STUMBLING BLOCK

Policyholder’s denied claim loses two court proceedings due to late filing

 [T]he insurance company should have focused on educating its policyholder.

Policy

By Bruce D. Hicks, CPCU, CLU

The Court Decisions column is a popular part of Rough Notes magazine. One reason for this is that the court room is where the promises made in an insurance contract often become real. All insurance professionals can develop “what if” scenarios, but until those scenarios are tested with an actual loss and a court decision, they remain mental exercises. This column comes from the industry expert editors of Policy Forms & Manual Analysis (PF&M). This is a knowledge base consisting of more than 15,000 pages of coverage explanations from Rough Notes Company’s digital solutions. The editors are going to dig a little deeper into one of those court decisions to identify a coverage problem, provide possible solutions and/or offer broader perspectives.

In this edition of “Dig a Little Deeper,” we look  at Rosenberg-Wohl v. State Farm Fire and Casualty Company, which went to litigation and was reviewed by both a trial and an appellate court. The dispute was initiated by an insurer deciding not to pay the policyholder’s expenses for replacing their front, exterior stairs. The replacement was due to the old stairs having an improper pitch that caused at least one visitor to trip, more than once.

The policyholders eventually sued but lost initially and upon appeal. Both courts hearing their case ruled against them. The decisions were based on their filing a lawsuit too late. Their policy contained a provision that litigation must occur no later than one year from the date of loss or damage. Neither court was swayed by the policyholder’s arguments that alleged bad faith as well as the insurer waiving the limitation.

You may think that our next step would be to discuss the importance of adhering to important policy provisions, especially those involved with loss notification. However, any considerations regarding timely filings or seeking financial relief in this dispute misses a point. In turn, it also misses an opportunity to explain how this situation should have been handled.

The court summary did not specifically mention why the insurer twice denied the loss. We suggest that the insurance company should have focused on educating its policyholder. It does not appear that a loss was filed connected to the incidents of a visitor tripping on the stairs.

By all appearances, the action taken by the policyholders was purely a matter of home maintenance. A set of, likely, older worn stairs that presented a trip hazard were replaced. Any response to a request to pay the expense should have included an explanation that maintenance is a regular responsibility of home ownership. It also could have mitigated the situation by pointing out that their decision was proactive.

The payoffs for the cost of installing safe stairs were to prevent injuries that could have resulted in serious liability losses and/or preserving their coverage, as the worn stairs might have become a reason for non-renewal.

The author

Bruce D. Hicks, CPCU, CLU, is senior vice president, Technical & Educational Products Division, at The Rough Notes Company. He has more than 30 years of property/casualty insurance experience, including personal and small business underwriting as well as compliance duties for several national and regional insurers. Active in the CPCU Society, Bruce served as a governor of the organization from 2007 through 2010 and currently serves on its International Interest Group Committee.