When Insurance Isn't
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
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
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.