Commonly Legal Disputes in an Insurance Agreement - Explained
When Insured and Insurer are in Conflict
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What are the common provisions in an insurance contract subject to legal dispute?
State law requires that insurance contracts contain certain provisions protecting the rights of the insured against the insurer. These provisions are commonly the subjects of litigation. An insurer that fails to pay an insurance claim for which it is legally obligated may be subject to a wrongful dishonor action by the insured. Some of these common provisions in many types of insurance policy are discussed below.
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What is the Incontestability Clause?
An incontestability clause protects the insured by preventing an insurer from denying coverage based upon certain misrepresentations by the insured when applying for the policy. These clauses generally do not protect against fraudulent statements made with the specific purpose of deceiving the insured into granting a policy. Incontestability clauses are effective after a stated period of time, the contestability period. The theory is that a misrepresentation that does not give rise to an issue in coverage within the stated period was not material at the time of the application for coverage.
What is the Anti-Lapse Clause?
An anti-lapse clause prevents an insurer from automatically canceling an insurance policy at the end of a specific policy term. In addition, state statutes require that the insurer give the insured sufficient notice of the policys termination date and inform the insured of what is required to continue coverage for a future coverage period. If the insurer fails to meet the notice and information requirements, the insured may be able to claim coverage or renew the policy beyond the posted termination date.
What is the Appraisal Clause?
Appraisal clauses seek to avoid litigation of disputes as to the replacement or repair value of covered items. Specifically, these provisions require that the insured and insurer submit any disputes as to valuation to qualified third-party appraisers. These appraisers arrive at a value that binds both parties. The parties split the cost of hiring appraisers to determine the dispute.
What are the Duties to Preserve Clause and Notice of Claims?
Nearly all insurance contracts require that the insured seek to preserve evidence surrounding a particular claim and provide notice to the insurer as soon as the insured has a reasonable belief that a claim has arisen. This is particularly true in an indemnification situation where the insurer is responsible for defending and paying any losses awarded through civil litigation.
What is the Duty to Preserve Evidence?
The insured must preserve any evidence relevant to the situation once the insured reasonably anticipates litigation on the matter.
What is the Duty to Provide Notice of Claims?
These provisions require an insured to provide notice to its insurer of any circumstance that may give rise to a claim under the existing policy. Failure to provide a notice of claim prior to the end of the policy may diminish the ability of the insured to make a claim for injuries or losses incurred.
What is a Co-Insurance Clause?
These provisions require that an insured purchase separate insurance on insured property up to a specific percentage of the insured property value. An insured who fails to purchase insurance to meet the required percentage of the property value may forfeit any or all of the coverage under a particular policy.
What is a Multiple Coverage Clause?
These clauses limit the insurers responsibility to pay for losses when multiple insurance policies cover the same property or loss. Generally, these clauses provide that an insurer will be a secondary insurer to any existing insurance. Alternatively, these policies state that the insurer will pay only a pro rata share of losses along with the other insurer.
What is a Dispute Clause?
Dispute clauses are provisions aimed at curbing insurance litigation. These provisions require the insured and insurer to submit any dispute to binding arbitration, rather than initiating a civil action. Many states will not enforce these provisions and allow parties to initiate litigation.
Why do you think the above-listed clauses are frequently the subject of litigation?
ABC Corp has an insurance policy with 123 Corp. It also has a policy with XYZ Corp. If ABC suffers an insured loss, what are some of the issues it may encounter when submitting a claim to ABC or 123 Corp?
- What is insurance?
- Captive Agent
- Independent Agent
- Captive Insurance Company
- Combined Ratio
- Claims Adjuster
- Capital at Risk
- Assigned Risk
- Incurred But Not Reported
- Qualified Actuary
- Cession (Re-Insurance)
- Burning Cost Ratio
- What is an insurance contract?
- Accidental Means
- Anti-stacking Provisions
- What is an insurable interest?
- What are the common categorizations of insurance?
- National Association of Insurance Commissioners
- Insurance Regulatory Information System
- American Academy of Actuaries Definition
- American Association of Insurance Services Definition
- American Council of Life Insurance Definition
- American Insurance Association Definition
- American Risk and Insurance Association Definition
- LLoyd's of London
- Associate in Insurance Services (AIS) Definition
- Associate in Loss Control Management Definition
- Associate in Marine Insurance Management Definition
- Associate in Personal Insurance Definition
- Associate in Reinsurance (ARe) Definition
- Associate in Risk Management Definition
- Associate in Commercial Underwriting Definition
- Associate in Insurance Accounting and Finance Definition
- Associate in Surplus Lines Insurance Definition
- Chartered Insurance Professional Definition
- Chartered Life Underwriter Definition
- Chartered Property Casualty Underwriter Definition
- Vehicle insurancePrivate Passenger Auto Insurance Risk Profile
- Underinsured Motorist Coverage
- Uninsured Motorist Coverage
- Omnibus Clause
- Health Maintenance Organization
- Capitated Contract
- Point of Service Plan
- Children's Health Insurance Program
- Disability Insurance?
- Credit Disability Insurance
- Life Insurance?
- Cash Surrender Value
- Absolute Beneficiary
- Acceleration Life Insurance
- Accelerated Benefit
- Accelerated Option
- Accelerative Endowment
- Charitable Gift Life Insurance
- Incontestability Clause
- Waterfall Concept
- Assumed Interest Rate
- Clean Sheeting
- Hazard Insurance
- Homeowners, Renters, and Fire Insurance?
- Participating Community (Flood Insurance)
- Insurance Considerations for Business
- Business Liability Insurance
- Commercial General Liability
- Liability Risk Retention Act
- Excess Insurance and Umbrella Insurance Policy
- Business Interruption Insurance
- Key Person Insurance Definition
- Own-Occupation Policy
- Self-Funded Health Insurance Plan
- Basket Retention Policy
- Commercial Blanket Bond
- Alternative Risk Transfer Market Definition
- Commercial Property Casualty Market Index Survey
- What are the primary obligations of the insurer?
- Earned Premium
- Reservation of Rights Letter
- Collateral Source Rule
- What are the primary obligations of the insured?
- Insurance Premium
- Affidavit of Loss
- What is the general structure of an insurance contract?
- Ambiguity Principle
- Accommodation Line
- What are the common disputed provisions in an insurance contract?
- Absolute Exclusion
- All Risks Clause
- What is required for the termination of an insurance contract?
- Risk Management
- Professional Risk Manager
- Associate in Management (AIM)
- Financial Risk Manager
- Forecasting (Business)
- Objective Probability
- Unconditional Probability
- Enterprise Risk Management (ERM)
- Operational Risk
- Business Recovery Risk
- Political Risk
- Asset Protection
- Performance Bond
- Barra Risk Factor Analysis Definition
- Above Ground Risk (Mining Industry)
- Bumbershoot Policy (Maritime)
- Abandonment Clause (Boat or Vessel)
- Bobtail Liability Insurance (Trucking Industry)
- Anti-Indemnity Statute (Construction)