INSURANCE; The Hawks and The Chicks

Many have fallen victims in the hands of insurance companies whose promises of indemnifying insured properties with them never saw the light of day. Some companies would even go the extra mile to haunt their own client’s benefactors of insured properties in the case of death of the major client. This corporate behaviour of enjoying premiums, recording huge profit after task figures on pages of their account books but recoiling clandestinely, like a retreating octopus, seeking legal channels to avert meeting their own obligations in terms of the deal entered into with their own clients in the event of destruction or damage of the insured property, item or payments to be made in terms of life insurance, makes individuals and corporate organisations loose trust in insurance companies. They (insurance companies) would rather employ the services of veteran lawyers to defend their company in a bid to avert paying claims, paying high amounts to these attorneys whose services and charges would be far from client’s financial reach to win legal suits, instead of honouring the deal between them and their clients. Kristina Cherevas an attorney with ‘subrogation and recovery law’ a legal firm in the united- states who specializes in insurance matters writes with a poetic analogy on the topic ‘How is there no recovery’? let me count the ways… What are the things that cause failures of reclaim in favour of insurance clients? Let’s begin this very crucial aspect of legal and business matter by exploring the key definition of terms conditions and concepts of insurance. Though largely peculiar to the united states, they are relevant to the overall understanding of insurance especially with reference to litigations in other climes.   

There is what seems like countless hindrances to subrogation recovery.  With a spin on Elizabeth Barrett Browning’s famous love poem for the title of this article, we delve broadly into the legal bars for recovery.  The non-exhaustive list below outlines some of the main legal doctrines barring recovery in insurance claims.  Hopefully, these simple definitions can assist in evaluating your next loss.  Please note the definitions are not state-specific and just provide a general overview of the doctrines; subrogation counsel will have state-specific rules, exemptions, and variations that could apply.

Statute of Limitations: Each state sets a time bar (commonly 1, 2, 3, or 4 years) from the date of the incident in which the carrier must file a civil lawsuit for damages.  Any suit filed after the required time frame will be barred.

Statute of Repose: In addition to the Statute of Limitations, each state also sets a time bar (commonly 6, 8, or 10 years) for claims against a contractor for negligent construction, service, repair, installation, maintenance, etc.  The time clock will begin either on the date of the service or the date, the damage is discovered, depending on the type of service.

Economic Loss Doctrine: This doctrine states that a party cannot recover in a tort action against the manufacturer for product defect if the only damage is to the product itself (i.e., no personal injury or no other property damaged).  For example, if a defect in an automobile or lawnmower caused fire damage to the product itself (the automobile or lawnmower) as well as the residence or neighbour’s fence, then this doctrine would not apply to bar pursuit of the manufacturer.

Implied Co-Insurance: Depending on the language of the lease agreement, some states provide that a tenant of a rental property is considered a co-insured under the landowner’s insurance policy.  Combined with the Anti-subrogation principle stating that an insurance carrier has no right to assert a claim against its own insured, the carrier would be barred from pursuing any “co-insureds” or “additional insureds.”

Government Immunity: Despite apparent negligence of a fire department, police department or municipality in causing or contributing to a loss, state codes governing these agencies commonly provide immunity for their actions or inactions, thus barring pursuit for a loss.

Comparative Fault:  Sometimes the insured’s own actions or inactions contribute to a loss.  Each state sets a bar or modification to the amount of recovery against a third party tortfeasor depending on the amount of fault of the insured.  Some states bar recovery completely if the insured was at fault, others only bar recovery if the insured was 50 per cent or more at fault, and other states reduce the amount of recovery against the third-party tortfeasor by the amount of the insured’s fault.

Of course, the “depth and breadth and height” (to steal a line from Browning’s poem) of these legal doctrines cannot be analysed without the state specific laws and circumstances of the particular loss.  Because most subrogation matters cannot be evaluated with a poetic ring, individuals and corporate organisations are highly advised to seek legal counsels when contracting deals that have to do with any forms of insurance, this would go a long way to helping individuals especially and companies to avoid costly mistakes, putting them in a better position to stand a chance of chicks winning legal battles that would always ensue with their predatory hawks. Read subsequent posts on this blog for in-depth discussions on insurance matters by seasoned experts.