In the early 2000’s I remember reading a post on an internet forum made by a middle-aged man soliciting advice on how to repair a gaming console. The post was several hundred words long and contained granular descriptions of every aspect of the problem. I faced an identical problem and was gratified by the detail the poster included. However, the only response was by a teenager who posted, “Do you really expect anybody to read all of that?” The internet eventually condensed this reaction to “text walls” with the abbreviation, “tl;dr” which means “too long; didn’t read.”
While popular culture clearly longs for high reward, low investment experiences, property and casualty insurance remains decidedly old school. The law does not recognize a tl;dr defense when the insurance in the policy is different than the insurance the consumer believed he was purchasing. Under Alabama law, insureds have a duty to read their insurance policies. Courts impute knowledge of insurance policy terms to an individual “who is competent in intelligence and background to understand insurance policy language.” If the insurance company delivers a policy, the terms of which are different from what was agreed when the insurance was bound, the insured must notify the company of the discrepancy and seek to cancel the policy. After the policy has been renewed, the insured is deemed to have waived his objections and claims regarding the discrepancy.
The law will forgive a failure to understand the terms of an insurance policy in only a couple of instances. First, if the insured cannot read and write the language in which the policy is drawn, he or she is excused for not reading it. Also, if the loss occurs before the policy is delivered, then the law will exonerate the insured if he or she was prejudiced by the failure to deliver. It seems likely that the rule could be expanded to forgive a failure to comprehend by an insured with a learning disability.
But reading an insurance policy is no easy feat. First, more than one document – or form, in insurance-speak – may affect coverage. Each part of an insurance policy has to be read and reconciled with the other parts. The following is a forms list for a typical homeowners insurance policy.
The first form listed, the homeowners policy declarations (or “dec” page), summarizes the information essential to the policy. It includes the name of the insured, a description of the property covered, and the period during which the policy is effective. It also outlines the policy’s coverages, limits, deductibles and discounts. The dec page ought to contain a list of the forms composing the policy, as in the image above.
The second form in the list, Homeowners 3 – Special Form, which we will call “the HO 3,” sets out the coverages, exclusions, and other terms relevant to the insurance. The Insurance Services Office (ISO) publishes this form, which is the most widely issued homeowner’s policy. This document is what most people consider to be “the policy.”
The remaining forms in the list, 3-6, change some of the terms in the HO 3 and must be read together with it. These additional forms are called endorsements and amend the policy terms. Endorsements (also called “riders” or “floaters”) are issued for different reasons, but all contain policy terms not set out in the HO 3 and therefore change it.
Insurance companies frequently offer coverages in addition to those set out in the HO 3 form. The third form on the list above changes the policy regarding replacement cost coverage. The Guaranteed Replacement Cost endorsement assures that a covered loss event destroys the home, then the insurer will pay to completely rebuild the home, regardless of the cost and without regard to the limits of insurance. If an insured believes that is the type of coverage he or she was bindng, but the dec page does not mention it, then contact the insurer and demand that the policy either be endorsed with guaranteed replacement cost coverage or cancel the policy and refund the entire premium.
Insurance laws vary from state to state and to be enforceable, every insurance policy has to comply with the law of the state in which it is issued. If the HO 3 was drafted to include every permutation of every state’s insurance law, it would be hundreds of pages long and largely unreadable. As such, every state’s insurance department approves forms for use with standard policies to bring them into compliance with the state’s laws. For example, if we look at the last endorsement, Special Provisions – Alabama, we will see that it changes the policy to conform to Alabama law.
HO 3 provides as follows regarding the insured suing the insurance company, a topic near and dear to your author’s heart.
But the Special Provisions – Alabama form changes this policy condition as follows:
Please note that the Alabama endorsement changes the HO 3’s fixed two-year limitation on bringing actions against the insurer to require that actions be brought within the time limitations imposed by Alabama law. In Alabama, an insured has at least 3 years after the date of loss in which to bring an action for breach of the policy terms. An insured that only consulted the main policy would have the mistaken belief that an action must be brought within 2 years.
Insurance policies are dense, complex, and lengthy. If reading yours leaves you unclear on your coverage, the dec page is generally far more accessible. It summarizes the key aspects of your policy, including the coverages included. If what is printed on the dec page does not jibe with what you thought you were buying, take action before you suffer a loss. Alabama law is not particularly forgiving.