Best practices for securing insurance policy enhancements to coverage should not be a confusing issue. Insurance brokers, who are essential to placing coverage, offer pre-approved insurance policy enhancements to coverage, and shop for the best price. Some corporate policyholders stop there, which is great, until a claim comes in. When an insurer denies the claim, the policyholders rightly question why their claim was denied. All too often, the insurer cites to an insurance policy enhancement to coverage, that was not really an enhancement to coverage, but a limitation to coverage.
There is nothing better than a great insurance broker. But, not all brokers understand that the gold standard for insurance policy placement involves more than just price and adding pre-approved broker enhancements to coverage to the policy. Depending on the company, an integrated legal /broker team may be warranted. There, the broker focuses on price, and obtains the best language they can find. Then, the suggested program is evaluated by policyholder counsel to determine if the proposed language functions as intended. The result is that the policyholder binds the best possible coverage for their specific needs.
This is not a complicated or expensive process, but the essential piece, legal review, can be overlooked if policyholders conclude that pre-approved endorsements are all that is needed to secure the best possible coverage.
Price is Important But Price is Not the Only Factor
Focusing only on price is a disservice to corporate policyholders. The purpose of insurance is to provide coverage for claims. Insurers sell a promise, and that promise is only as good as the language contained in the insurance policy. Yet, Insurance policies are one sided. They are drafted by some of the best insurance company lawyers in the industry, and are designed to cover less rather than more. Standard form policies are marketed to brokers and policyholders with the understanding that many corporate policyholders will accept their terms and conditions, as proposed, without alteration.
Standard Policy “Improvements” Can Create More Issues Than They Solve
Naturally, most corporate policyholders push back on policy language. Insurers expect this and have contingencies to appease policyholders. Insurers and brokers have developed standard pre-approved “improvements” to coverage that are added by the broker as endorsements to the policy. The policyholder may then be told that they have all of the improvements, and that the coverage is great. The problem with these improvements, like the policy itself, is that they were expertly drafted by insurance company lawyers who understand insurance law in all 51 jurisdictions. Many times, an “improvement” to coverage actually takes away coverage afforded by recent case law. Hence, an insurance policy with all of the bells and whistles recommended by a broker in good faith, may provide less coverage than the original policy.
Learning From Insurance Company Practices
Insurance coverage for any given claim is determined by ever changing insurance case law and statutes. Insurers constantly monitor these developments, as it is a critical part of their business. Policy language is adjusted based on the law. Pre-approved forms are adjusted to limit coverage.
Policyholders, however, may unintentionally rely on insurance brokers to interpret the law and tell them what the policies cover. Insurance companies know this as well. But, insurance companies do not rely on insurance brokers to tell them what their policies mean. Instead, they rely on lawyers, and they have many of them at their disposal. See Where Have all of the Insurance Lawyers Gone
Fixing the Problem of Insurance Policy Enhancements to Coverage
Although insurers are intently focused on insurance law when approving policy language, policyholders are at a distinct disadvantage. Insurance brokers, upon who policyholders rely, don’t practice law and will readily admit that they cannot opine on what the policies cover . The best they can do, is try. And they do a valiant job at that. But, without an understanding of the law, their proposed adjustments to policy language may not be proper.
Selecting appropriate policyholder counsel for insurance policy review, however, can be difficult. Virtually every law firm in the country advertises their ability to review insurance policies. Most of these firms represent insurance carriers. Some openly claim that because they wrote the policy forms for insurers, they are uniquely suited to revise them for policyholders. That could be true, but it raises questions of loyalty, and makes one wonder if such a firm would later advise an insurer on how to avoid revisions they made for a policyholder, because they are, in fact, uniquely suited to do so. Call me old fashioned, but it does not seem right for a law firm to play on both sides of the corporate fence.
Either way, the best practice for securing insurance policy enhancements to coverage is for corporate policyholders is to not accept an insurance program without legal review.
Miller Friel represents corporate policyholders in insurance coverage disputes. We litigate and resolve complex insurance claims on behalf of some of the world’s finest companies. We also see the worst of the worst insurance company tactics. Some of this can be avoided if care is taken at the front end when policies are being underwritten.
The important thing is that policyholders find a corporate insurance recovery law firm to review their policies. There are many law firms doing this, but only a few are doing it correctly. Moreover, there are drastic differences in how effectively policyholder law firms address the problem. The important thing for policyholders to recognize is that the process of insurance policy placement, from start to finish, is one sided in favor of insurers.
Miller Friel handles insurance policy reviews for select corporate clients with complex insurance programs. For those we cannot serve, we are happy to recommend unbiased counsel to assist.