannot be considered fortuitous, and may not serve as the basis for recovery under an all-risk insurance policy; (b) in deciding whether a loss was fortuitous, a court should examine the parties’ perception of risk at the time the policy was issued; (c) ordinarily, a loss which could not reasonably be foreseen by the parties at the time the policy was issued is fortuitous. Underwriters Subscribing to Lloyd’s Ins. Cert. No. 80520 v. Magi, Inc., 790 F.Supp. at 1048. 

Property insurance fraud is committed whenever a person knowingly submits a false claim. Fraud is a misrepresentation of a material fact done deceitfully with deliberate intent.

Under most liability insurance policies, fraud is not covered. The insurers’ position in denying coverage for fraud is based on the “occurrence” language found in the contract. It provides that an occurrence is covered and defines that term as something neither expected nor intended from the standpoint of the insured (See Fortuity). Fraud is an intentional tort and does not constitute an “occurrence.” Dresser Industries, Inc. v. Underwriters At Lloyd’s, London, 106 S.W.3d 767 (2003).

Under Common law, the tort of fraud has five elements, including scienter and intention to induce the plaintiff to act or refrain from acting. Consequently, in most cases, for an “occurrence” to exist, most courts to hold that this was intended to refer to accident, and not an act that requires scienter, or willful intent. Taylor Morrison Services, Inc. v. HDI-Gerling America Ins. Co., 293 Ga. 456 (2013).

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with fraud. The information contained herein shall not be taken or construed as legal advice.

In the auto insurance area, coverage that can be added to some auto insurance policies to pay the difference between the actual cash value of the car and the amount the insured still owes. GAP stands for Guaranteed Asset Protection.

The obligation for morality, honesty, and fair dealing which all parties must legally abide by. It is the opposite of bad faith.

Although good faith may be implied in every contract, good faith issues do not often appear outside the insurance context because of the straightforward nature of most agreements. Couch on Insurance Third Edition § 198:12. In most non-insurance contracts, the parties are generally recognized as having adverse interests, and rarely will a relationship arise between the parties that supports remedies beyond the terms of the contract. Couch on Insurance Third Edition § 198:12.

The good faith obligations of an insurer to its insured run deeper than those in a typical commercial contract; unlike with a typical commercial contract, in which proof of bad motive or intention is vital to an action for breach of good faith, an insurer’s breach of good faith may be found upon a showing that it has breached its fiduciary obligations, regardless of any malice or will. Badiali v. New Jersey Mfrs. Ins. Group, 220 N.J. 544, 107 A.3d 1281 (2015). 

The duty of good faith includes insurers’ duty to investigate claims filed by the insured, or by third parties against the insured. Couch on Insurance Third Edition § 198:2. Some jurisdictions hold that the duty to investigate is a general one, flowing from the overarching duty of good faith and fair dealing. See Lakehurst Condominium Owners Ass’n v. State Farm Fire & Cas. Co., 486 F. Supp. 2d 1205, 1217 (W.D. Wash. 2007). Other jurisdictions find the duty to investigate in a state statute mandating investigations of claims because the statute usually has “reasonableness” standard as part of the investigation. See Federal Ins. Co. v. HPSC, Inc., 480 F.3d 26, 35 (1st Cir. 2007).  

An insurer’s duty of good faith also includes duties that arise when disclaiming coverage. Generally, under both common law and statutory law, the carrier has a duty to inform an insured of these claims decisions in a reasonably prompt and informative manner. Couch on Insurance § 198:31.  Under common law, in some jurisdictions, when a carrier fails to inform the insured of a claims decision in a proper manner, that carrier potentially waives certain defenses, like the ability to enforce some exceptions to coverage. Id.

A form of personal coverage which offers protection for the policyholder and the residents of the home for accidents that occur on the property. The broad risk provisions may cover losses and damages applicable to the dwelling, structure, personal property, and any additional living expenses that must be indemnified.

One of the most common forms of insurance in modern times, homeowners insurance is, in reality, a package policy with a combination of various types of coverages provided thereunder. Couch on Insurance Third Edition § 1:56. The policy typically covers the home (building) and its appurtenant structures from a variety of perils, such as fire, windstorm, vandalism and malicious mischief. Id. The insureds’ personal property is likewise covered under this policy from a variety of perils including fire and theft. Id. Liability coverage is also provided under the policy for the insureds’ liability arising out of the premises covered under the policy. Id.  

“Physical loss” within the meaning of a homeowners policy covering direct physical loss to property may include not only tangible changes to the insured property, but also changes that are perceived by the sense of smell and that exist in the absence of structural damage; however, these changes must be distinct and demonstrable. Mellin v. Northern Security Insurance Company, Inc., 167 N.H. 544 (2015).

Homeowners’ liability policies typically exempt from coverage bodily injury or property damage arising out of or in connection with a business engaged in by the insured. People characteristically separate their business activities from their personal activities, and therefore, business pursuits coverage is not essential for their homeowners’ or farmowners’ coverage and is excluded to keep premium rates at a reasonable level. Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex. 2005).

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with homeowners insurance. The information contained herein shall not be taken or construed as legal advice.

The relationship between the landlord and the tenant(s) in an insurance contract governed by the “Sutton Rule.” Where under the lessor’s insurance policy, in the event of an accident caused by the lessee, the lessor may or may not be able to subrogate against a tenant for the property damage they caused.

An implied co-insured circumstance arises between a landlord, tenant, and insurer in which the tenant is considered a coinsured of a landlord with respect to fire damage to leased residential premises; as an implied co-insured, an insurer has no right of subrogation against a tenant whose negligence causes fire damage. This is commonly referred to as the “Sutton Doctrine” throughout relevant case law, after the Oklahoma Court of Appeals decision titled Sutton v. Jondahl, 532 P.2d 478 (Okla. App. 1975).

Under the Sutton doctrine, the law considers the tenant as a co-insured of the landlord absent an express agreement between them to the contrary, comparable to the permissive-user feature of automobile insurance. Hanover Ins. Co. v. Honeywell, Inc., 200 F.Supp.2d 1305 (N.D. Okla. 2002). This principle is derived from a recognition of a relational reality, namely, that both landlord and tenant have an insurable interest in the rented premises—the former owns the fee and the latter has a possessory interest. It is permissible under the Sutton doctrine for a landlord and tenant to enter into an express agreement or lease provision that would place responsibility for fire damage upon the tenant.

This individual provides adjusting services which can be contracted by any insurance company in need of an adjusting expert to assess the claim and is generally not directly associated with any particular insurance company.

An insurance adjuster acts on behalf of an insurer. King v. National Sec. Fire and Cas. Co., 656 So.2d 1338, 1339 (1995). Courts have noted that because the relationship between an independent adjuster and an insurer is contractual, the adjuster is subject to the control of the insurer, to which it owes a duty.

Thus, as the Arizona Court held, “the relationship between adjuster and insured is sufficiently attenuated by the insurer’s control over the adjuster to be an important factor that militates against imposing a further duty on the adjuster to the insured.” Koch v. Bell, Lewis & Associates, Inc., 176 N.C.App. 736, 739 (2006). See also Trinity Baptist Church v. Brotherhood Mut. Ins. Services, LLC Further, 341 P.3d 75, 83 (Okla. 2014) (“An independent adjuster hired by an insurer owes no duty of care to the insured”).

