The owners of a mobile home park, which was large enough to have its own sewer treatment facility, sought reimbursement for losses connected with having to shut it down. The park's facility was affected by a party, that was never identified, who dumped an unknown substance there. The operation was closed when the substance was discovered. The operators wanted to make sure that the substance did not enter the waterways connected to the facility.

The substance turned out to be more problematic than just being a pollutant. The substance stuck to the treatment center's walls and machinery. The shutdown was also necessary to get it cleaned off all surfaces and then it was re-opened. When filing a claim with its insurer, the latter denied the loss, claiming that nothing occurred to trigger a commercial property policy's protection.

Click here for full information on how the opposing arguments were viewed by the trial and appellate courts.

Insurance policies are agreements that are prone to misunderstandings about their execution. Losses are always stress tests that perform the role of refining coverage obligations. We know that various policies are purchased as protection against certain sources of loss. We also know that both the policyholder and the insurer should have a clear understanding of how and when a given policy should respond. However, it isn't until a loss occurs and a claim is made is there proof of how the expectations of the two parties align.

What is revealed, time and again, is that nothing about insurance policies are safe from disputes. When claims are denied, insurers must offer justification, usually pointing out one or more parts of a policy. While denials are frequently accepted, just as routinely, they also function as the starting point of a disagreement.

Click here for an excerpt of wording regarding coverage found under the Commercial Property Section of PF&M in Advantage Plus.

In this situation, the mobile home park did not accept the insurer's position. Policyholders have every right to challenge denials. While agreements usually involve parties of equal standing, that is rarely the case with insurance contracts. Insurance companies typically sell standard policy forms that are considered contracts of adhesion. An assumption is that insurers have superior knowledge regarding their products. But superior knowledge is not perfect knowledge.

A relationship between the parties to an insurance contract are defined by obligations as well as expectations. An insurer has a primary obligation to fulfill its duty to pay for eligible claims and a policyholder has a primary obligation of paying premiums in a timely matter. It is important that losses are handled in a manner that, eventually, is understood by both parties. Disputes are natural and how they are resolved often depends upon the level of trust that exists.

Click here for to see an article discussing trust under E-marketing for Agencies found in Advantage Plus.

Once a policyholder notifies its carrier about a loss, the next step is crucial. An insurer begins with gathering more information which may lead to arranging for paying a claim or other options, including a denial. The more clear-cut the situation, the quicker a decision is made. Sometimes, more time may be needed and the insurer may choose to investigate a loss in more detail in order to make a decision. A reservation of rights letter may be used to allow for further study of a claim and this letter plays an important role.

Taking more time to decide about the eligibility of a loss can create an expectation that coverage is due. Rather than allowing this development, an insurance company can send a letter to a policyholder that a loss is being evaluated but that the process does not necessarily mean that coverage will be granted. The reservation of rights letter permits a proper evaluation while maintaining a right to, possibly, deny coverage. A key item is the tone of communications. While denials are rarely welcome, the manner in which they are made and explained often determines whether the issue is resolved or further disputed, even litigated.

Click here to see an article that further discusses misunderstandings between insurers and policyholders. It's from Rough Notes Magazine found in Advantage Plus.