Although the law can guide a practitioner in interpreting the various component parts of an insurance policy, the ability to analyze a policy and render a competent coverage analysis requires certain practical considerations. An opinion regarding coverage cannot be confidently given without consideration of all of the following:
Accurate Copy Of The Policy
Few insureds ever obtain, much less maintain, a complete and accurate copy of their policies. Although a commercial broker will often maintain or be able to reconstruct a complete and accurate copy, many retail agents will, in response to a request for a copy of the policy, provide a declarations page and state-specific endorsements without all policy forms.
The only way to be sure to have a complete and accurate copy is to obtain a certified copy of the policy from the insurer. A certified copy is one assembled by the insurer and attested to, under oath, as to being complete and accurate.
The Declarations Page
The declarations page provides individualized details about the insured, the insurer and the coverage provided. It lists the precise entity insured and sometimes additional insureds. It specifies the name of the insurer, which is the proper entity to name in any suit on the policy. A declarations page also provides the limits potentially available for each type of coverage. Entering a limit is often the method of indicating what coverages are available. The declarations page sets the amount of the deductible.
The Deductions Page
Finally, a declarations page should list the forms and endorsements that make up the complete and accurate policy. Any analysis of the policy should begin with a comparison of the list of forms and endorsements with those actually attached to ensure that all forms referenced are present and that no form present is not referenced.
The Coverage Clause
The coverage clause (or insuring clause or coverage grant) is the meat of the policy and the first substantive element for analysis. Many policies have multiple coverages and multiple coverage clauses. For example, most automobile policies provide property coverage for damage to the insured’s vehicle and liability coverage for bodily injury or property damage the insured may cause to third parties. In the commercial context, a business might have a single “policy” providing coverage for property damage, loss of business income, general liability, employment liability, or even kidnap and ransom insurance for traveling executives. Each must be read separately, though they sometimes reference each other.
What a coverage clause giveth, an exclusion may taketh away. Each exclusion should be separately considered with respect to the attendant circumstances of each loss, bearing in mind the rule of narrow construction described supra.
Conditions describe the tasks and procedures the parties must follow both before and after a loss. Conditions include the familiar notice and cooperation provisions that often constitute conditions precedent to coverage. The conditions section will also contain procedures and time limits applicable to the insurer in adjusting and paying the loss. Many policies include condition sections that apply only to a particular coverage as well as a section of “general” conditions that apply to all coverages. Thus, not all conditions necessarily apply to each loss.
Most policies contain a definitions section. Definitions must be read simultaneously with the other policy components. Although purporting to merely define certain words and phrases, many definitions severely restrict or enlarge coverage.
Endorsements must be considered with a view as to how they alter the provisions previously considered. Endorsements may go so far as to add entirely new coverage sections, delete a previous endorsement, or merely define a word or phrase.
When reading an endorsement that purports to alter previous language, it is helpful to actually note such deletions on the portion of the policy referenced by the endorsement.
Grants of coverage, conditions, exclusions, definitions, endorsements and even declarations pages are read in accordance with the rules of contract construction described supra.