An insured only has a cause of action against an independent adjuster for intentional torts and has no cause of action against independent insurance adjuster on a theory of simple negligence. King v. National Sec. Fire and Cas. Co., 656 So.2d at 1339 (1995). Conversely, an insurance adjuster’s breach of duties to an insurer subjects adjuster to liability for insurer’s resulting loss, and insurer can seek indemnity for liability accruing from adjuster’s negligence. Id. 

Duties of insurance adjuster vary and are defined by terms of contract between insurer and adjuster. Id. 

Property damage claims occasionally involve injury or death to the property occupants. Personal injury claims and wrongful death claims typically require experts and evidence preservation.

Due to the often complex and varying nature of the law throughout different jurisdictions, it is frequently advisable to consult with a lawyer when dealing with injury law. The information contained herein shall not be taken or construed as legal advice.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with injury law. The information contained herein shall not be taken or construed as legal advice.

Inland marine insurance indemnifies loss to specialized types of property. It generally involves property coverage for any moveable property including an instrument of transportation at a fixed location. 

When one insured under a shared insurance policy is to blame for the loss or damage of the property, this person is the wrongdoer. In joint property ownership, when the other policyholder was not involved in intentional property damage or loss they are deemed the innocent co-insured. Innocent parties may experience a difficult time in receiving settlement for an insurance claim under these circumstances.

Under the innocent co-insured doctrine, an “innocent co-insured may recover under an insurance policy even where the loss was caused by a co-insured’s intentional acts, unless the insurance policy makes clear that it provided only for joint, rather than several, coverage.” Auto-Owners Insurance Co. v. Eddinger, 366 So.2d 123, 124 (Fla. Ct. App. 1979). “Generally speaking, the determination of the question whether an innocent coinsured may recover on fire insurance after another coinsured has intentionally burned the covered property ordinarily depends upon whether the interests of the coinsureds are joint or severable.” Modern authority favors allowing recovery by an innocent co-insured unless the policy clearly states otherwise. Atlas Assur. Co. of America v. Mistic, 822 P.2d 897, 899 (Alaska 1991). 

Existence of the doctrine depends on the language of the policy in most jurisdictions. Courts have contrasted the term “an insured” with the term “any insured.” In State Farm Fire and Cas. Ins. Co. v. Kane, The U.S. District Court for the Southern District of Florida held that an innocent co-insured may not recover where the policy stated that it would be void if “any insured” engaged in fraud. 715 F.Supp. 1558 (S.D.Fla. 1989). The court reasoned that the phrase “any insured” expresses intent to create joint obligations between the co-insureds, therefore leaving an innocent co-insured liable for the intentional acts of the other. The 11th Circuit stated in Michigan Millers Miut. Ins. Corp. v. Benfield that “an insured,” unlike “any insured,” is ambiguous because a reasonable person reading the contract could not determine whether “an insured” established joint or several liability. 140 F.3d 915 (11th Cir. 1998). The court later held that if the insureds are not referred to in the policy, then it would be construed as an ambiguous term in favor of the innocent co-insured.

For more information, please see this article.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with issues surrounding innocent co-insured parties. The information contained herein shall not be taken or construed as legal advice.

Someone who receives commission for signing insurance policies from multiple insurance carriers to find the customer the most suitable policy for that person.

Most personal insurance policies and a significant portion of commercial insurance policies cover risks that are relatively small in nature. As a result, the majority of contact between the insurer and the insured occurs indirectly, via agents and brokers who operate primarily from small offices spread throughout most city neighborhoods and small towns across the country. Couch on Insurance Third Edition § 1:2.

An insurance agent has only the authority that is conferred upon him or her by his or her principal, the insured, or as arises by operation of law. Couch on Insurance Third Edition § 46:1, citing Lewis v. Michigan Millers Mut. Ins. Co., 154 Conn. 660 (1967). A broker has no final authority to act on behalf of an insured absent proof that the broker by custom or otherwise was clothed with apparent authority to make a binding contract for the insured. Delchamps Ins. Agency v. Diaz, 178 So. 2d 325 (La. Ct. App. 4th Cir. 1965). 

The agent of the insured owes to the insured the duty to act loyally, sometimes characterized as in the capacity of a fiduciary. Browder v. Hanley Dawson Cadillac Co., 379 N.E.2d 1206 (Ill. App. Ct. 1st Dist. 1978). This is true even though the agent receives commissions from the insurer while acting as an agent for the insured in procuring the policy. Id. Despite the agent’s general duty to obey the instructions of the insured, the agent may under certain circumstances exercise a discretion as to whether to act or how to act or may be expressly granted that discretion by the insured. Couch on Insurance Third Edition § 46:29. As in the case of agents generally, the law excuses a strict compliance with instructions when some special or unexpected emergency or necessity would render the compliance impracticable or impossible or when it would defeat the very purpose intended to be accomplished. Id.

An agent employed to effect insurance must exercise such reasonable skill and ordinary diligence as may fairly be expected from a person in his or her profession or situation, in doing what is necessary in every aspect of the profession, including but not limited to: effecting a policy, seeing that it effectually covers the property to be insured, and selecting the insurer. Couch on Insurance Third Edition § 46:29. 

In the property context, the amount and extent of property insurance coverage in a policy. 

Insurance law is the highly specialized practice of law surrounding insurance, including claims and policies. 

The person in an insurance contract who will receive a certain sum in the event of a specified event occurring within policy provision.

A typical Homeowner’s policy defines the “Insured” as:

“a. You and residents of your household who are:

1. Your relatives; or
2. Other persons under the age of 21 and in your care or the care of a resident of your household who is your relative;

b. A student enrolled in school full-time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:

1. 24 and your relative; or
2. 21 and in your care or the care of a resident of your household who is your relative; or

c.

1. With respect to animals or watercraft to which this policy applies, any person or organization legally responsible for these animals or watercraft which are owned by you or any person described in 5. a. or b. “Insured” does not mean a person or organization using or having custody of these animals or watercraft in the course of any business or without consent of the owner; or
2. With respect to a motor vehicle to which the policy applies:
   1. Persons while engaged in your employ or that of any person described in 5.a. or b.; or
   2. Other persons using the vehicle on an insured location with your consent.” When the word an immediately precedes the word insured, the words an insured together mean one or more insureds.”  HO 00 03.

The “where,” dictating the parameters of authority and control needed to make legal decisions and judgments in certain situations.

Jurisdiction defines judicial power; it is “the power of courts” to “inquire into facts, apply the law, make decisions, and declare judgment.” Police Com’r of Boston v. Municipal Court of Dorchester Dist., 374 Mass. 640, 662-63 (1978). The analysis of “where” to bring the action encompasses the extremely important question of which jurisdiction—federal or state, and if state, which state—as well as which venue within that jurisdiction. Couch on Insurance Third Edition § 227:1.

Resolution of these issues is increasingly determined by reference to explicit statutes and rules of procedure, all of which operate within the somewhat shifting boundaries of the constitutional requirements of due process. Id. Where an action is instituted is the plaintiff’s choice initially. Defendants are able to challenge this choice through various devices including: an objection that the chosen jurisdiction is improper under the constitution, statutes, or rule; arguments that although the jurisdiction is technically proper, the court should abstain from exercising that jurisdiction; and claims that while the jurisdiction itself is a proper one, the case is either improperly venued or should be transferred to a “better” venue even though initial venue is technically proper. Id.

