07 Nov Who Interprets Coverage?
As hopefully many agents know, clients have (in all but a few states) a duty to read their policy. After all, an insurance policy is a contract between the carrier and the insured, and shouldn’t a party to a contract have a duty and responsibility to read it? Personal lines clients are likely more apt to read their policy than commercial clients, especially when many commercial lines policies approach 200 pages. I recently noted a BOP policy with more than 150 pages. I struggled to read it, and I am more apt to read it than most clients due to my occupation.
In a recent situation I was made aware of, this client (a hotel on the BOP policy) appeared to have read their policy and was questioning some specific scenarios (where a hotel could have some exposure) and wanted some clarification on policy language. As you no doubt have seen, there have been several actual situations where individuals/families have experienced tremendous tragedy (often death) due to what appeared to be carbon monoxide poisoning. So this hotel client wanted some clarification on whether injuries to their guests from carbon monoxide poisoning would be covered and wanted specific language actually included on a Certificate of Insurance that stated that carbon monoxide poisoning (resulting from equipment used to heat/cool the hotel) is not excluded.
I Googled the question, “Is Carbon Monoxide a pollutant?” and the response indicated it was “because it reacts with hemoglobin,” which causes vital organs to lack oxygen, causing injury. So, does that mean that the pollution exclusion applies? There is, however, a grant of coverage for “Bodily injury if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building….” So, does that grant coverage? You can see why the client wanted clarification and, as mentioned, wanted the agency to include on the certificate that this type of loss would be covered. So rightfully so, the agency realized that they were not the “final” interpreter of coverage and asked the carrier.
I don’t know if you’ve ever asked a carrier whether coverage would apply based on a hypothetical claim, but the typical response will be something along the lines of “Tell us the facts, and we will tell you whether there is coverage or not.” Early in my insurance career as a senior underwriter, I learned that is the typical response. The agency asked the carrier and was not able to obtain a definitive response on whether coverage would apply. So, it is not suggested at all for the agency to include on a certificate that coverage for this exposure is not excluded. Imagine if they did (because they thought coverage would apply, only to discover that a claim of this type was denied). Certificates are IMPORTANT documents and need to be treated as such.
Based on the various policy language, it is unclear whether a claim involving carbon monoxide poisoning would be covered, and that is the reason for delving into this issue. The main point is that there will be times when the client is asked for an interpretation of coverage. Agents should not be providing this since you do not have the authority, and your opinion, while hopefully valued, does not really count. Ask the carrier, but don’t be surprised if they don’t want to give you an answer until a claim has occurred and they can review the facts. Unfortunately, for agencies, it is too late for you to do much about this then.