CTC Transportation, Inc. insured its motor truck cargo exposure with Essex Insurance Company. The coverage provided had a $500,000 limit, a 1% deductible, and was subject to 100% coinsurance. When the $700,000 crane it was transporting hit a bridge and was damaged, CTC submitted repair costs of $61,604.91. Essex offered $36,739 after applying a coinsurance penalty and the deductible.

CTC sued, stating that the coinsurance clause was ambiguous and difficult to understand. It incurred $40,000 in attorney’s fees to present its case. The trial judge agreed with CTC that the coinsurance section was ambiguous and CTC won the first round. Unfortunately for CTC, the appeals judge had a better understanding of the policy and reversed the trial judge's decision.

Click here for the details on this court case.

Coinsurance is a condition in most property and inland marine coverage forms used as a mechanism to encourage the insured to insure to value. A penalty is applied to the loss amount if a loss occurs and the value of the property at the time of loss is less than the limit of insurance.

Click here for help to understand how the coinsurance clause works.

Yes and no. Coinsurance generally applies only to commercial property and certain inland marine coverages. However, all property related coverages encourage insurance to value. Personal lines and many businessowner policies encourage insurance to value by providing replacement cost on buildings only when limits are a certain percentage of their actual values on the date of loss and paying only actual value cash value when they are not.

Click here to review the loss settlement condition of the ISO Homeowners Policy and the loss payment condition of the ISO Businessowners Policy.

Some of your customers may be led to believe that the valuation on their policies should follow marketplace valuation. However, this approach can lead to serious distortions in property values.

Consider using this e-marketing article in a newsletter or on your web page as a necessary reminder.

The questionnaires for the Commercial Lines Survey Service Category have been updated. There are 91 classifications in this category, including:

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