An insurance policy purchased in case a person whom the business is dependent on for continued success is lost so that the business could continue to function from the payout.

A nonperformance of a condition that the policy depends on being performed which results in the termination of the policy.

“Lapse” refers to termination of coverage at the end of the policy period resulting from the insured’s failure to pay future premiums or otherwise manifesting the intent not to renew. See Scott v. Federal Life Ins. Co., 200 CA2d 384, 391-392 (1962). “An express provision of an insurance contract stipulating that a default in payment renders the policy void or causes it to lapse is valid, and a default in such payment ordinarily forfeits the policy where statutory provisions are not violated.” Id. As a rule, the insurer does not act in bad faith by denying a claim on the basis that the policy lapsed where there is credible evidence that payment of premiums was made outside the grace period.  However, where the insurer had an established pattern of accepting premium payments after expiration of the contractual 31-day grace period with the intent to deny coverage when a claim was made, imposition of the penalty was warranted.

A Life insurance policy is an insurance contract in which the insured pays a premium to the insurer so upon the insured’s death or at a specified date, the insurer will pay a certain sum of money or benefits to the policyholder’s beneficiaries.

Life insurance is particularly apt to give rise to competing claims to the proceeds. Couch on Insurance 3d § 179:19. Some practitioners suggest that this phenomenon is a function of the ability to name and change beneficiaries (and to falsely tell people that they have been named as beneficiary) and the general lack of need for a beneficiary to have an insurable interest when the insured purchases the policy. Id.

Since these competing claims frequently take considerable time to be resolved, local statute or court rule commonly allows the insurer to pay any admittedly due proceeds into court pending a final resolution. Id.  When the insurer deposits the amount of the policy with the court pending a determination of the proper distribution, it is generally held that the insurer is not liable for interest on the policy after the date of such deposit. There is some disagreement concerning interest on the funds for the interim between the death of the insured and the deposit with the court. By one view, there is no right to interest on the policy from the date of the insured’s death until payment into court unless there has been an unreasonable delay in making such deposit. Keyser v. Gieda, 16 Pa. D. & C. 619 (C.P. 1931). By another view of the matter, however, a life insurance company is required to pay interest on the policy proceeds for the interim between the receipt of proof of death and payment of the proceeds into court as part of an interpleader action. Atlin v. Security-Connecticut Life Ins. Co., 788 F.2d 139 (3d Cir. 1986) (applying Pennsylvania law).

Before an insurance company can pursue any type of reimbursement for themselves or subrogation, they must first compensate their insured for all damages suffered according to this equitable insurance law principle.

The Made Whole Doctrine provides that, whether in the context of a reimbursement request, offset, or direct subrogation action, a fault-free insured must be made whole for their entire loss before an insurer may offset or recover its own payments. The “made whole doctrine,” provides that “the insurer may enforce its subrogation rights only after the insured has been fully compensated for all of its loss.” United States v. Lara, 2009 WL 3754069, at *2 (D.Conn. Nov. 6, 2009). Thus, when insurance coverage compensates a policyholder for less than the full loss, the insurer must first use any recovery from a third-party to compensate the policyholder for the remainder of its loss before keeping anything for itself. See Fireman’s Fund Ins. Co. v. TD Banknorth Ins. Agency Inc., 644 F.3d 166 (2nd Cir. 2011). The made whole principle is a “rule of interpretation” that can be signed away; it is thus a default rule that “only exists when the parties are silent.” Barnes v. Indep. Auto. Dealers Ass’n of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389, 1394 (9th Cir.1995).

In Arkansas, an insurer’s subrogation right is secondary to the right of the insured. Green v. Ford Motor Co., 2011 WL 2666198 (W.D. Ark. 2011). An insured should not recover more than that which fully compensates him, and an insurer should not recover any payments that should rightfully go to the insured so that he is fully compensated. Id. In California, the rule operates so that it generally precludes an insurer from recovering any third-party funds unless and until the insured has been made whole for the loss. Progressive West Ins. Co. v. Yolo County Superior Ct., 135 Cal.App.4th 263 (Cal. App. 2005).

Insurance coverage for property in any stage of a maritime voyage or on navigable waters which the property’s owner has bought an insurance policy for.

Generally, when a plaintiff’s claims support admiralty jurisdiction, the court will apply federal admiralty law. Smith v. Carnival Corp., 584 F.Supp.2d 1343 (S.D. Fla. 2008); See Everhart v. Royal Caribbean Cruises Ltd., 2008 WL 717795, at *2 (S.D.Fla. 2008) (discussing the threshold requirements of maritime situs and maritime nexus to bring the suit in federal courts). This applies to insurance coverage disputes if the existence of admiralty jurisdiction over the dispute exists. Folksamerica Reinsurance Co. v. Clean Water of New York, Inc., 413 F.3d 307 (2nd Cir. 2005).

There are, “three traditional forms of marine insurance—hull insurance, cargo insurance, and protection and indemnity insurance.” Id. at 311. Courts have concluded that a typical Commerical General Liability policy, “simply lacks the genuinely salty flavor necessary to constitute a maritime contract.” Id. 

Courts have found very few “clean lines between maritime and non-maritime contracts,” including insurance policies. Norfolk S. Ry. Co. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 23 (2004). The boundaries of admiralty jurisdiction over contracts are conceptual rather than spatial and defined by the purpose of the jurisdictional grant. Id. (quoting Kossick v. United Fruit Co., 365 U.S. 731 (1961)). To protect maritime commerce, the Supreme Court of the United States has instructed Courts to look to the contract’s “ ‘nature and character’ ” to see “whether it has ‘reference to maritime service or maritime transactions,’ ” Folksamerica Reinsurance Co. v. Clean Water of New York, Inc., 413 F.3d at 312 (quoting N. Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119, 125, 39 S.Ct. 221, 63 L.Ed. 510 (1919)).

“Under the old, now outdated rule, [admiralty] jurisdiction was said to be reserved to ‘contracts, claims, and services purely maritime,’” Rea v. The Eclipse, 135 U.S. 599, 608 (1890). The test has since been loosened, “considerably.” Sirius Ins. Co. (UK) Ltd. v. Collins, 16 F.3d 34, 36 (2nd. Cir. 1994). The Supreme Court has recognized “two exceptions to the general rule that ‘mixed’ contracts fall outside admiralty jurisdiction.” Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 109 (2d Cir.1997). The first: “[T]hat a federal court can exercise admiralty jurisdiction over a ‘mixed’ contract if … the claim arises from a breach of maritime obligations that are severable from the non-maritime obligations of the contract.” Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 555 (2d Cir.2000); The second exception allows courts to exercise admiralty jurisdiction where the non-maritime elements of a contract are “merely incidental” to the maritime ones. Transatlantic Marine Claims Agency, 109 F.3d at 109.

Depending on the language, nature, and character of the insurance policy, it may be considered a maritime contract, and therefore subject to federal jurisidicton.  

