You've likely seen this scene: A policeman stands between a crowd of onlookers and a crime scene, intoning repeatedly "Move along, nothing to see here." But he really is saying, "Plenty happening here, but let's act like it isn't."

I'm reminded of this as we enter the final dog days of summer. In many areas of the country, the heat becomes so oppressive that many folks lay low in August, stay out of the heat and pursue activities no more strenuous than climbing into a hammock or watching a cork bob at the end of a fishing line in some shady creek. If late summer were voice mail, it would answer all calls with, "Sorry, I'm unavailable and unwilling to take your call right now. Don't bother leaving a message, because I'm unlikely to return it before September."

Perhaps that is what some folks at ISO and insurance companies hope we do instead of paying closer attention when they tweak wording and provisions in forms. Oh, nothing major or significant, mind you. Just like those policemen, except the insurance lingo is different. "No change in intent. For clarification purposes only. Really, we are just making a few editorial changes. Of course, it is remotely possible, in certain cases, these may represent a reduction in coverage, but that was certainly not our main reason."

In other words, "Move along, nothing to see here." And just like in the movies, the reality is the opposite.

May I nominate a few examples for the "Insurance Disingenuous Hall of Fame"?

Category: "If It Ain't Broke, Break It"

Nominees are:

  1. HO 2000 program golf cart "fix," where ISO clarified intent by claiming coverage everyone knew had existed in the HO forms for years actually never existed. Veterans from that day often referred to this as the "Dallas Shower Scene" fix.
  2. HO 2000 program college student "fix," where ISO issued a series of modifications and endorsements regarding coverage for college students that make little sense. Insurance scholars argued that coverage-wise, nothing actually changed. Hard to believe, after ISO kicked up all that significant dust.
  3. HO 2011 program personal property stored in mini-warehouses "fix," where with little or no explanation, ISO decided that storage exposure needed to fall under the same limited coverage as property located at another residence premises—while still leaving full Coverage C limits applicable for all other personal property anywhere in the world. And we all know how risky the furniture stored in that mini-warehouse outside Cleveland is compared to that trunk full of souvenirs and duty-free jewelry in Bangkok.

Category: " It Ain't Broke, But Then Again It Could Be, So Better Safe Than Sorry"

Nominees are:

  1. Any carrier that changes ISO wording while stating they really meant simply to clarify the ISO wording, even though they aren't sure that it needed clarifying, the carrier wording may not, in fact, clarify it, and they aren't positive there is any real need for the clarification. For example, an alert reader recently forwarded me a recent carrier endorsement titled "Amendment of Contractual Liability Exclusion—Exception For Damages Assumed In An Insured Contract Applies Only To Named Insured." Recent claims had the carrier thinking there might be an issue, although it couldn't say for sure. So as I understand it, the carrier wanted to close that theoretical door before it theoretically opened. Has insurance embraced quantum physics?
  2. A major carrier CEO recently announced significant rating and coverage changes because insureds in certain areas of the country were turning in too many hail damage to roof claims.  He's clearly set aside, at least temporarily, the foundational insurance rating/underwriting concept known as "the law of large numbers." Will the next announcement be that those darn insureds in the Gulf regions seem far more inclined to repeated hurricane-related claims than folks in North Dakota? I can hear that CEO now: "You know, this insurance would be a really great and profitable business if these idiots would just quit turning in claims!"

Category: " It May Or May Not Be Broke, So We May or May Not Fix It, But We'll Claim We Did"

This category also is known as "the triumph of motion over meaning" or, to "Blazing Saddles" fans, "We must protect our phony-baloney jobs, gentlemen."

Nominees are:

  1. Any GL primary and noncontributory endorsement or COI wording that claims to clarify and confirm the coverage being requested has been provided. As discussed in last month's column, "Defining Moment," this is a classic case of one party demanding, "We don't know what we are asking for, but you must give it to us" and being answered by another, "We don't know what you are asking for either, but here it is!"
  2. Check out the CA 20 48 endorsement, designated insured. Go ahead. What does it do in coverage terms? Exactly nothing. It clearly states "This endorsement does not alter coverage provided in the Coverage Form." They may as well have said, "Hey, designated insured! Joke's on you! Hahahahahaha!" So why did ISO do it? Simple: to get those who insisted on proof of additional insured status under a BAC off its back, despite the clear policy wording that included them: See "Who is an Insured" 1.c. This is my own favorite proof of the logical outcome of our contract madness: when everything must be in writing, it is inevitable that we will be forced to put nothing in writing.

The bottom line?

Maybe the real joke is on all of us who are told to take forms language and endorsements seriously. ISO and carriers insist on the importance of each and every word. What, then, are we to think when these same folks:

  • Respond to contract term demands for non-existent "vaporware" coverages and terms even they cannot explain by offering endorsements or policy variations they claim comply fully
  • Expend great time and trouble drafting endorsements to address issues they then say may not really exist
  • Issue endorsements that clearly do nothing.

Simple. We are to think, "Move along, nothing to see here." 

Quite the contrary, grasshopper. There is way too much to see here. For one, follow Ronald Reagan's advice to "Trust, but verify." Before assuring a client those endorsements or policies comply with contractual or COI demands, read the applicable endorsement or policy language, and don't put your name on anything for which you aren't willing to stick your E&O neck into the noose.

Consider the true irony that in response to the same possibility—fear of an overlooked exposure—insureds are told to purchase the broadest possible coverage while at the same time carriers are increasingly issuing modifying endorsements to narrow coverage. In a real sense, the firemen are now running away from the fires.

As for the last, no carrier is going to issue a customized endorsement without good reason. Any protestation to the contrary brings to mind that great lyric from the old Jonathan Edwards song "Sunshine:"

"He says in love and war all is fair, 

But he's got cards he ain't showing."

So we better dig out those cards and react accordingly. Either we embrace this newly discovered risk to our insureds as a needed addition to our professional advice, counsel and risk management, or we find another carrier that isn't quite so paranoid.

Nothing to see here?

I wish.

NOT FOR REPRINT

© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.