It is Prudent to Read the Policy Before You Sue
Barry Zalma
May 10, 2023
Read the full article at https://lnkd.in/gFsmsfuq and see the full video at https://lnkd.in/gjyA88Eg and at https://lnkd.in/gZPVXAzY and at https://zalma.com/blog plus more than 4500 posts.
The insured sued its insurer for what it believe was the limit of liability of its policy for damage to property by fire. The insurer defended based on the fact that as an excess policy in one of multiple lawyers of insurance coverage it was only obligated to pay that proportion of the loss as described in the policy. The Insured sued and the USDC for the Eastern District of Washington resolved the dispute by reading the full policy in Oregon Potato Company v. Kinsale Insurance Company, No. 2:22-CV-0049-TOR, United States District Court, E.D. Washington (May 5, 2023).
BACKGROUND
In a first-party property insurance excess coverage dispute the USDC was faced with competing motions for summary judgment. Plaintiff Oregon Potato Company (“OPC”) sued Kinsale Insurance Company for (1) declaratory judgment, (2) breach of contract, (3) insurance bad faith and breach of the covenant of good faith and fair dealing, (4) violation of Washington’s Unfair Claims Settlement Practices Act and Consumer Protection Act, and (5) reservation to assert claims for violation of Washington’s Insurance Fair Conduct Act.
OPC is a Washington corporation headquartered in Pasco, Washington that processes vegetable products and has a facility in Warden, Washington.
On January 21, 2021, a fire destroyed or damaged OPC property in Warden.
Before the fire OPC had purchased first-party property insurance covering its properties written in three layers, with the last insurer, Kinsale taking (20%) over the second excess layer for $25,000,000 to $50,000,000 for the shares shown in their respective parentheses. Kinsale expresses liability as “$5,000,000 Part of $25,000,000 Excess of $25,000,000 Per Occurrence.”
Kinsale’s policy contains the following Insuring Agreement: "The company will indemnify the Insured for our share, as shown in Item 1 of the Declarations Page of this Policy, of the Ultimate Net Loss caused by the direct physical loss or damage to Covered Property in excess of the Primary and Underlying Excess Insurance as shown in the Schedule of Underlying Insurance of this Policy, occurring during the policy period. This agreement is subject to the following terms, conditions and any endorsements to this Policy."
Kinsale’s policy defines “Ultimate Net Loss” as follows: "Ultimate Net Loss shall mean the actual loss sustained by the Insured as a direct physical result of the peril(s) insured against by the policy(ies) of the Primary and/or Underlying Excess Insurer(s) limited by: a. Any sub limited contained within this Policy or the policy(ies) of the Primary and/or Underlying Excess Insurer(s), and b. Making deductions for any salvage and recoveries from any source other than this Policy and the policy(ies) of the Primary and/or Underlying Excess Insurer(s)."
The first sub-location listed on the Statement of Values, shown in paragraph 10, was severely damaged. Kinsale initially viewed OPC’s loss as “a complete loss to our layer/capacity” and set reserves at is full $5 million limit. Kinsale does not dispute that this was its preliminary determination but contends that it was subsequently superseded by a more accurate determination of a lower loss reserve after investigation and evaluation proceeded.
OPC sent an Insurance Fair Conduct Act notice to Kinsale asking to pay its full $5 million limit. Kinsale responded that its policy “unambiguously” provides only “limited liability for Location 1 to the $25,100,000 stated value” and that its limit of liability is not $5 million, but instead 20% of every dollar of loss above $25 million.
OPC contends it is currently entitled to payment of the remaining balance of Kinsale’s $5,000,000 policy limit and Kinsale contending that it has paid all sums due according to proofs of loss submitted to date.
DISCUSSION
The “Occurrence Limit of Liability Endorsement” (“OLLE”): OLLE is a modification to the underlying policy and sets the upper limits of Kinsale’s liability. The OLLE is read in conjunction with the rest of the policy as “ALL OTHER TERMS AND CONDITIONS OF THE POLICY REMAIN UNCHANGED.”
