Insurance coverage is determined from two sources: (1) the policy language or (2) statutes and prior court decisions. The insurance policy is a contract with language giving specific coverage and exclusions that take away coverage. You have to read the entire policy to decide if the policy provides coverage. The language of any policy can be overridden by court cases, statutes, and insurance department regulations.
For instance, an insurance company is prohibited in most places from insuring criminal actions or intentional acts that could result in punitive damages. Insuring people for committing crime would be harmful to society and as a matter of public policy.
Statutes of limitation require lawsuits to be filed in a set amount of time. An insurer cannot generally shorten the statute of limitation by placing language in the policy giving less time for the insured to sue. On the other hand, clauses giving more time for the policyholder to bring suit do not violate public policy and courts typically hold increased statutes of limitation in the policy are binding.
Adjusters familiar with the law and knowledgeable about their company’s products can answer most questions that come up. A good adjuster recognizes there are questions he can’t answer.
Anytime you are unsure about coverage, it is best to obtain a “coverage opinion.” This is a legal opinion from an attorney advising you about the law for your specific case. Coverage opinions should be done by competent attorneys. The Oklahoma Supreme Court said there was bad faith when the law clearly showed there was coverage, but the coverage attorney said don’t pay the claim. The court said the insurance company should have been aware of the law and choosing to hire an incompetent attorney didn’t protect it. Barnes v. Oklahoma Farm Bureau Mutual Ins. Co., 2000 OK 55, 11 P.3d 162.
If coverage is not available, the insured needs to be told why payment will not be made. Insureds have less experience and normally don’t have a background in insurance law. An explanation of how a policy works and impressing upon the policyholder that insurance policy doesn’t cover “everything” is appropriate when a claim is denied for lack of coverage. Good communication will head off misunderstandings that result in litigation.
In some cases, questions over coverage need to be decided by letting a judge tell everyone the answer. In these cases, you file a special lawsuit called a declaratory action. This is a lawsuit where the parties tell the court, “we need your guidance.” The court will rule one way or the other, usually by reviewing briefs and materials submitted by the parties. A declaratory judgment action, also called a “dec action” or “DJ” is a proper method for an insurance company to sue its insured and ask the court to answer questions where there hasn’t been a lot of earlier cases on the same point or when there isn’t a clear statute controlling the issue.
[ln::firm_name] has years of experience in providing opinions of coverage questions and knows the rules of law that apply. The firm regularly performs legal research to find the answer to troubling questions. Curious about coverage for a claim you have – call us. 1-866-959-3185.