Matching is a principle that is generally unique to the insurance industry, yet it is a prominent consideration in almost all property claims. A matching issue arises when, following a loss, the repair or replacement of a damaged portion of property will result in a mismatched appearance with an undamaged portion of the same property. As a result of the mismatched appearance, the insured seeks payment for the replacement of the undamaged portion of the property.

Matching issues often arise in losses concerning damage to flooring, roofing, siding, interior walls, cabinetry, windows, trim, and other finishes. Mismatches potentially arise due to age, wear, color, size, shape, availability of materials, or other visual qualities.

Generally, the principle of matching only applies when the property had a uniform, matching appearance prior to the loss.  For example, if the siding of a large building is damaged in a storm on two sides, and siding that matches the other two sides of the building is unavailable, then courts in some jurisdictions have concluded that “the only sensible result is to treat the damage as having occurred to the building’s siding as a whole”. If the building owner “were to replace the siding on the damaged south and west elevations with siding that did not match that on the undamaged north and east elevations, it could not possibly be said that they had been made whole, for it would be left with a building suffering from a glaring and profound flaw.” Windridge of Naperville Condominium Ass’n v. Philadelphia Indem. Ins. Co., 932 F.3d 1035, 1038 (7th Cir. 2019). 

To view an article concerning matching, click here.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with matching. The information contained herein shall not be taken or construed as legal advice.

A nonbinding dispute resolution forum. The technique requires a mediator to work with the opposing parties to adjust or settle the dispute.

Mediation is essentially a form of “assisted negotiations” in which the parties agree to enlist the help of a neutral third party to assist the negotiating parties in reaching mutually acceptable terms of settlement. As mediation is, by definition, a nonbinding proceeding, its results leave considerable room for further dispute, including rejection of the mediation result or award and consequent determinations of whether the rejecting party can be forced to pay the cost of mediation (especially if the subsequent litigation is no more favorable to it than the mediation award that was rejected). Couch – Insurance 3d. § 209:5.

Virtually all states have promulgated statutes or court rules providing for varying degrees of confidentiality in mediation. Leary v. Geoghan, 2002 WL 32140255 (Mass.App.Ct. 2002). The underlying rationale of these statutes and rules is that confidentiality is crucial to the effectiveness of mediation. Id. As one commentator has explained: “The willingness of mediat[ing] parties to ‘open up’ is essential to the success of the process. Id. The mediation process is purposefully informal to encourage a broad range discussion of facts, feelings, issues, underlying interests and possible solutions to the parties’ conflict. Id. Mediation’s private setting invites parties to speak openly, with complete candor. Id.  Without adequate legal protection, a party’s candor in mediation might well be ‘rewarded’ by a discovery request or the revelation of mediation information at trial.

A principal purpose of the mediation privilege is to provide mediating parties protection against these downside risks of a failed mediation. Id. Participation will diminish if perceptions of confidentiality are not matched by reality. Leary v. Geoghan, 2002 WL 32140255. Another critical purpose of the privilege is to maintain the public’s perception that individual mediators and the mediation process are neutral and unbiased. Id. 

An insured’s failure to a attend court-ordered mediation conference can warrant imposition of sanctions, despite contentions that, “[insurer] had the exclusive right to decide to defend or settle a claim or suit within policy limits; that [insureds] had no authority to bind insurer to any settlement; and that [insureds’] counsel, who attended mediation, had full settlement authority on insurer’s behalf. Mash v. Lugo, 49 So. 3d 829, 830 (Fla. Dist. Ct. App. 5th Dist. 2010). An appellate ruling governing attendance at mediation conferences requires attendance by the party and a representative of the insurer, in addition to counsel. Id.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with mediation. The information contained herein shall not be taken or construed as legal advice.

Mortgage is the note used for a money loan taken out by a debtor which comes with the promise that the debtor will pay back the loan with interest to the creditor in exchange for the property title, once the loan is paid off. The clause specifies the obligations of the mortgagee to continue providing coverage. This property insurance provision provides security to the mortgagee by producing a separate contract between the insurer and the mortgagee instituting that a loss to mortgaged property is payable to the established mortgagee. 

A failure to exercise reasonable care resulting in damage or loss.

In any negligence case, a plaintiff must prove at minimum: (1) the existence of a duty; (2) breach of that duty; (3) causation between the breach of duty; and (4) the plaintiff’s injury and damages. Hayes v. D.C.I. Properties-D KY, LLC, 563 S.W.3d 619 (Ky. 2018).

Recovery on an accident insurance policy is not defeated by the mere fact that ordinary negligence of the insured contributed to the occurrence of the accident, unless the policy expressly excepts from the risk accidents due to the negligence of the insured. See Cranfill v. Aetna Life Ins. Co., 49 P.3d 703 (Okla. 2002) (stating the mere fact that an insured’s death may have resulted from his or her own negligence does not prevent that death from being accidental under the plain meaning of the word “accident”).

The insured’s negligence contributing to the occurrence of the accident should be distinguished from “negligent” actions of the insured following the accident. If the post-accident conduct is such that it may be said to be the cause, or at least a contributing cause, of the ultimate injury or death, the requisite causal connection between the accident and loss may be broken. For example, an insured who stepped into a water-filled hole, wetting one leg to the hip, yet continued his duck hunting for several hours on a chilly morning, was not entitled to recover for the ensuing disabling tuberculosis under an accident policy covering loss caused by accident “independent of all other causes.” See Troupe v. Benefit Ass’n of Ry. Employees, 57 S.D. 147 (1930).

Coverage for any and all loss or damages to the insured’s property, except for any coverage exclusion(s) in the policy.

Insurance coverage to fix, replace, or upgrade property which has suffered a loss that is now required to meet additional building codes or local specifications that may have been nonexistent prior to the accident.

For purposes of Ordinance and Law coverage under a property insurance policy, “Ordinance and Law” is the cost of bringing any structure (e.g., a roof) into compliance with applicable ordinances or laws. Jossfolk v. United Property & Cas. Ins. Co., 110 So.3d 110 (Fla. Dist. Ct. App. 4th 2013). “Ordinance and law coverage provides additional reimbursement to the insured … to cover ‘costs necessary to meet applicable laws and ordinances regulating the construction, use, or repair of any property.’ ” Venture Construction Group of Florida, Inc. v. American Guarantee and Liability Insurance Company, 2018 WL 8353912 (S.D. Fla. 2018), quoting Noa v. Florida Insurance Guaranty Association, 215 So.3d 141, 143 (Fla. 3d DCA 2017).

Civil authority exclusions to all-risk policies often state that an insurer will not pay for losses resulting from the enforcement of a civil law or ordinance regulating the construction, repair, or demolition of a building or other structure unless endorsed to the policy. Couch on Insurance 3d § 152:27. This language bars liability where repair or replacement of existing structures is necessitated solely by an ordinance or law. Id. However, where damage occurs due to a covered peril, courts are split over the question of whether this type of provision excludes coverage for increased costs of rebuilding necessitated by ordinances or building code changes. Id.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with ordinance or law coverage. The information contained herein shall not be taken or construed as legal advice.

The investigation after an insurance claim is filed to retrieve the source and the events leading up to the loss or damage of the insured’s property.

Provision to determine the allocation of coverage in a claim involving multiple insurers without allowing the insured to profit from the loss and to minimize a particular company’s liability.

