'Tis the season to be politicking
In perusing this article and this article in the Insurance Journal I was struck by the differences between the everyday understanding of an insurance contract and the understanding I have been gaining through working with them in the legal system. Senator Richard Blumenthal of Connecticut, who to his credit wants to save money for his constituents, has in my opinion put State Farm and other insurance companies into a really unfortunate position. The article says:
Blumenthal said State Farm is the largest insurer not to waive the deductible and continues to apply the charge to claims it received because the storm was downgraded less than 24 hours before causing damage in Connecticut.
“I understand that the insurance policies State Farm wrote for Connecticut residents permit the company to charge a full hurricane deductible, as Irene was downgraded to tropical storm status before the 24 hours that your policies require,” Blumenthal said in his letter to State Farm CEO.
“However, I urge you to reconsider this narrow interpretation of your policy documents. The total amount that State Farm would have to waive in deductibles would be negligible, and would represent a significant benefit to your policyholders.”
Reading his comments, I am not sure the senator does in fact understand the insurance policy, or policies in general. Insurance policies do not "permit companies to charge . . . ." They either cover some loss/damage/injury, or they do not -- an outcome that is not based on the company's "permission." In fact, the insurance company that would decide to apply only certain provisions of their policy would be acting incorrectly. The company must strictly follow their contract that was entered into in good faith. The "narrow interpretation" Blumenthal is criticizing is merely proper application of the policy. Says who? Well, says the courts.
Because of his challenges, insurance companies that don't capitulate are faced with bad publicity by the public who, understandably, are not aware of the applicable legal background. Because the insurance company IS aware of the legal implications of their choices, and because they are aware of other dangers (some of which are noted by the comments to the articles) that could come about if they begin picking and choosing when to apply policy language, they have no choice but to turn the other cheek.