The Devil Is In the Details. What Did Your Premium Discount Actually Cost You?

This well-known idiom alludes to a catch or mysterious element hidden in the details.1 Policyholders purchase insurance to protect and secure their property. Unfortunately, many carriers do not disclose provisions that limit their policyholders’ rights in the event a dispute arises.

Policyholders’ initial concern is their premium payment, and they often fail to consider what coverage they are actually purchasing. However, cheap insurance is, well, cheap insurance and often results in reduced protections and less coverage.

Recently, a few provisions have been making their way into commercial insurance policies that “catch” or substantially affect policyholders’ rights – for example, a Choice of Law provision that selects New York law as the law governing the dispute and the appropriate forum for lawsuits.

Under this provision, the policyholder will no longer have the protections of Florida Law but will be subject to the less favorable laws of New York. Absent additional protection in the Policy, New York law is very strict on the issue of Late Notice, with some case law going as far to say a three-month delay bars coverage.2 This substantially differs from Florida Statute § 627.70132, which permits two years to provide notice of a claim.

Next is a Mandatory Arbitration Provision. This provision requires the parties to participate in an arbitration in place of a conventional lawsuit. This directly strips a party’s access to the court system. Arbitration is also often more costly than a conventional lawsuit. Generally, in an arbitration, each party will hire its own arbitrator and split the cost of a neutral judge. These three will make up the arbitration panel. It should be no surprise that each party will likely be billed well over $1,000 for each hour worked by the panel. Finally, the Arbitration Provisions often limit the ability of the panel to award certain types of damages, such as punitive damages.

Surprises can often be unpleasant. The last thing anyone wants is to be surprised with insurance provisions that reduce their protections and cost them more money. So, pay attention to exactly what you’re buying when choosing your insurance policy.

1 Titelman, Gregory. Random House Dictionary of Popular Proverbs and Sayings. Random House Reference (1996). p. 119.

2 Minasian v. IDS Prop. Cas. Ins. Co., 676 Fed. App’x 29 (2nd Cir. 2017).