“Other” or “double” insurance exists where two or more policies of insurance are effected that 1) cover the same interest in the same, or part of the same, property; 2) cover against the same risk; and 3) are either in the name or for the benefit of the same person. Couch on Insurance 3d § 169:9. Other insurance clauses address rules for determining responsibility if more than one coverage is considered to apply. Id. Other insurance clauses are generally of three types: (1) calling for proration of coverage between the multiple policies; (2) stating that the policy will be “excess” to any other applicable coverage; (3) seeking to avoid any contribution at all. Id.

In the absence of any provision to the contrary, one policy of insurance is not rendered void by the insured’s obtaining additional insurance of the same subject matter against the same risk. Couch on Insurance 3d § 98:1. However, a condition is ordinarily inserted in policies insuring property that stipulates that the policy shall be void in case of other, additional, or double insurance upon the property covered by the policy, without the consent of the insurer. Id. This provision exists in order to remove any chance that double insurance will allow the insured to profit from a loss, thereby providing an incentive for fraud or, at the least, providing little incentive to protect against a loss, insurers quite commonly address the right of the insured to carry other insurance on the same risk. Id. 

The general contractor’s time and expenses quantified as a percentage of the job’s total cost, which considerably differs depending on the contractor.

Overhead and profit are costs included in repair estimates and paid to contractors pursuant to contracts for repairs.  

Specifically, overhead includes “fixed costs to run the contractor’s business, such as salaries, rent, utilities, and licenses.” Trinidad v. Florida Peninsula Ins. Co., 121 So.3d 433, 436 (Fla. 2013). Profit “is the amount the contractor expects to earn for his services.” Id. 

Courts have held that there clearly are certain types of property damage claims which will not require the services of a general contractor. An example is where the loss involves only a damaged pipe, and a plumber alone normally would be called to perform all necessary repairs. They held that there are some types of covered losses where the services of a general contractor normally would not be utilized. Thus, in some cases, contractor expenses would not have to be included in repair or replacement cost estimates. Mee v. Safeco Ins. Co. of America, 908 A.2d 344 (Pa. Super. 2006). There are many instances where the insured reasonably would be expected to call a contractor, especially where there is extensive damage to a home requiring the use of more than one trade specialist. 

Partial Claim Denial occurs when one apect of the claim is denied, but coverage may be afforded for other parts of the claim. 

The different parts of  the insurance policy include the declarations, the agreement conditions, policy exclusions, definitions of vocabulary, related deductibles, endorsements, and the premium amount.

Generally, the law recognizes a natural presumption that identical words used in different parts of insurance policy are intended to have the same meaning, but this presumption is not rigid and readily yields when the text uses the words in such various connections that it warrants the conclusion that they were employed in different parts of the act with different intent. Couch on Insurance 39 § 22:2; See RSUI Indemnity Company v. The Lynd Company, 466 S.W.3d 113 (Tex. 2015). Other parts of an insurance policy are an important source of guidance regarding the plain meaning of an insurance policy term, particularly when the term contains a word used elsewhere in the policy. Principles of the Law of Liability Insurance § 4 DD (2012).

Endorsements, riders, marginal references, and other similar writings are a part of the contract of insurance and are to be read and construed with the policy proper. See Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767 (2009). A “rider” or “endorsement” is a writing added or attached to a policy or certificate of insurance that expands or restricts its benefits or excludes certain conditions from coverage; when properly incorporated into the policy, the policy and the rider or endorsement together constitute parts of the contract of insurance and are to be read together to determine the contract actually intended by the parties. 

The cause of a loss from risks and hazards. A peril is a thing to be insured against.

While some policies are “all-risk” policies, with specific perils listed to be excluded from coverage, others list specific perils to be covered. A policy cannot extend coverage for a specified peril, then exclude coverage for a loss caused by a combination of the covered peril and an excluded peril, without regard to whether the covered peril was the predominant or efficient proximate cause of the loss. Vardanyan v. AMCO Ins. Co., 243 Cal.App.4th 779, 796 (2015). “[I]n an action upon an all-risks policy … (unlike a specific peril policy), the insured does not have to prove that the peril proximately causing the loss was covered by the policy. This is because the policy covers all risks save for those risks specifically excluded by the policy. The insurer, though, since it is denying liability upon the policy, must prove the policy’s noncoverage of the insured’s loss–that is, that the insured’s loss was proximately caused by a peril specifically excluded from the coverage of the policy.” Id. at 796-97, quoting Strubble v. United Services Auto. Assn., 35 Cal.App.3d 498, 504 (1973).

Due to the substantial effect that the interpretation of clauses listing perils, either to be covered or excluded, can have upon the existance of coverage, the language surrounding these clauses is the subject of much dispute and litigation. 

The amount of payout given to the insured during the time needed to repair or replace loss or damage. The timeframe starts when the incident occurs and ends at the time of the property being fixed and can function normally.

A “period of restoration” is defined as ending “when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality.” Lava Trading Inc. v. Hartford Fire Ins. Co., 365 F.Supp.2d 434, 442 (S.D. N.Y. 2005). It is often found in the context of Business Interruption clauses, limiting the time that the insurer covers interruption of business so that the space may be restored to its pre-loss condition. An example of a period of restoration clause is: “Business Interruption clauses shall not exceed such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair, or replace such property that has been destroyed or damaged” (the “Restoration Period”).

On their face, a period of restoration clause envisions a hypothetical or constructive (as opposed to actual) time frame for rebuilding, as evidenced, for example, by their use of the subjunctive “would.” Duane Reade, Inc. v. St. Paul Fire and Marine Ins. Co., 411 F.3d 384, 392 (2nd Cir. 2005).

Insurance coverage protecting the rights of the policyholder which provides coverage for bodily injury, property damage, and sometimes violations of privacy, including slander, libel, and defamation.

Both tangible and intangible items, owned by an individual for which a market or cash value can be determined. Generally, personal property is covered in homeowners policies, often refered to as ‘Coverage C’, and will replace personal belongings up to the limits of the policy.

The section of an insurance policy that sets forth contingencies for the insured and the insurer pertaining to matters such as the insured’s duties after a loss, including loss reporting and settlement, property valuation, subrogation rights, and cancellation and modification. The policy conditions are usually stipulated in the coverage form of the insurance policy.

The amount of money paid by the policyholder to their insurance carrier for the indemnity of claims made which are specifically covered in the policy.

The insured’s failure to pay the policy’s premium can result in the cancelation of the policy and the denial of all claims under that policy. Stennett-Bailey v. Allstate Insurance Company, 91 N.Y.S.3d 155 (2d Dep’t 2018). If the insurer notifies the insured that the policy will be canceled if the premium is not paid on time, the insurer can cancel the policy even if the premium is paid, but after the agreed upon deadline. Id.; See also State Farm Mut. Auto. Ins. Co. v. Abercrombie, 212 Ark. 855 (1948). “The court should give an instructed verdict for the insurer as requested, where the proof shows that the insured had an automobile liability policy which provided that failure to pay the premium would void the policy, and all evidence shows that the premium due on a particular date was never paid and that the automobile liability policy was cancelled for such nonpayment prior to the date of the accident. Id.   