The underlying policy states that Kinsale will indemnify OPC “for our share … of the Ultimate Net Loss . . . in excess of the Primary and Underlying Excess Insurance as shown in the Schedule of Underlying Insurance of this Policy”.
Taken together, the language of Kinsale’s policy is not ambiguous. Kinsale’s insurance policy provides excess coverage, which when triggered, is for their “share”, i.e., $5 million out of the $25 million, or 20 percent. Kinsale’s proportional/share liability does not automatically entitle OPC to $5 million under the OLLE – to read otherwise would entitle OPC to overlapping, not excess, coverage. It was only required to pay 20% of the amount owed by its share of the total loss.
Therefore, summary judgment in Kinsale’s favor is appropriate.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808
Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257
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://podcasters.spotify.com/pod/show/barry-zalma/support; 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; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Consider subscribing to my publications at substack at https://lnkd.in/gcZKhG6g
Go to Newsbreak.com https://lnkd.in/g8azKc34
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: https://lnkd.in/guWk7gfM
Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; https://lnkd.in/gAXsGjdi;
Go to the Insurance Claims Library – https://lnkd.in/gWVSBde.
The Professional Claims Handler
Post 5218
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-8-barry-zalma-esq-cfe-zdwsc, see the full video at https://rumble.com/v70zl4s-the-zalma-philosophy-of-claims-handling-part-8.html and at https://youtu.be/MIYcF71ffRQ, and at https://zalma.com/blog plus more than 5200 posts.
Claims Commandment X – Thou Shall Not Pretend to be a Lawyer
Some experienced and professional claims people know the law in their area of expertise better than most lawyers.
Adjusters should be adjusters and leave lawyering to lawyers. Similarly, lawyers should be lawyers and never try to be adjusters.
Claims Commandment XI – Thou Shall Empathize With the Claimant
Everyone presenting a claim is unhappy, disturbed, shocked, injured and needs help.
Empathy is identification with and understanding of another’s situation, feelings, and motives. It is the ability to understand another person’s circumstances, point of view, thoughts, and feelings....
HOW TO CREATE AN EXCELLENCE IN CLAIMS HANDLING PROGRAM
See the full video at https://rumble.com/v70wb2i-the-zalma-philosophy-of-claims-handling-part-6.html and at https://youtu.be/tL5nDKPEs40 and at https://zalma.com/blog plus more than 5200 posts.
Post 5217
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry.
An Excellence in Claims Handling program begins with a statement in the insurer’s claims manual or statement of professionalism that it is dedicated to providing excellence in claims handling to every insured who presents a claim.
The excellence in claims handling program should include, at a minimum:
A series of lectures supported by text materials explaining:
A definition of insurance.
How to read and understand an insurance policy.
How to interview an insured, witness, or claimant.
How to assist an insured in the insured’s obligation to ...
The Professional Claims Handler
Post 5216
Read the full article at https://www.linkedin.com/pulse/zalma-philosophy-claims-handling-part-5-barry-zalma-esq-cfe-jde8c, see the full video at https://rumble.com/v70q4x8-the-zalma-philosophy-of-claims-handling-part-5.html and at https://youtu.be/6b9tZQsEkB4, and at https://zalma.com/blog plus more than 5200 posts.
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry.
Standards to be a Professional Claims Adjuster
The Insurance claims professional should be a person who:
1. Can read and understand the insurance policies issued by the insurer.
2. Understands the promises made by the policy.
3. Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
4. Are competent investigators.
5. Have empathy and recognize the difference between empathy and sympathy.
6. ...
The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
The History Behind the Creation of a Claims Handling Expert
The Insurance Industry Needs to Implement Excellence in Claims Handling or Fail
Post 5210
This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
My Training to be an Insurance Claims Adjuster
When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.
I was initially sat at a desk reading a text-book on insurance ...
