By Ken Kukral
Over my 27 year career in insurance one of the most common questions I have received is the question on “is it covered?”. I get asked this question when:
– After a claim has happened and the agent is questioning if they should submit the claim
– When agents come up with hypothetical questions. Agents trying to understand where coverage starts and stops and hoping to understand any coverage gaps that may be there.
– After some sort of event they heard about in the news and their client called wanting to know if this type of loss would be covered.
– When agents are walking through a quote or policy and are trying to understand so they can intelligently answer their customer’s questions.
My answer? Of course it is always, “it depends”. How is that for a political answer? Not to be smart or anything it really does depend. In a lawsuit, you need to go down to each count in the suit to see if it will be covered by a policy. You have to remember that many times a plaintiff’s lawyer will make demands for things that are not covered by an insurance policy (such as punitive damages) to gain leverage over the defending party. When an insured finds out there are areas they don’t have coverage for they almost always automatically come back more willing to settle. Many times in a general liability policy I have been conditioned to ask the question, “show me where it is NOT covered”. Then I look through the exclusions till I come up with where it is not covered. An example might be CCC (Care, custody & control) exclusion for damage to an item that is in the possession of a contractor.
How should you deal with these types of questions? For newbies in the business, they should answer, let me check and find out for you. For us more seasoned professional, we should first clarify what they are asking. If someone asked if a liquor liability loss would be covered under their general liability policy, you would need to ask more details. If they are in the business of selling, serving or manufacturing liquor, the answer would be no. If they are hosting a party, the answer might be yes under certain conditions. I like to pull the policy wording that applies and bring it to their attention. The policy speaks for itself and I try to not give opinions that are not backed up by policy wording.
Keep in mind when discussing property claims you have to look at the specific form to see if it is covered. If it is on a basic policy form then it would NOT be covered unless the loss was from the covered perils. A special form loss would be covered unless it was excluded.
Ultimately it is the job of the adjustor for the insurance carrier to make a determination if a claim is covered or not. If they deny a claim that is later found to be covered, then they could be subject to a bad faith claim. Many agency contracts with insurers spell out that the agent does not have claims authority and it is up to the sole discretion of the insurance company to determine if a claim is covered or not.
What tips do I have if you are asked the question, “is it covered”?
– Learn your carrier’s policy forms. Your clients will have little trust in you if you won’t answer their questions and defer them all to the insurance company. You should be able to answer a number of basic questions and may have to refer to the insurance policy for many others.
– Refer to policy language whenever possible. Since the insurance contract is the one that determines coverage, you want to come back with wording from the policy. When you take the stand in the courtroom you will be much more confident when you have the insurance contract backing you up rather than an un-informed opinion.
– Review exclusions with your client. Your client needs to understand that not EVERYTHING is covered and they should understand what is not covered.
– If you have to, ask the carrier. They may or may not answer. If they do, make sure your file is documented properly in case there is a claims situation later on.
– Do research yourself. Many times there are articles online dealing with these type of questions your clients ask. An article that explains things in “layman’s terms” will sink in better with the client than some technical explanation.
– Don’t guess. If you don’t know, say so. Then work to find your client an answer.
It is part of being in this business that you will field these questions. Get used to it and make sure you educate yourself so you know what you are selling. Remember we are non-lawyers selling contracts. Your clients come to you for advice on a “technical” product and rely on you to help them protect their assets. The better you can answer their questions (such as is it covered?) the more confidence they will have in you and your agency. Don’t go to CE classes purely to meet the insurance department imposed requirement, but go to improve your knowledge of your industry.