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Insurance Terms

Here is the fine print

Insurance terms can be somewhat difficult to understand, not because they are necessarily unclear, but because they are defined within the policy in different sections. Often, their definition varies from section to section, making you think the policy makes no sense.

We have an entire section devoted to "How to Read the Policy,” however, it is important to understand the legally recognized terms. These terms do not need to be defined as they are likely already interpreted by case law or by statutory definition. These terms can give you a very hard time as you might not agree with an interpretation of the term, but the insurance company will state that this is the insurance law of your state.

Common disputes occur over terms like:

• Actual Cash Value
• Right of Appraisal
• Insurable Interest
• Duty to Cooperate

It is important to note that these insurance terms do not have to be "spelled out in the policy" per se. They are terms that are applied to auto policies by default. For example, under the good faith concept, an insurer must act in good faith when conducting a coverage, fault, and injury investigation on behalf of an insured.

The good faith concept is not necessarily written into the policy, but as a public understanding of these types of contracts (insurance policies are contracts), it is understood that the duty of good faith exits, even if not referred to by name.

Because of this, concepts like Replacement Cost do not have to be specifically defined if the insurance company does not want to define it in the actual policy and would rather defer to the definition given to the term by legal precedent.

However, simply because an insurance adjuster tells you that insurance terms are interpreted a certain way, it does not mean they are correct!

This adds more to the confusion regarding car accidents and claims.

Adjusters are not lawyers and they are not trained (nor have the access) to interpret legal terms and their real significance. If the insurance company does not define insurance terms, then those terms must be interpreted by statute or case law. The adjuster must provide you with the court holdings or the statutes where you can see their meaning.

Remember that if a term is confusing and not crystal clear (it is ambiguous), then the insurance company must interpret that term in your favor (this is called the interpretation of the policy concept).

This creates an interesting situation.

If you are looking for coverage, and the policy could exclude that coverage, then you could try to show an ambiguity. If insurance terms are ambiguous or contradictory, they must be taken in the light most favorable to you (the insured).

For coverage to be excluded, the insurance policy must be clear and unambiguous. Note that for the interpretation of coverage concept to apply, the insured must show an ambiguity first; then apply the concept afterwards. The concept does not create ambiguity where it does not exist nor grants coverage where the language of the policy clearly excludes it.

All the following insurance concepts have certain caveats on their definitions, and it is very important for you to understand their real significance.

Insurance Clauses and Terms

Overview
Actual Cash Value or ACV
Additional Insurance Clause
Cancellation of Coverage Clause
Choice of Law Clause
Forum Selection Clause

Duty to Cooperate Clause
Duty to Report Losses Clause
Financial Responsibility Clause
Insurable Interest Concept
Interpretation of the Policy Concept

Mandatory Arbitration Clause
Mitigation of Damages Clause
Non Duplication of Benefits Clause
Proof of Loss Clause
Promissory Estoppel Concept

Reservation of Rights Concept
Reasonable and Necessary Clause
Right of Appraisal Clause
Right of Settlement Clause
Rights of Counsel Concept

Subrogation of Rights Clause Part I
Subrogation of Rights Clause Part II
Statute of Limitations Concept
Replacement Cost Value
Restoration Coverage
Transfer of Benefits Clause
Also see more about insurance terms and coverages here

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