Insurance policies are the most unread best sellers in America. Many people pay for what they think is "full coverage" only to find that the insurance policy contains a number of conditions and exclusions that restrict of eliminate coverage for certain risks. This can lead to many disputes between policyholders and their insurance carriers, brokers and agents over the nature of the coverage provided and the duties of each party.
Interpretation of Insurance Policy
An insurance policy is to be interpreted with the words and terms given their customary and usual meanings. When terms are ambiguous, you must consider the other evidence and testimony in this case concerning the intention of the parties. If the terms are still ambiguous, the language in the policy must be interpreted against the insurance company.
Duties of Insurance Agents and Brokers
Insurance Agent's Duty to Insured
Although an insurance agent acts on behalf of the insurance company and not the insured, the agent owes the insured a duty of reasonable care if the agent undertakes to act for the insured and the insured may rely on the agent to perform this duty.
Insurance Agent's Duty to Insurance Company
An insurance agent has a fiduciary relationship to the insurance company. This means that the agent owes the insurance company a duty of good faith, reasonable care and skill in performing the agent's duties. The agent is responsible for any loss the insurance company sustains as a result of the violation of this duty.
Insurance Broker's Duty to Insured
A broker owes the insured a duty to act with good faith, reasonable care, and skill. The insured may rely on the broker to perform this duty. The broker is responsible to the insured for any loss sustained by the insured as a result of the violation of this duty.
Liability Insurance Coverage: Terms, Conditions & Exclusions
Cooperation by Insured
A policyholder's duty to cooperate with his carrier does not end with timely payments of insurance premiums. It typically extends to timely reporting of claims, working with the carrier to document the claim, helping the carrier defend certain liability claims and lending assistance to the insurance company's investigation. The failure of the insured to cooperate may free the insurance company from responsibility for the claimed injury, damage, or loss provided that the failure actually prejudiced the insurance company in investigating or defending against the claim. The insurer insurance company must establish by a preponderance of the affirmative evidence that it actually was prejudiced by the failure to give the necessary cooperation or notice.
Avoidance or Forfeiture of Policy
1. Fraud or Misrepresentation by Insured - An insurance company may deny a recovery under a life or health insurance policy or an annuity contract because of misrepresentations, omissions, concealment of facts, and incorrect statements if:
(1) the statements were made fraudulently; or
(2) they were material to the acceptance of the risk or the hazard assumed by the insurance company; or
(3) if the true facts had been made known to the insurance company, the insurance company in good faith would either not have (i) issued, reinstated or renewed the policy or contract, or (ii) issued a policy or contract in as large an amount or at the same premium or rate, or (iii) provided coverage for the hazard resulting in the loss.
2. Waiver by Insurer - When the insurer intentionally gives up a known right or fails to act in light of certain facts, it may be held to have waived waived certain policy defenses, particularly if the carrier's actions lead a reasonable person to believe or think that it will not insist on its rights. An insurance company is considered to know all facts that are known or should have been known by its officers, agents and employees if they had acted with reasonable diligence and in a reasonable manner to follow up information which it or they possessed.
3. Estoppel of Insurer - An insurance company is estopped from raising certain policy defenses or enforcing certain provisions of the policy if by the words, conduct or silence of its officers, agents or employees who knew or should have known the pertinent facts, it was communicated to the insured that it would not assert this right and the insured relied on this belief to the insured's prejudice. As with waivers of certain policy defenses, the insurance company is considered to know all facts that are known or should have been known by its officers, agents and employees if they had acted with reasonable diligence and in a reasonable manner to follow up information that they possessed.
Rescission or Cancellation of Policy
An insurance company may rescind or cancel a policy of insurance if the insured was guilty of making a false representation To obtain that insurance. However, once the insurance company knows of the false representation it must promptly rescind or cancel the policy and return the premium paid for that policy. Its failure to act promptly is evidence that it has waived the false representation.
An insurance company is considered to know all facts that are known or should have been known by its officers, agents and employees if they had acted with reasonable diligence and in a reasonable manner.