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Legal Speak

When Insurance Isn't

Published November 26, 2012 12:53 PM by Tony DeWitt

From time to time I have argued that insurance is something that people purchase, forget about, and never use.  That is, until something awful happens, and then they find out that the insurance policy they bought is not the policy they think they bought.


As a lawyer who sues big corporations from time to time for violations of the False Claims Act, it’s hard for me to feel sorry when a big company gets hit with a big lawsuit that alleges they bilked the federal government for millions of dollars.  And when that lawsuit is coupled with a claim that the company fired a whistleblowing employee, I have even less sympathy.  But there are news reports today that a Japanese drug-maker is suing its insurer because the insurer is reneging on its insurance contract.


The company thought it had coverage, entered into settlements, and now can’t get the insurer to step up to the plate and pay it back.


Unless you work in the legal profession where this occurs regularly, you probably don’t know that about 25% of the time insurance companies sell policies that provide coverage for several things, but then include exclusions that swallow whole the coverages offered.


If you have not read your homeowner’s insurance in a while, pull it out of the firebox (Yes, surely you keep your policy in a fireproof box in your house in the event of a fire, right?).  Read through the policy declaration page, that’s the one that says you’re covered for $100,000 for fire, wind, etc.  Now go back a few pages and start looking for the exclusions.  Here’s where you’ll find that your insurance policy doesn’t really offer all that much protection.


One of my favorite exclusions is the “intentional acts” exclusion.  Suppose some religious zealot comes to your house and attempts to push his way inside with 14 tracts explaining why you’re going to hell if you don’t convert to his particular religion.  Nicely asking him to step off your front porch doesn’t work, so when he attempts to push past you into your living room, you push him hard in the chest and he falls over your azalea bush and breaks an ankle.  He sues you for battery and negligence.


Battery is what is called an “intentional tort.”  You had to intend to make harmful contact with your victim.  You didn’t really intend to hurt him, you just were trying to keep him out of your house.  Nevertheless, you’re likely to receive a letter from your insurer telling you that it is defending you under a “reservation of rights.”  What this means is that it will offer up a defense but if the plaintiff wins, any judgment gets paid, if at all, by you.


Most people don’t read their insurance policies until after something bad happens.  But the time to change insurers is now if something in your insurance policy is not what you want it to be.  Different insurers have different policies and different interpretations.  It is a good idea to discuss any questions you have about coverage with your insurance agent, and get any answers to those questions in writing. 



posted by Tony DeWitt


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About this Blog

    A.L. "Tony" DeWitt, RRT, CRT, JD, FAARC
    Occupation: Attorney
    Setting: Jefferson City, Mo.
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