How to Prevent Your Insurance Company's Unilateral Expansion of Exclusions

Financial Services Alert

PUBLISHED ON: October 5, 2006

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Insurance coverage disputes can resemble a cat-and-mouse game, where the insurance company makes every attempt to avoid paying a claim.

In some cases, an insurance company will attempt to expand the meaning of an exclusion to such an extent that it effectively leaves the policyholder without coverage. In the wake of Hurricane Katrina, many insurance companies are attempting to avoid coverage by giving unfounded and expansive readings to the concurrent causation exclusion which allegedly voids coverage if a covered peril, combined with an uncovered peril, simultaneously damages the insured property. In the case of Hurricane Katrina, insurance companies denied coverage for wind damage because it was combined with uncovered water damage. Adam F. Scales, a professor of insurance law, has noted that “[t]here’s no question that the anti-concurrent clause is bad for policyholders” and that “it’s not fair because it defeats policyholders’ reasonable expectations.” (Joseph B. Treaster, Small Clause Big Problem: A Detail In Insurance Policies Is An Issue In Hurricane Claims, The New York Times, August 4, 2006, at Sec. C.)

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