December 20, 2016

Retroactive Date Exclusions: Commonly Alleged, But Seldom Applicable

In today’s post, Brian Friel addresses one of the most common reasons for denial raised by insurance carriers today: retroactive date exclusions.  These retro-date exclusions have become a favorite reason for denial by insurance carriers, but they are seldom applicable.  In this video, Brian addresses a typical scenario.  A client came to us with a denial letter from its insurance carrier that relied primarily on a retro date exclusion. 

After carefully reviewing the policy, we determined that the retroactive date exclusion did not apply. We took our argument to the insurance company, explained our reasoning, and the insurance company retracted its denial, resulting in a multimillion dollar settlement for our client. 

This arc from denial letter, to coverage analysis, to positive outcome is highly repeatable.  We use this kind of approach for each and every one of our corporate policyholder insurance clients.  A denial letter from an insurance carrier is not the end of the road for an insurance claim; it is an invitation to re-examine the claim and negotiate.  Corporate policyholders have the opportunity to overturn a denial of coverage,  but this typically cannot be done without skilled legal assistance. 

Watch the video to learn more about how corporate policyholders can overturn insurance claim denials based on retroactive date exclusions, and please feel free to contact us if you have any questions. 

We have included a transcript of the video below:

Retroactive Date Exclusions: Commonly Alleged, But Seldom Applicable

One example we had a couple years ago was for an industrial client of ours. They received one of these very intimidating, very professional looking denial letters. Their initial reaction was, “I think the claim is denied.” Through their defense counsel, they got in touch with us, we took a look at the letter. One of the main reasons, really the real reason why the insurance company denied coverage was because there was an exclusion in the policy for any wrongful acts that occurred prior to September 2013, because that was the year of some event in the company, terms of an acquisition at around that time. They were not going to cover any wrongful acts that occurred prior to September of 2013.

The complaint that was filed, which is a very, very significant complaint with lots of exposure, in terms of money damages, had allegations of wrongful conduct back in 2011 and 2012. Insurance company cites to this exclusion, this basically what we call the prior dates exclusion, and says, “Coverage is not available.” The company was willing to accept that and give up this claim worth millions of dollars. We then took the letter and we did something else. We actually looked at the insurance policy. These are very complicated contracts. These are 50, 60, 80, even over 100 pages of lots of sections and provisions, exclusions, definitions, grants of coverage, and then we have all of these endorsements, which are basically modifications to a form policy. There could be 10 endorsements. There could be 50 endorsements.

To make things even more confusing, the endorsements sometimes are issued at different times even during the policy period, and in some endorsements, later endorsements will actually nullify or modify an early endorsement, which in turn had already modified or nullified the original policy provision in the policy. You could see how confusing this can get.

We went through like we always do and read every one of these terms, conditions, endorsements in the policy. There was an endorsement. There were about 30 altogether. It was, I think, number 26 or number 27, and it was part of a larger endorsement, which had a lot of changes to the policy and buried in there was an amendment to that prior acts exclusion. Guess what? The insurance company had deleted the September 2013 date as an exclusion. It no longer was part of the policy. We brought this to the insurance company’s attention, and we had settled the case within a couple months after that for literally millions of dollars for a very simple policy term that was buried in an endorsement at the back of the policy.

You’d be surprised how often this happens. I won’t say insurance companies are necessarily intentionally misrepresenting policies when they write these denial letters, but you have to realize they’re coming at a claim with an inclination to deny the claim. Insurance companies in the claims process are not your friends. They have a business model. Collect premiums and pay out as little as they can when a claim comes in. When a claim comes in, there is an incentive for them to find ways to deny coverage, and they can be overly aggressive and sometimes, whether it’s intentional or unintentional, there are provisions that could be beneficial to you as a corporate policyholder that they don’t see or they don’t interpret the way what we consider more reasonable interpretation that a policyholder would adopt.

It’s very important to realize that. That’s one example.

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