A Primer on Reading Your Insurance Policy
No, this isn’t a blog post about whether or not your insurance covers losses arising out of COVID-19. That’s a question that is dependent on the particular language of your policy and even then, there can be a certain amount of grey arising from the application of existing law to new circumstances, of which COVID-19 and its associated consequences are one. We may not even know the answer in any given case until after we have the benefit of some judicial decisions to guide us. So if you have a serious question about COVID-19, you need to be speaking directly with your lawyer to evaluate your specific situation.
But if, in contrast, you’ve been prompted by COVID-19 (or anything else) to pull out your insurance documents and just have a look, if you are a homeowner, or a business owner, or perhaps even a lawyer who doesn’t normally work with insurance documents, you might be wondering just what the *!? you are looking at. This blog post is for you.
What Makes Up the “Policy”?
Not every policy is structured the same, of course, but if you are talking about a typical home-owner’s policy or a commercial insurance policy, then the whole policy includes a few things; even the application documents can form part of the policy. But the most important parts for purposes of understanding what coverage you have and what coverage you don’t are the policy “Declarations” and the language of the actual policy provisions themselves (which are contained in separate documents from the Declarations). You may have (I dare say “should have”) received a copy of the actual policy provisions at the time you first acquired a given policy, but in my experience they are typically not delivered again when the policy is renewed. So when the time comes around to have a look at what you’ve got, they are often nowhere to be found, if indeed you ever had them.
What is the “Declarations” Page?
The Declarations Page may or may not actually be called that. Whatever it is called, it is likely going to have some basic information such as who the Named Insured is (there may be other persons or entities insured by the policy besides the Named Insured), his, her or its address, the period in which the insurance is active, the location that is covered if it pertains to a specific property, etc.
Apart from that, the Declarations Page “declares” what insurance coverages are part of the policy. It does that in a summary form, by reference to other documents which actually contain the terms governing coverage in each given case. So, for example, if you have a commercial insurance policy with coverage for property, the Declarations Page is likely going to have a heading which says “Property”. There may be subheadings under that heading, but there will also be one or more references to other documents, which might be described as “forms” or “broad forms” or something else. Usually, each form is going to have a numeric or alpha-numeric designation as well as a name, and possibly a date, and all of that together tells you what specific other document or documents the insurer has produced, with the terms and conditions that relate to the coverage that you have for “Property”.
If you also have coverage for liability, then there is likely going to be another heading which says “Liability” and which, in turn, may have subheadings and will have one or more references to other forms which contain the actual terms and conditions which govern the insurance that you have for liability.
In addition, the Declarations Page is usually going to have other information specific to each coverage that is listed; for example, if there is a deductible, what it is, what the limit of the insurance is, and perhaps a “coinsurance” percentage if one is applicable (a discussion of “coinsurance” will have to wait for another day).
The point of all of this is that the insurer can effectively customize coverage for a given customer by putting together different combinations of coverage contained in different standard documents to get the combination of coverages that may be most suited to a particular customer’s needs. So, a commercial insurance policy in any given case doesn’t have to include coverage for equipment breakdown, but it can. Or, it doesn’t have to include provision for non-owned automobile liability as part of its liability coverage, but it could. You (start to) figure out whether it’s in or out of your policy by looking at the Declarations Page.
Endorsements are additional documents that qualify other documents set out in the Declarations Page. So, for example, if your insurer’s standard property coverage does not include cyber insurance, but you want to buy it and add it to the package, the insurer could include an endorsement to provide for that coverage. Your main property form may have an exclusion for damages to your electronic information that the cyber endorsement might remove or qualify. Or, for example, an endorsement could add an exclusion that otherwise doesn’t exist, perhaps for terrorism, which you might accept in order to lower the price of the insurance.
Endorsements can be listed on the Declarations Page, or they could be issued separately, for example, if a change is made part way through the coverage period and a new coverage is added, or perhaps if there is a change of location for property coverage. The insurer could issue an endorsement which would be a separate document amending or qualifying the original Declarations Page.
So How Do You See What Coverage You Actually Have?
Well, first you have to know what is on the Declarations Page. And then you have to look at the various forms that are listed on the Declarations Page that pertain to the coverage you are interested in. If you don’t have those, you have to get them, either from your broker or from the insurer directly. You have to make sure that you have accounted for any endorsements that may have been made after the fact, and if you actually do have the forms from when you originally purchased insurance, you should check the current Declarations Page from any renewal to see if the dates of the forms referred to are the same as the ones you have – there could have been updates and amendments so that the current version is different.
You also have to be careful to read various forms that go together, together. So, for example, there could be a set of “general conditions” that apply to all of the different forms, or all of the different forms that pertain to a particular kind of coverage. These might include, amongst other things, definitions of words or phrases that are used in various forms. You also need to ensure that, when you are reading a particular form that may contain an exclusion, or that may say that a particular kind of coverage is included, that there is not an endorsement in a separate document that changes what you read in the first one.
Complicated, Isn’t It?
Well, yes it is. Which is why, while you are perfectly entitled to have and review all of your insurance documents, if you have a serious question you need professional help to really understand what your rights are or might be. A first place to go for advice is often your broker, who has (or ought to have) a good understanding of the kinds of coverages that you have and don’t have, and how the insurance in general “works”, including what to do if you want to make a claim.
At the same time, unless your broker is also a lawyer, your broker can’t give you legal advice. So when it comes to understanding what the specific language of the policy means legally, you need to talk to a lawyer, and preferably one who has experience in dealing with insurance. While one principle of interpretation in insurance law is that the language should be read in accordance with its plain and ordinary meaning, the reality often is that due to a long history of judicial interpretation, words that appear to have a plain and ordinary meaning actually mean something totally different in a courtroom. That’s where the expertise of a lawyer comes in, and why you need good quality legal advice if you do have a serious issue that you need to understand or pursue.