Subject to the agreement between insured and insurer, failure to pay premiums will not always end in the cancellation of the policy. Since unpaid premiums generally amount to a “debt” from the insured to the insurer, the insurer may reduce the proceeds of the an insurance policy by any amounts so owed instead of cancelling coverage. See Bensinger v. California Life Ins. Co., 459 S.W.2d 511 (Mo. Ct. App. 1970). In the context of life insurance, if the insured’s death occurs during a period of grace for payment of the premium under the policy, the amount of the policy becomes due- less any premium due the insurer. Id. 

Evidence presented in a statement requesting the total indemnity needed to cover the loss or damages done within a timely manner.

In the event a policyholder disagrees with the insurer’s adjustment, settlement, or payment of the claim, a policyholder may submit to the insurer a proof of loss within a time period set forth in the language of the policy, usually one year from the date of the loss. The primary purpose of a proof of loss, which is to provide notice to the insurer of the claim. Wientjes v. American Bankers Ins. Co. of Florida, 339 Fed.Appx. 483 (5th Cir. 2009).

Property damage often results from third party negligence. Typically these claims require experts and evidence preservation.

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with property damage third party law. The information contained herein shall not be taken or construed as legal advice.

When two different insurers are obligated to provide the insured protection, each insurer must share in the burden of defense.

Policies of property, automobile, and commercial general liability insurance commonly contain pro rata provisions. Though these clauses may be worded differently, in their essence, they provide that where the insured has other insurance against a loss covered by the policy the insurer shall not be liable for a greater proportion of such loss than the applicable limit of liability stated therein bears to the total applicable limit of liability of all insurance against such loss. Couch on Insurance 3d § 219:27 A “pro rata clause” apportions liability among concurrent insurers. Cincinnati Ins. Co. v. American Alternative Ins. Corp., 866 N.E.2d 326 (Ind. Ct. App. 2007).

The insured’s advocate hired for his or her specialization in property claims and the negotiation of an insurance claim.

The responsibility of the homeowner to use reasonable care to maintain heat in the building and shut off the water supply as well as drain the system appliances of water if the dwelling is to be vacant for some period of time.

Many policies have an exclusion for damages caused by freezing. An exception to this exclusion in a homeowner’s policy exists if insured used reasonable care to maintain heat in a building or if insured shut off water supply and drained plumbing and appliances of water.  Jugan v. Economy Premier Assurance Company, 728 Fed.Appx. 86 (3rd Cir. 2018). If the insured shows  they used reasonable care to maintain heat in home, or evidence establishing a reasonable expectation of coverage under policy given the circumstances, then the application of exclusion is precluded so that coverage for insured homeowners after a home and its contents sustained water damage due to a freezing is not barred. Id. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with reasonable care to maintain heat. The information contained herein shall not be taken or construed as legal advice.

In Massachusetts, the appraisal process after a fire loss is referred to as a reference proceeding. It is well established that a reference consists of, “three disinterested men, the company and the insured each choosing one out of three persons to be named by the other, and the third being selected by the two so chosen.” Paris v. Hamburg-Bremen Fire Ins. Co., 204 Mass. 90 (1910). Many policies stipulate that a reference, unless waived by the parties, shall be a condition precedent to any right of action in law or equity, to recover for such loss. Union Institution for Savings v. Phoenix Insurance Company, 196 Mass. 230, (1907). 

The relevant Massachusetts statute reads:

“In case of loss under this policy and a failure of the parties to agree as to the amount of loss, it is mutually agreed that the amount of such loss shall be referred to three disinterested men, the company and the insured each choosing one out of three persons to be named by the other, and the third being selected by the two so chosen; and the award in writing by a majority of the referees shall be conclusive and final upon the parties as to the amount of loss or damage, and such reference, unless waived by the parties, shall be a condition precedent to any right of action in law or equity to recover for such loss; but no person shall be chosen or act as a referee, against the objection of either party, who has acted in a like capacity within four months.” M.G.L.A. 175 § 99. 

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with references. The information contained herein shall not be taken or construed as legal advice.

The mutually understood need to revise a previously instated insurance policy based on a mistake, in order to express the true intent of the agreement between all of the parties.

An insurance policy is subject to reformation precisely as any other written instrument upon the same grounds and subject to the same limitations. Couch on Insurance 3d § 26:1. Further, a contract of reinsurance is subject to reformation under the same circumstances as an original contract of insurance. Id. Reformation is a proper remedy where the parties have reached a definite and explicit agreement. There must be an understanding that there is an agreement, but whether by mutual or common mistake, or mistake on one side and fraud or inequitable conduct on the other, the written contract fails to express this agreement. Reformation then corrects the policy so as to make it conform to their real intent, and the parties will be placed as they would have stood if the mistake had not occurred. Id. 

Actions for reformation of the insurance policy tend to be brought in a context where the plaintiffs also seek other relief to which they would be entitled under the reformed terms of the policy. Couch on Insurance 3d § 230:27

Remediation costs include “reasonable expenses incurred to investigate, quantify, monitor, mitigate, abate, remove, dispose, treat, neutralize, or immobilize ‘pollution conditions’ to the extent required by ‘environmental law.’” Louisiana Generating, L.L.C. v. Illinois Union Insurance Company, 831 F.3d 618, 623 (Cir. 5th 2016).

The amount owed to the insured for the replacement of an asset in present time, in order to bring the insured back to the same position they were in before the loss occurred.

Hypothetical replacement cost is an estimate of the costs of reproducing the destroyed property as it stood at the time of loss, not a calculation of the projected cost of the actual replacement property. Because the replacement property need only be “functionally similar” to its predecessor, it is inevitable that certain elements of the destroyed property will not be reproduced. Although the costs of these elements are not included in the actual replacement cost, they are included in the hypothetical replacement cost, which concerns only the projected expense of replacing what was destroyed. 

When assessing liability, an implicit instance of negligence that had to occur for the incident to even be possible. The direct translation in Latin is “the thing speaks for itself.”

Res ipsa loquitor is a doctrine found in tort common law that allows the inference of negligence on the part of the defendant to be made if these elements are met: (1) the instrumentality causing the damage must be in the exclusive control of the defendant; (2) the occurrence, in the ordinary course of things, would not have happened in the absence of negligence; (3) the occurrence must not be due to any voluntary act on the part of the plaintiff. Holt v. Summers, 942 S0.2d 284, 289 (Miss. Ct. App. 2006). If these elements are met, then the circumstances of the case are such that common knowledge and experience would justify the inference that the accident would not have happened in the absence of negligence. Hansen v. City of Pocatello, 145 Idaho 700, 702 (Idaho 2008).

A declaration by an insurer that there is a coverage issue and that coverage might not apply, which is sent to the insured. This allows the insurer extended time to investigate without waiving their right to later deny coverage based on the investigation’s findings.

The purpose of a reservation of rights is “to protect both the insurer and the insured by allowing an insurer who is uncertain of its obligations under the policy to undertake a defense while reserving its rights to ultimately deny coverage following its investigation.” Hoover v. Maxum Indem. Co., 291 Ga. 402, 404 (1) (2012). In most jurisdictions, acting under a “reservation of rights” is an established procedure. By this method, insurers can provide the insured a defense to liability and reserve for later the question whether the policy provides coverage. St. Paul Fire and Marine Ins. Co. v. Englemann, 639 N.W.2d 192 (2002). The insurer’s enhanced duty of good faith arises in a reservation-of-rights situation because, according to the insurance contract, the insurer has a duty to represent the insured on covered claims. A reservation of rights allows the insurer to challenge its liability on the underlying claim while still fulfilling its duty to represent the insured. Twin City Fire Ins. Co. v. Colonial Life & Acc. Ins. Co., 839 So.2d 614, 616 (Ala. 2002).

