The Structure of an Insurance Policy--How to Read It (Part 8 of 8)

PART 8—HOW TO READ THE POLICY

Assuming you’ve read Parts 1–7 and are still interested in reading your policy, this post is, in my opinion (and you know what they say about those), the best way to go through your policy to see if you’re covered. Reading your policy is not an easy task—policies are a labyrinth of words and phrases. As Indiana’s Supreme Court stated: “Synthesizing the policies’ insuring agreements with their respective definitions of capitalized words and phrases is a daunting task, replete with often confusing, redundant, and sometimes circular concepts.” Cinergy Corp. v. Associated Electric & Gas Insurance Services, Ltd., 865 N.E.2d 571, 576 (Ind. 2007). So don’t feel bad, the Indiana Supreme Court even thinks it’s hard to do.

Before I proceed, please forgive me if I repeat a few points from my earlier posts. I know some people skip to last the chapter book to find out how it ends. Granted, a how-to-read-an-insurance-policy post isn’t Clancy or Grisham (it’s not even Twilight), but there are some things you should know, so I thought they were worth repeating.

You should start with the Dec Page. Check the forms listed on it to make sure you have the full policy. If you don’t have a copy of the policy or are missing a form, call your insurance company, agent, or broker to get it. Ask for a “certified” copy (this means they’re guaranteeing you the policy is all there). I like to then go to the Endorsements. Go through these to see what parts of the policy have been modified.  Each endorsement should tell you what part of the policy it is changing. I generally mark (use a pencil—trust me, you’ll make a mistake or two) the modified section in the policy. This way, I know that when I get to that modified section I shouldn’t waste my time trying to figure it out—I should just read the endorsement. 

Once you’ve done this for all the endorsements, you should find the policy’s Insuring Clause. Take a look at this language to see if the policy language appears to cover your problem. If so, great! If not, consider talking to an attorney. I’m not trying to make a shameless plug here—you don’t have to call me—but if it’s important get a lawyer involved. Don’t forget to flip back to the Definitions Section any time you come across defined terms (look for quoted, italicized, bolded, and/or all caps words).  Remember: the definitions are rarely the common meaning of the word.  

If you have coverage, you then need to check to see if an Exclusion applies. If there aren’t any exclusions that take away coverage, things are looking good for you. Finally, you need to check the Conditions to make sure you are doing what you need to do (like paying that last premium installment or letting your insurer or the agent/broker know there is an issue).

When you’re reading a policy, often times there can be multiple ways to interpret the meanings of words or phrases. In Indiana (and in many other states), the interpretation should favor coverage.  If there is more than one reasonable way to interpret the policy, it will be interpreted in favor of providing you coverage. This rule is a great asset to policyholders. In Indiana you don’t have to show that your interpretation is the most likely; you only need to show that your interpretation is a reasonable one. The Indiana Supreme Court has explained the justification for this rule: “This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer.  ‘The insurance companies write the policies; we buy their forms or we do not buy insurance.’” Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind. 1996), quoting Am. Econ. Ins. Co. Liggett, 426 N.E.2d 136, 142 (Ind. Ct. App. 1981).

Good luck—it’s not an easy task.