A few weeks ago, we published a guest blog from Dick Tutwiler of Tutwiler and Associates about a large hurricane loss he was handling in Dutch Windward Island Chain of the Caribbean with interesting facts.
The post, How an Exclusionary Provision Might Lead to Full and Proper Insurance Payment, detailed how an exclusion of coverage in the policy actually helped to prove the insured was not "under insured" and avoid penalties within the policy. When we last heard from Mr. Tutwiler, he had presented this to the carrier and was awaiting a response.
I followed up with Mr. Tutwiler to find out how the claim had ended.
Here is an excerpt from his blog post:
There is nothing like being victorious, especially when you know you were right. And sometimes the victory is sweeter when the fight was long and hard as was this commercial property insurance claim from a 2014 hurricane loss in the Caribbean that we wrote about a few weeks ago.
No question that working abroad has its challenges on many fronts. We had Dutch, French, British and Cayman Island folks all finally coming together and working hard to not only understand each other’s positions but also overcome some very unusual facts and coverage issues.
One of the many takeaways we learned from this complex claim was that it is critical that a policyholder at the inception of coverage discussions have a thorough and clear understanding of the property to be insured, the values of those properties and the interplay of the perils the policy is supposed to cover.
Once the policy is issued, if a dispute occurs post-loss, absent something in writing that endorsed the policy pre-loss, the language in the policy will be hard to overcome. After all, it is a binding contract both parties agreed to.
If a new carrier is going to quote a price, I suggest you get an appraisal from a competent disinterested appraiser so the property value and the actual property to be insured is not disputed before the policy is bound.
While this may not be a big issue on a typical homeowner’s loss, where a home’s replacement value and contents can be reasonably estimated, it may become critical on commercial losses where various types of policies are typically offered. The locations of the properties, the perils to be covered and business being insured, along with the details of any financial losses such as loss of profits and extra expense need to be clear and understood.
Without going into great detail, other than agreed valued policies where both sides agree to the sum insured, questions will likely arise post-loss about values and if those insured values meet CO-INSURANCE requirements or in offshore policies “AVERAGE CLAUSES.” Failing to meet insurance to value may result in severe penalties as was proposed in our case. Just as important, is the requirement that all agree on the perils that will apply to each type of property. Generally, once a loss occurs, coverage, property insured and values may be hard to dispute.
After a close reading of the policy in our Caribbean case however, it was clear that the policy was separated by the perils that applied. Yet the values that were listed on the declaration page were shown as if the policy covered all the perils listed in the policy for all of the properties at this resort. A problem occurred when the average clause was calculated by the loss adjuster for the insurer who took the TOTAL VALUES of all the property and applied this sum against the property that was covered and was damaged by the hurricane. In simple terms, $770,000 of value was added in the average clause that was not covered property for the HURRICANE PERIL, and thus should not have been included in any calculation for insurance to value.
Attorney Nicole Vinson acutely framed the issue with her statement on my guest blog How an Exclusionary Provision Might Lead to Full and Proper Insurance Payment published a few weeks ago.
Reading the policy and using the exclusion actually helped put real dollars in our client’s pocket that otherwise would have been withheld as a penalty.
So how did we do in the negotiations? Well first let me say that not only is it important to have a clear understanding of the facts of the loss and the coverages, it is equally important to have a strategy in the negotiation phase.
Perhaps it’s best to close this out with an excerpt from emails sent to us from our clients; First from the manager of the resort, “You both did a wonderful job today at the table ...Excellent strategy, ... I was honestly amazed and astonished about how far he managed to go according to what we encountered today at the table! Excellent!
Now from the owner of the resort, “Thank you all from the bottom of my heart!”