Due to the often complex and varying nature of the law throughout jurisdictions, it is frequently advisable to consult with a lawyer when dealing with reservations of rights. The information contained herein shall not be taken or construed as legal advice.

A type of liability defined as a hazard or peril which an insurer agrees to cover under the terms of the policy.

The basic definition of insurance requires risk shifting and risk distribution. Risk shifting is a mechanism that shifts risk from one party to another, typically the insurer, in return for a premium payment. Couch on Insurance 3d § 101:1.

Policies contain a risk requirement that the insured suffer some loss in order to be covered. In general, the loss must occur as a result of a fortuitous event, not one planned, intended, or anticipated. This risk requirement is imposed to eliminate the insured’s motive to commit fraud and thereby profit from an intentional act.

The “risk” covered by a policy may depend on circumstances that lead an insured to seek insurance coverage in the first instance. The “risk” covered by the policy is, in general, the category of loss or type of liability the insurer agreed to provide coverage for under the terms of the policy. Couch on Insurance 3d § 101:3. Typically, the insurer agrees to a broad scope of coverage under the insuring agreement, which is then narrowed by one or more exclusions or endorsements that specifically excludes or limits the risk from coverage. Id. citing West American Ins. Co. v. Prewitt, 401 F. Supp. 2d 781, 789 (E.D. Ky. 2005).

When coverage for the risk is in dispute, some jurisdictions may interpret the “risk” covered by the policy by the reasonable expectations of the insured or the insurer, if applicable. Reasonable expectations are determined not by what was actually intended but what a reasonable insured in light of the circumstances surrounding the positions of the parties would have understood the “risk” to mean. Couch on Insurance 3d citing Philadelphia Indem. Ins. Co. v. Barerra, 200 Ariz. 9, 18, 21 P.3d 395, 404 (2001). The majority of courts apply the doctrine of reasonable expectations only if policy wording is subject to differing interpretations. State Farm General Ins. Co. v. Mintarsih, 175 Cal. App. 4th 274 (2d Dist. 2009).

Two of the main categories of policies, named perils and all-risk policies, are distinguished by types of risks they provide coverage for. “Named perils” or “specific perils” policies provide coverage only for the specific risks enumerated in the policy and exclude all other risks. United Technologies Corp. v. American Home Assur. Co., 989 F. Supp. 128, 142 (D. Conn. 1997). “All-Risk” policies provide coverage for all risks unless the specific risk is excluded. North American Foreign Trading Corp. v. Mitsui Sumitomo Ins. USA, Inc., 413 F. Supp. 2d 295, 300–01 (S.D. N.Y. 2006). Nevertheless, “All-Risk” policies only insure against a loss that arises from a fortuitous event that is unexpected and not probable. Although designated an “All-Risk” policy, such policies are not considered an “all loss” policy because they contain various exclusions and do not in fact cover all losses.

The person employed by an organization who is responsible for recognizing, prioritizing, and dealing with liabilities and peril to avoid more serious burdens.

Damaged property that is unusable for its original purpose without repair or alteration. The salvage value is the assessment of the property’s recoverable worth at the time of the accident, taking the actual cash value and taking the annual depreciation and other deductions into account.

An official arrangement, under which the conditions for compensation are agreed upon between the two or more parties in order to resolve a dispute.

A deliberate or negligent act of concealing, destroying, constructing, or changing evidence pertinent to a legal proceeding.

“Under the spoliation of evidence rule, an adverse inference may be drawn against a party who destroys relevant evidence. Even though application of the rule could prove to be critical to a party’s recovery on a claim, it is not an affirmative defense, but a rule of evidence, to be administered at the discretion of the trial court.” Vodusek v. Bayliner Marine Corp.,71 F.3d 148, 155-56 (4th Cir. 1995). “Consequently, a party need not indicate its intent to invoke the spoliation rule in the pleadings.” Id. The remedy against a party to litigation for spoliation can be an independent cause of action for spoliation of evidence or other available remedies such as discovery sanctions and a rebuttable presumption of negligence for the underlying tort. See e.g. Martino v. Walmart Stores, Inc., 908 So.2d 342 (Fla. 2005).

Please consult an attorney to determine what the available sanctions may be in a specific jurisdiction. 

This individual is employed by an insurance company or self-insured entity and investigate, estimate, and/ or resolve insurance claims.

After the insurer pays the insured for a claim filed under the policy, if a third party was primarily liable for the accident, then the first party’s insurer has the right of subrogation. This means they can seek retribution for the wrongful act caused by the third party which they had to incur.

Subrogation itself is not unusual; in general terms, it “simply means substitution of one person for another; that is, one person is allowed to stand in the shoes of another and assert that person’s rights against a third party.” US Airways v. McCutchen, 569 U.S. 88, 97 n.5 (2013). In the insurance context, the “doctrine of subrogation enables an insurer that has paid an insured’s loss pursuant to a policy … to recoup the payment from the party responsible for the loss.” Daniels v. State Farm Mutual Automobile Insurance Company, 193 Wash.2d 563, 569-570 (2019). The right to pursue such a claim against the at-fault party is often included in insurance policies. Id. at 570.  

The insurance company subrogee, having stepped into the shoes of the insured subrogor, is entitled to assert all of the subrogor’s rights and claims against the responsible third party. US Airways v. McCutchen, 569 U.S. 88, 97 n.5 (2013). Likewise, the third party—now defending an action brought by the subrogee—is entitled to assert every defense it otherwise could have raised against the subrogor.  Id. In that vein, the third party’s liability to a subrogee cannot be greater than it would have been to the subrogor. Restatement (Third) of Restitution & Unjust Enrichment § 24. If the insured still has uncompensated injuries, both the insurer and insured will generally be looking to recover from the same third party by way of subrogation. That party’s own insurance and assets are not always sufficient to cover both claims.

In such circumstances, there is a high potential for conflict between insureds who wish to be compensated for the full extent of the damages they have suffered, and first-party insurers who expect to be reimbursed for amounts they have advanced to the insured. Daniels v. State Farm Mutual Automobile Insurance Company, 444 P.3d 582 (Wash. 2019). See The Made Whole Doctine for judicially imposed solution to this potential conflict between insured-subrogor and insurer-subrogee. 

A Sump Pump is a device used to remove water from the bottom level and/or foundation of a building to prevent water damage from flooding or water backup.

In the absence of a specific provision, whether backup constitutes “water,” within the meaning of a policy exclusion for damage caused by water, is an issue of fact to be determined at trial. See Sterling v. City of West Palm Beach, 595 So. 2d 284 (Fla. 4th DCA 1992) (discussing whether raw untreated sewage, which pours continuously from the insured’s bathtub and toilet after tree roots worked their way into sewer lines constitutes “water”).

