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Vol. 9 - Issue 1
January 8, 2020


Federal Government To Now Review All Insurer Disclaimer Letters


In the last issue of Coverage Opinions I addressed the fact that literary classics were not my thing in school nor afterwards.  But I said that it would have been different if our greatest authors had been coverage lawyers or other professionals.  In that case, there are several literary classics that would surely be on my shelf. 

For example, as I discussed in the last issue of CO, if Nathaniel Hawthorne had been a coverage lawyer, he would have written The Scarlet ROR Letter, the story of Hester Prynne, a claims adjuster, who wrote a 74-page reservation of rights letter, that included 73 pages of verbatim policy language, including provisions from policies that the insured didn’t even have.  The letter was challenged by the insured.  The court held that the reservation of rights letter, despite its length, did not meet the “fairly inform” standard.  However, the court did not estop the insurer from asserting any coverage defenses.  Instead, Prynne was required to wear an R on her shirt until the claim settled.  

The next literary classic that I surely would have read is George Orwell’s 1984 Corners.  It is the story of the U.S. government’s creation of a second Department of Defense, which has the job of reviewing all disclaimer letters, to be certain that an insurer’s decision to deny a defense was correct.  Insurers have been infiltrated by the Though Police, which secretly listens to insurers’ claims roundtables.  If the Thought Police hear an acknowledgment by the participants that two reasonable interpretations of the policy exist, but coverage is not afforded, an adjuster will be sent to Room 101.  Covering the walls of claims departments are posters that read “Big Brother Is Watching Your Disclaimer Letters.”
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