Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
November 02, 2022
Claims Commandments

Claims Commandment Number IV Thou Shall Understand The Policy

Read the full article at https://lnkd.in/gGf5zzjp and see the full video at https://lnkd.in/gJXWW43V and at https://lnkd.in/gxE8peEG and at https://zalma.com/blog plus more than 4350 posts.

In this the fourth of Fifteen Claims Commandments we deal with the need for every insurance claims professional to read and understand the terms and conditions of the policy that made promises to an insured who is presenting a claim.

Insurance Policies are Contracts

Insurance policies are contracts. To understand insurance claims the adjuster must understand how all contracts, and specifically insurance contracts, are interpreted. Rules of contract interpretation have developed over the last 300 years and are applied by courts with the intent to fulfill the desires of all parties to the contract.

People and judges who are not conversant in insurance and the interpretation of insurance contracts believe that the insurance policy is difficult to read and understand. They are wrong. However, as one court said in Delancy v. Rockingham Farmers Mutual, 52 N.H. 581 (1873):

This [policy], if read by an ordinary man, would be an inexplicable riddle, a mere flood of darkness and confusion … should some extremely eccentric person attempt to examine the involved and intricate net in which he was to be entangled, he would find that it is printed in such small type and in lines so long and crowded as to make the perusal of the document physically difficult, painful and possibly injurious.

Since 1873 insurance policies are printed in large print and in language, by statute, that anyone with a fourth grade education can understand. Still, there seem to regularly be disputes taken to court about the meaning of terms, conditions and limitations of the policy of insurance.

The following rules govern the construction of contracts of insurance:

If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed at the time of making it, that the promisee understood it.

If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous. However, if the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous.

When a policy is interpreted, the provisions of an endorsement control the interpretation over the body or declarations of a policy when the two are in conflict.

For example, if the language written to limit an insurer’s liability to the appraised value appears on the declarations page, while the valuation condition that provides for an actual cash value adjustment appears on a form endorsed to the contract, the endorsement’s language would control the interpretation of the contradictory language of the policy.

However, the fact that the two sentences could have been written more clearly, did not mean that they were ambiguous.

Reasonable Expectations

Consider the reasonable expectations of the insured but, when doing so, include the understanding that every insurer is presumed to be acquainted with the practice of the trade that the insurer insures.

More than 150 years ago the US Supreme Court in Hazard’s Administrator v. New England Marine Insurance Co., 33 U.S. 557 (1834) adopted the rule. The Supreme Court concluded that “no injustice is done if insurers are presumed to know their insureds’ industry because it is part of their ordinary business.”

In MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635 (2003), the California Supreme Court first stated the primacy of the “reasonable expectations” test when interpreting insurance policies. It decided that the reasonable expectations of the insured required coverage to exist for an ordinary act of negligence even if it involved pollutants.

Where the language of the policy is clear, the language must be read accordingly, and where it is not, it must be read in the sense that satisfies the hypothetical insured’s objectively reasonable expectations.

If you find the term is clear and unambiguous there will be no need to apply the reasonable expectations test.

If you find any ambiguity, or determine the insured should be paid, the application of the reasonable expectations test will give a court the ability to construe the policy against the insurer and in favor of payment of the insured’s claim.

The Plain Meaning Test

Most states will apply the plain meaning test.

Long-established insurance law supports the conclusion that insurers are presumed to know and be bound by the meaning of the terms used and customs adopted in their insureds’ industries. Insurers, and insurance claims professionals, faced with a need to understand and apply the wording of a policy of insurance must now conduct their investigation to include:

a detailed investigation of the facts of the loss and policy acquisition;

a determination of the expectations of the insured and the insurer at the time the policy was acquired;

a determination of the purposes for which the policy was acquired; and

an examination of all communications between the insurer and the insured or their representatives.

To conclude a thorough investigation the insurer must at least conduct a detailed interview of the insured, the claimants, the brokers, and the underwriters. When there is a dispute over the meaning of common terms, the court will often find it necessary to inform upon the understanding of persons in the particular business insured so that the judge must consult the opinions of experts.

Expert testimony can be helpful in establishing that the insured’s or the insurer’s interpretation of the term at issue is different from that advanced by the other was reasonable. In California, this may be sufficient for a party to prevail because although insureds are treated differently so that even if the insurer’s interpretation is considered reasonable, it would still not prevail, for in order to do so it would have to establish that its interpretation is the only reasonable one.

An insurance claims professional can never make, or recommend, a decision with regard to an insurance claim until he or she has read the entire policy as it relates to a loss, interpret the policy wordings in accordance with the rules of interpretation stated above, conduct a complete and thorough investigation to determine the reasonable expectations of the insured, and if unable to decide to seek the advice of competent coverage counsel.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected] and receive videos limited to subscribers of Excellence in Claims Handling at locals.com

https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

00:10:14
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals