While insurance policies may look the same in structure at first glance, each policy is unique and contains terms, conditions, and definitions that may be different from other policies. Many insurers will utilize a standard form for their policies and vary it using modifications called “endorsements.” It is extremely important that you read the entire policy, including the exclusions and endorsements, which can drastically change or limit coverage. Below are descriptions of key provisions in most policies.
Declarations Page or “Dec page” contains many of the basic details about a policy, including the insured’s name and address, the insurer’s name and address, the policy number (and form number if one exists), the type of coverage purchased, and the time period for coverage. The Dec page will likely also contain the liability limits of the policy, including the “per occurrence” limits, the “aggregate” limits, the deductible and self-insured retention where applicable. The Dec page may also list whether the policy includes endorsements and whether the policy contains primary or excess coverage.
Insuring Agreement (or Clause) is the agreement by the insurance company to provide coverage to its insured and is the basis for any obligations owed to the insured. It will often contain a description of the different types of coverage available under the policy, which might include coverage for property damage, bodily injury, business interruption, cyber security or other physical or economic injury depending on the policy. The Insuring Agreement often includes a description of the circumstances under which the insurer has a “duty to defend” the insured in actions alleging liability by the insured.
Names Insureds clause(s) describes who is considered an insured under the policy. This can include multiple individuals or entities depending on the type of policy. Endorsements can also expand the number of individuals and entities who are insured.
Exclusions define what is not covered by a policy and often remove coverage that would otherwise be provided by the Insuring Agreement. Therefore, it is very important to pay careful attention to the exclusions when evaluating a policy. Although exclusions may contain exceptions that allow coverage in certain situations, these exceptions may not provide any more coverage than what is provided by the Insuring Agreement. Generally, exclusions are construed as narrow as possible by the courts. Ambiguous exclusion language is generally construed against the insurer.
Limit of Liability section provides specific details as to how the liability limits apply to coverage under the policy—both in an aggregate and per occurrence basis. These limits will vary depending on the type of coverage. Also, while the same, or very similar, language is often used to define “per occurrence,” the application will vary depending on the facts; policyholders and insurers will take different positions depending on the financial impact.
Conditions on coverage are imposed in all policies. Often, these are duties that the insured must carry out to obtain coverage. These conditions can be both precedent and subsequent to a coverage decision by the insurer. They usually include both a duty to provide notice to the insurer of an occurrence or claim and a duty to cooperate with any investigation of the claim. The conditions can also contain restrictions on coverage, including circumstances that would render the policy void and relieve the insurer from providing coverage, such as bankruptcy or a failure to pay premiums by the insured. This section also frequently contains an “Other Insurance” clause which details how the policy’s coverage interacts with other applicable coverage.
Endorsements section contains modifications to the standard form that usually makes up the main section of the policy. The endorsements can modify the policy’s coverage by changing any term or condition of the policy, such as adding and removing coverage from the main policy, adding additional insureds, removing or changing policy provisions, adding new conditions or restrictions, or varying the coverage by territory or location. Endorsements should always be read carefully when analyzing coverage under a policy.
Claim procedures can be sprinkled throughout a policy, but the conditions section will likely contain the most valuable information on this topic. As a first step, the policyholder must provide proper and timely notice to the insurer as specifically defined by the policy—usually as soon as it becomes aware of an underlying loss that may trigger coverage (or risk losing that coverage). This is often the right stage to engage insurance counsel in order to provide the proper notice and maximize your claim.
Unique Aspects of Excess Policies:
A Certificate of Insurance in an excess policy defines the specific time period where coverage applies. It contains a schedule of the underlying insurance, which lists the primary and lower level excess policies. This allows you to understand where it falls on the tower of insurance coverage (i.e. how far it sits above the primary policy). The underlying limits of these lower level policies must be exhausted by judgments or settlements before the excess policy applies. The certificate of insurance will also contain information as to whether the policy “follows form” to an underlying policy. This means it adopts any coverage provisions in the underlying policy’s form not specifically modified by the excess policy. It would also contain information regarding a quota share.
Excess policies are normally less stringent than primary policies as it pertains to notice and will only require notice from the insured when it becomes clear that the excess policy will be affected. Excess policies generally do not contain a separate duty to defend, but coverage may contain reimbursement from the costs of presenting a defense.
Unique Aspects of Umbrella Policies:
An umbrella insurance policy sits over one or more underlying liability policies (and often sits directly over a primary policy). All umbrella policies are excess policies because they afford coverage that is excess over underlying insurance, but they can also contain primary coverage for claims not covered by the underlying primary policy. An umbrella policy can contain two types of coverage identified in many policies as “Coverage A” and “Coverage B.” Coverage A provides excess coverage for damages exceeding the policy limits of the underlying policy. Coverage B provides additional primary coverage. An umbrella policy may add a duty to defend for the insurer for any suit against the insured alleging liability not covered under the underlying primary insurance.