Qualification and Experience Requirements of High Risk Property Insurance Policies

Specialized and high-risk policies, like marine, aviation, and trucking, often contain requirements for qualifications and experience of the operator. These are often critical factors establishing coverage, which are raised after a loss occurs. These policies are not one-size-fits-all; they are tailored to specific risks and require operators to meet certain criteria to ensure that they are capable of managing those risks effectively. For example, an aviation policy might stipulate that the pilot must have a certain number of years and flying hours of experience, as well as specific certifications. Failing to meet these requirements could void the coverage, leaving the policyholder exposed to significant financial risks.  

A recent ruling on this topic1 was conversational but to the point:         

SYNY Logistics, Inc., a large interstate trucking company, bought an insurance policy from Great Lakes Insurance SE. The policy covered drivers as they hauled freight across the country. But the policy did not cover anyone and everyone who got in the cab and got behind the wheel. The policy required drivers to have one year of driving experience.

One day, Brent Granville, a driver for the company, hopped into his big rig with a set of keys. He started the engine and went trucking with 354 days of experience under his belt. That’s close to a year of experience, but it’s not a year. Unfortunately, he crashed.

The accident sparked a dispute between the trucking company and the insurance company. SYNY later filed this declaratory judgment action, seeking coverage for the accident. Great Lakes, in turn, filed a counterclaim about the lack of coverage. The insurance company then moved for summary judgment, arguing that there is no coverage because the driver did not have the experience required by the policy.

The Court grants Great Lakes’s motion. When it comes to coverage, the policy is not in for a penny, in for a pound. It’s miss by an inch, miss by a mile. Granville got 97% of the way toward satisfying the one-year requirement. So, he’s 100% short and is entitled to 0% coverage.

The judge analyzed the policy and made this observation:

The endorsement declared that Great Lakes would not indemnify SYNY for damage unless an ‘experience[d]’ driver operated the vehicle. …The driver must ‘have’ a certain level of experience. Id. Specifically, the driver must provide ‘documented evidence’ showing that he ‘ha[s]’ the necessary experience ‘at the inception of th[e] Policy or at the date of hire, whichever is the later.’

The parties agree on the relevant dates. SYNY hired Granville on April 19, 2020. …The policy started on August 24, 2020. August 2020 came after April 2020. The policy start date is the later date. So the question is whether Granville had ‘a minimum of one (1) years continuous driving experience, within twenty-four (24) months of’ August 24, 2020….

Granville did not. Granville received his commercial license on September 5, 2019….The policy started 354 days later. He was only nine days away from hitting the 365-day mark. He got 354 feet toward the 365-foot finish line.

That’s close, but no cigar. Granville fell short of notching one year of driving experience under his belt. So the policy did not cover Granville. For want of 9 days, the coverage was lost.

The experience requirement makes sense. After all, Great Lakes was insuring heavy equipment that could cause a lot of damage to a lot of people. So, before signing up for that potential liability, Great Lakes wanted to make sure that the people doing the driving knew what they were doing.

“That’s close, but no cigar” is something you may hear me say in a speech. I do not believe I have ever read a federal judge’s opinion with this phrase.

The judge noted that the policyholder may have been able to make a waiver or estoppel argument to avoid the adverse ruling, but its lawyers failed to make it:

SYNY states that ‘prior to the issuance of the Policy,’ and during the application process, SYNY Logistics provided Great Lakes with a list of drivers. The list included Granville. But Great Lakes never ‘informed’ SYNY that Granville was not qualified. Instead, Great Lakes ‘invoiced’ SYNY for premiums.

Maybe SYNY is hinting at a waiver or estoppel argument. Great Lakes anticipated the argument in its opening brief. But facts dumped into a brief do not make a legal argument. An estoppel or waiver argument should – at the very least – use the words ‘estoppel’ or ‘waiver.’ SYNY’s brief has none.

This Court will not build the argument for the parties. SYNY has waived its waiver and estoppel arguments. See Cent. States, Se. & Sw. Areas Pension Fund v. Midwest Motor Express, Inc., 181 F.3d 799, 808 (7th Cir. 1999) (‘Arguments not developed in any meaningful way are waived.’);…

Federal Judge Steven C. Seeger made this ruling. He is bright, fairly new to the bench, and certainly well qualified:

Seeger earned his Bachelor of Arts, summa cum laude, from Wheaton College and his Juris Doctor, magna cum laude, from the University of Michigan Law School, where he was inducted into the Order of the Coif and served as both an associate and articles editor of the University of Michigan Law Review.

After graduation from law school he served as a law clerk to Judge David B. Sentelle of the United States Court of Appeals for the District of Columbia Circuit. After his clerkship, Seeger practiced for twelve years in the Chicago, Illinois, office of Kirkland & Ellis, where he spent his last seven years as a partner. From 2010 to 2019, Seeger served as Senior Trial Counsel in the Chicago Regional Office of the United States Securities and Exchange Commission, where he litigated cases to enforce federal securities laws on behalf of the public.  

Certainly, the idea that the brightest minds and most skilled lawyers should serve as judges is a compelling one. The judiciary plays a critical role in interpreting laws and delivering justice, and having highly qualified individuals in these positions can significantly impact the quality of rulings. This is especially true in specialized areas of law, such as insurance coverage, where the complexity of the issues demands a nuanced understanding.

The takeaways from this post are:

When dealing with specialized property policies regarding high risks, carefully check for qualifications and experience requirements.
If the insurance company knows the qualification and experience level are not met at the point of application, make a waiver or estoppel argument.
Insurance law opinions do not have to be nerdy and boring explanations.
We need to encourage and reward the best and brightest to accept important public service positions.  

Thought For The Day        

More important than your obligation to follow your conscience is your obligation to form your conscience correctly.

—Antonin Scalia

1 SYNY Logistics v. Great Lakes Ins., No. 22-cv-764 (N.D. Ill Sept. 30, 2023).