Claims Tips

How to read an insurance policy :

Reading an insurance policy is difficult, even for many insurance professionals.  It seems as if everything is excluded and nothing is covered.  How and where do you look to figure out if you actually have any protection?  Hopefully this page will help!

First off, this document is NOT meant in any way to replace the coverage you may or may not have.  Do not take this page to a lawyer and say that we told you something was covered!  Instead, use this page as a tool to help you get through the insurance language to a point where you can ask your agent, “paragraph K says this is excluded, but I need this covered” and you will be just fine.

First off, insurance forms are designed like what a machinist would call a “blank”.  This means that a majority of insurance companies use what is called an “ISO Form” and then modify it through a series of endorsements to tailor coverage the way they want.  Think of it as going to Men’s Warehouse and buying a suit off the rack.  Although the suit may be roughly the right size, it then must be tailored.

If you think you have a claim, the adjuster, will usually follows these steps in order:

  1. Are you an insured under the policy? (you or your business name for example)
  2. Was there damage or injury? (according to the definitions of your policy)
  3. Are all the elements required for triggering coverage satisfied? (this includes definitions)
  4. Is the reported damage or injury specially excluded?
  5. Are there any policy limits left to pay the claim?
  6. Did you meet the policy conditions (reporting it quickly etc.)?

If the answer is yes to all of the above, the claim will most likely be paid.

Here is another important piece of information to know: most (NOT ALL) policies are written as what is called a “special” form.  This means in English that the insurance company must prove something is either excluded or not covered per the checklist above.  This means the insurance company must climb the hill first in order to deny a claim.

Now go to your policy and look for the exclusions.  This is what typically defines what the coverage is or is not.  If you do not find your answer there, put on your muck boots and grab a yellow, pink, and green highlighter.  Trust us here!

Look at your policy and you will find sections called Common Conditions or Florida Changes that are lengthy and will provide little if any information to help you.  Instead start looking for sections that stick out such as Exclusions or Additional Coverage’s.  These provide what you are looking for.

Start reading one of those sections.  Since insurance companies can say “No Coverage” and “It’s covered” in the same sentence, start with your highlighter and highlight anywhere – even mid-sentence – where it says “you have coverage” or “this is NOT excluded” with the green highlighter, and anywhere it says “no coverage” or “excluded” with the pink highlighter.  Use the yellow one for any definition given in the policy wording.  Maybe this sounds impossible, but if you are in a real jam, you would be amazed out how much easier this makes reading those HUGE forms!

In closing, you can always call us of course – but we hope what we said above helps make a little more sense out of how these policies are written.  Of course our lawyer wants us to remind you that PLEASE do not expect these very basic guidelines to apply in every situation.  They are only meant to provide some very basic information and may not apply to your specific situation.  Call your agent or lawyer if you have questions about your specific coverage situation.

What do you mean I am not covered?! 

One of the most common stories I hear from contractors is how they had a claim and the insurance company told them to “pound sand” because the claim is “not covered”.  Therefore the contractor swears that “insurance is a racket, insurance people are evil, and why does the state require it, etc.”  Our industry deserves a lot of this criticism because we do a HORRIBLE job communicating with contractors regarding what they need and does your policy even cover it.

Here are a few simple (and free) ways to keep yourself from becoming a statistic if you ever do have a claim:

  • Exclusions vs. Premium  If anything is excluded under your insurance policy, except in rare instances, it is because it can be purchased elsewhere.  For example your General Liability excludes Auto.  Your Auto policy excludes your General Liability.  Both Auto and GL exclude Pollution.  This means that you can cover just about any exposure…for a cost.  Remember that a crazy low premium, although acceptable to The State of Florida, may not even cover a paper cut.  This is why I warn Camtech students that “low bid” in drywall may be Ok, but with insurance you are asking for trouble!!!  This leads us into…
  • What if _____ happens?  Since you already or are about to have your own contracting business, make a list of all the things that scare you.  I realize this list can be long and dark, but consider the ones that could derail your business that you may or may not expect your insurance to cover.  For example: one of your employees steals all of your copper tubing in your warehouse , or your trailer with most of your tools is wrecked while being towed by your car.  Then ask the agent “is this covered and for how much?”  You may be shocked at what you hear.
  • Get out of jail free card   If your agent tells you “don’t worry, you have coverage if an elephant stampede attacks your job site!” ask them to email that statement to you and save it in some sort of insurance folder.  That way if it turns out you did not have coverage for the occasional elephant stampede, you can go back, show them the email, and perhaps reach some sort of settlement.  Worst case, some lawyer would LOVE to help you work things out with the insurance company.
  • Who do you want to get the check?  A liability policy pays SOMEONE ELSE.  A property (and there are many different kinds) pays YOU.  If you have a General Liability policy, it does not write checks to you!  If you want to get the check, tell your agent!

In summary, PLEASE talk to us, your agent.  You should feel like you agent is a member of your team.  Failure to communicate with a subcontractor is a recipe for disaster.  Same thing holds true with your insurance guy!   Bring him into your team so he can help look out for and protect you against those scary nightmares running through your job site like an elephant stampede.  This way we can all sleep better at night!

If you would like to learn more cheap and free ways to protect your company, go to our Risk Management page at www.constructionprosins.com or contact me “Tall Ed” at ed@constructionprosins.com.

 

How to Prevent (almost all) Claims