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Home / News & Events / What Insurance Coverage Do You Really Have

What Insurance Coverage Do You Really Have

Individuals and businesses deal with insurance frequently, but often do not understand their insurance coverage. This is the first in a series of articles that will outline basics of insurance coverage, types of policies exclusions, and pitfalls.

From the individuals prospective, many of us have multiple policies such as automobile, homeowner's, umbrella, life insurance, disability, and medical policies. Automobile and homeowner's policies are what are termed "blended" coverage. In each there are features of first party coverage - that is, coverage to reimburse losses to the insured's property or person and third party coverage, which covers losses for which the insured is responsible to other persons or their property.

Businesses typically have multiple policies as well. These include commercial general liability, worker's compensation, automobile liability, and policies to protect their property, director and officer's coverage, and many more. Again, many of these policies are "blended" and contain features of both first party and third party coverage.

As a general matter, insurance policies are contracts between the insurer and the insured and often contain duties on the part of both the insurer and the insured. By means of contract and payment of premium, a certain amount of risk, as clearly defined or set forth in the policy, is transferred to the insurance company in return for the premium. Insurance companies have three basic duties under most liability insurance contracts. These include; the duty to defend their insured against claims; the duty to indemnify their insured or cover them for losses within the scope of the policy; and the duty to deal with their insured and handle claims in a good faith manner.

In Arizona, an insurance policy is defined in law to include the declarations page, the standard policy provisions, and any endorsements to the policy. This means, if asked for your insurance policy, it will likely include a preprinted form (the standard policy provisions), some attachments to it (the endorsements) and a separate page that sets forth the amount of coverage you bought (the declarations page). Some endorsements are standard and preprinted on what are called "manuscript" forms, and some are negotiated and tailored to the operations of the specific business or individual. Policies shift risk. Reading a typical policy, you may see that there is first a broad grant of coverage, which would, without anything further, appear to shift an entire sphere of risks to the insurance company. However, it is usually followed by an exclusive section where events are excluded from coverage. Even with that elastic approach to coverage, there may be definitions or endorsements that give back certain pieces of coverage. Therefore, it is essential to read the entire policy to determine the aggregate of what is covered.

The policy contains a definition of the "insured" which attempts to tell the holder of the policy who is covered or what business is covered under the policy provisions. Some people are insured as the "named insured" and thereby have certain rights to designate coverage. Others may qualify as an "additional insured", "loss payee" or a "beneficiary". These parties may have no specific contractual rights in the absence of an assignment. There are other common exclusions in policies, such as the "international act" exclusion. This attempts to deny coverage for an act intended to have a damaging result by the insured.

Policies have different provisions that provide for which claims are covered. These generally fall into two categories - the occurrence policy and the claims made policy. Occurrence policies provide coverage when the property damage or bodily injury occurs during the policy term. A claims made policy may limit an insured's coverage, and hence the insurer's exposure to specific claims arising during a defined period of time.

Many times, businesses and individuals fail to consider whether their insurance might apply to all or a part of the claim maid against them. In that regard, they should read their policy carefully and discuss it with their attorney or other professional. There are things that may not appear to be covered, that may be covered in part or in whole. The insurance Company may provide you with a defense and a lawyer to defend you. If you have a specific policy issue or question, please contact Scott Richardson at either sjr@jaburgwilk.com or 602-248-1012.