Policies of insurance commonly do, however, specify that loss is not covered if caused by, resulting from, contributed to, or aggravated by water which backs up or overflows through sewers or drains. Couch on Insurance 3d § 155:71. This exclusion has not been limited to circumstances involving forces of nature. Thus, this common type of exclusion precludes coverage when, for example, sewage from a municipal sewerage system backs up into a dwelling house through a private sewer line. Courts in different jurisdictions vary on how they interpret such exclusions. You should consult an attorney to determine how such exclusions are interpreted in different jurisdictions. 

The occupant of a space rented out by the property’s landlord.

Third-party coverage insures against injury done by an insured to a third party’s property. “[T]he… question of insurance coverage under a third-party liability policy turns… on whether a third party has sustained injury to… its own property.” Agip Petroleum Co., Inc. v. Gulf Island Fabrication, Inc., 3 F.Supp.2d 754 (S.D. Tx. 1997). First- and third- party coverage protect against different risks and consumers pay substantially less for first party coverage than they do for third- party coverage. Pepper v. State Farm Mut. Auto. Ins. Co., 813 N.W.2d 921 (Minn. 2012).

When the insured property cannot be utilized in its current state and the price to repair it is greater than the actual cash value insured, the claim is considered a total loss.

Terms often employed for limiting coverage to only total loss include: actual total loss, constructive total loss, and compromised and/or arranged total loss. Couch on Insuracne 3d § 9:27. These total loss provisions are geared towards avoiding the need for investigation and evaluation of the extent of damage in situations when it is relatively obvious that the ultimate conclusion will be that the subject property is a total loss. Id. However, in certain situations, the application of this language is unclear and becomes the focus of a dispute between the reinsured and the reinsurer. Id.

An actual total loss occurs when the insured property no longer exists or is destroyed and a constructive loss is found when the cost of repairs exceeds the repaired value of the property. Id. citing American Marine Ins. Group v. Neptunia Ins. Co., 775 F. Supp. 703, 706 (S.D. N.Y. 1991). Where the reinsurer fails to define the meaning of total loss, courts have held that the reinsurance agreement was meant to allow recovery for any type of total loss, including a compromised or arranged total loss. See Id. 

Jurisdictions interpret the phrase “total loss” differently and you should accordingly consult an attorney to discuss the interpretation of total loss in your jurisdiction. 

An unbiased ‘referee’ selected by the court or the arbitrators as an expert in the field. This person provides a resolution agreement in the appraisal or arbitration process.

An umpire is a person selected by the arbitrators, pursuant to the authority of the submission, to decide the matter in controversy when the arbitrators are unable to agree. Couch on Insurance 3d § 211:2. The umpire is bound to hear and determine the case as if it originally had been referred to him for decision, and to make an award, in which neither of the original arbitrators is required to join in order to make it valid and binding on the parties. Id. In a typical “appraisal clause” in a homeowner’s policy, the insurer and the claimant each appoint an “appraiser.” The two appraisers then appoint this“impartial umpire” who is tasked with resolving issues between the appraisers, should they not agree. Cousino v. Stewart, 2005 WL 3120245 (Ohio. Ct. App. 2005).

The assessed and agreed upon amount of money fixed in the policy. An insured would pay this sum without having to find the actual cash value in a total loss.

The basic principle of a ‘valued policy’ statute is that parties to a fire insurance contract agree in advance on a valuation of the property to be insured, and, in the absence of fraud, this valuation is binding and not subject to judicial inquiry. Nathan v. St. Paul Mut. Ins. Co., 243 Minn. 430 (1955). Many states have enacted these statutes with the “underlying purpose of protecting an insured faced with the total destruction of his or her property.” St. Paul Reinsurance Co., Inc. v. Irons, 345 Ark. 187, 191 (2001). In cases where a total loss is involved, a clause that diminishes recovery to less than the full amount stated in the policy is void. Id.

An intentional and malicious act of damaging or decimating property not owned by the vandalizer.

Many policies cover “[v]andalism, meaning willful and malicious damage to, or destruction of the described property,” but exclude coverage for loss or damage “caused by or resulting from theft.” SJP Properties, Inc. v. Mount Vernon Fire Ins. Co., 2015 WL 4524337 (E.D.Mo. 2015). Some courts have construed the term “Vandalism” as an umbrella term that encompasses damage caused during a theft or attempted theft. For example, the Alabama Supreme court construed the term “vandalism” broadly in keeping with its common usage and concluded the policy provided “coverage for acts of vandalism or damage done to the building in connection with a burglary or theft.” Aetna Cas. & Sur. Co. v. Ardizone, 481 So.2d 380, 384 (Ala.1985).

Non-domestic animals that can be damaging to property.

Some property insurance policies contain special provisions that except coverage of loss caused by vermin, as well as other things, such as insects. See Christ Episcopal Church of Bastrop v. Church Ins. Co., 731 So.2d 1071 (La.App. 2 Cir. 1999) (excepting coverage for any damage to Chruch’s “organs, carillons, chimes, bells and other musical instruments” caused by vermin). Courts have held that the term vermin unambiguously includes rats and mice when included in the policy even absent a more specific definition contained within the policy. See North British & Mercantile Ins. Co. v. Mercer, 211 Ga. 161 (1954); Christ Episcopal Church of Bastrop v. Church Ins. Co., 731 So.2d 1071. However, absent a section within the policy that specifically defines ther term “vermin”, courts have held the exclusion ambiguous as to losses caused by other small animals and have therefore construed coverage in favor of the insured. See Jones v. American Economy Ins. Co., 672 S.W.2d 879 (Tex.App. 5th Dist.1984) (racoons); Umanoff v. Nationwide Mut. Fire Ins., 442 N.Y.S. 2d 892 (N.Y.City Civ.Ct.1981) (racoons); Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y.2d 386 (1962) (carpet beetles); North British & Mercantile Ins. Co. v. Mercer, 211 Ga. 161 (1954) (squirrels, and holding that rats and mice are unambiguously included in the vermin exclusion).

A type of loss covered by most insurance policies for an unforeseen and unintentional accident involving water. It is important that the insured understands the language of the policy to describe the covered and excluded peril. Water damage can cause mold, ice dams, decay, collapse, and more.

A typical insurance water loss exclusion provision does not cover loss to the property consisting of or caused by: (a) Flood; (b)Water that backs up through sewers or drains; (c) Water that overflows from a sump pump, sump pump well or other system designed for the removal of subsurface water; or (d) Water on or below the surface of the ground, regardless of its source, including water which exerts pressure on, or flows, seeps or leaks through any part of the residence premises.

Courts have construed this broadly in favor of the insurer, as, “an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.” Parks Real Estate Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir.2006). Due to the all encompassing language of water loss exclusions, courts have held that the insurer clearly shows intent to not insure against flooding or other water losses in the policy. See Platek v. Town of Hamburg, 24 N.Y.3d 688 (2015). Often, policies contain an exception to this exclusion if “sudden and accidental direct physical loss caused by fire, explosion or theft resulting from any of the items listed in water loss exclusion.” Id. at 688. 

Coverage to protect the insured from water and water-borne materials that affecting the property by accidental discharge, leakage, or overflow of the building’s plumbing systems. This type of loss is sometimes not covered by insurance policies.

A peril caused by high winds bringing damage and destruction to the insured property.