Insurable Interests Defined: A Blog Series – Episode Four, California

In this week’s episode of my continuing blog series, we travel to California to see how the Golden State defines Insurable Interests. Spoiler Alert: You need to read the policy!

In California, the general rule, “limits recovery of proceeds under an insurance contact to the named insureds,”1 and that “[a]n insurance contract is personal and provides protection for the named insured, not for a general class of ‘actual owners.’”2 Further, not only do they have to be the named insured, but they must also have an insurable interest.3 Without an insurable interest, the insurance contract will be void.4

Under California law, an ‘insurable interest’ means a ‘pecuniary interest.’5 “Simply phrased, an insurable interest exists when “the insured has a direct pecuniary interest in the preservation of the property and … will suffer a pecuniary loss as an immediate and proximate result of this destruction.”6



Office of Public Insurance Counsel Weighs in Against Proposed Mandatory Arbitration Endorsement

Alex Winslow of Texas Watch passed along to me that the Office of Public Insurance Counsel (OPIC) has weighed in against the mandatory arbitration endorsement proposed by Texas Farm Bureau and now (semi-secretly) before the Texas Department of Insurance (TDI) for approval. OPIC is the state office tasked with representing policyholders in rate and form filing decisions. I have linked a copy of their very strong letter addressed to David Maddox, the Commissioner of Insurance for the State of Texas. OPIC agreed with the letter sent to Maddox last week by Texas Watch, which I linked to an earlier blog, but OPIC made some other very good points, which I highlight here.

The insurance industry might argue that arbitration is a fair, alternative way for the carrier and the policyholder to settle their dispute. However, OPIC points out that arbitration is only fair when both parties are on equal footing-like if JP Morgan Chase is going to arbitrate with Wells Fargo. However, OPIC did a…


Matching Damaged Property of Residential Losses

Rutgers Law Professor Jay Feinman was commissioned by United Policyholders to write a report on the issue of “matching” following property losses to residential structures. He summarized the issue of matching as following:

Disputes can arise under a replacement cost policy if property is partially damaged. The insurer asserts that it is only required to pay for repair or replacement of the limited portion of the property that is damaged. The policyholder claims that more is needed to replace the property to a condition comparable to the position it was in prior to loss. A typical example arises if a portion of a roof is damaged. Replacing only the damaged shingles restores the functionality of the roof but does not fully replace the damaged property because the new shingles do not match the existing shingles. Prior to the loss the roof had a uniform appearance, and uniformity has a significant effect on value; therefore, the proper measure of replacement cost is the cost to…


Hail Storms, Wear and Tear, and Inadequate Maintenance

Hailstorms are wreaking havoc as noted in Brandee Bower’s post yesterday, Greetings From Hail Alley. After contacting their insurance companies, some policyholders unfortunately find their insurance companies deny the claims based on exclusions in the insurance contract involving wear and tear as well as inadequate maintenance.

To be fair, roofs get older and there is always wear and tear on older roofs. Rarely are close up pictures taken of roofs taken just before a hailstorm occurs. Accordingly, changes in the condition of some roofs caused by the winds and hail in a hailstorm versus pre-existing wear and tear become an issue.

My impression is that many insurers are increasingly claiming exclusions caused by wear and tear as well as inadequate maintenance. Indeed, insurance company engineering firms are increasingly advertising their services for these issues. There is nothing unethical about this, but the trend is landing many hailstorm losses into denials and subsequent…


Greetings from Hail Alley!

On May 10, 2016 there was a severe thunderstorm near Colorado Springs, Colorado. The below photograph depicts hail streaks (hail falling to the ground) and is a stunning image that captures the destructive nature of these storms.1

‘Hail Alley’ is part of Colorado’s Front Range (and where I live) and receives the highest frequency of hail in North America.2 Colorado is ranked second for the number of insurance claims filed due to hail damage.3 Only Texas has more, likely because it is three times the size of Colorado (and everything is bigger in Texas, right? I know my hair was in college!). In the past three years, 182,591 hail-related claims were filed in Colorado.4

As we are now in peak storm season (April-August), this is a great time to review your policy. Make sure you have adequate coverage and that you understand any exclusions in your policy. Insurance policies are adhesion contracts, meaning they typically are not negotiated so if you don’t like the…


Commercial Marine Insurance and Depreciation on Engines

When Hurricanes hit, residential and commercial property are commonly considered when you think of the insurance losses. But in coastal states hurricanes can also have a devastating impact on commercial and recreational marine losses.

As with residential and commercial property, you need to be sure you review and understand your boat’s insurance policy. It is likely that a boat owner or captain has taken special consideration with a Hurricane or Tropical Storm because part of the application requires a written plan for the boat when a Hurricane comes to town.


Taking a look at one policy, the amount of the vessel’s insurance was for an agreed value but there is still a depreciation schedule in this policy. The way this policy was written, partial losses would be paid at replacement cost with a few exceptions but one of the exceptions applies to outboard motors. On a smaller vessel the engine can be the most valuable component.

Looking at the language for partial…


United Policyholders Weighs In on Mandatory Arbitration Shenanigans at Texas Department of Insurance

Amy Bach, Executive Director of United Policyholders (“UP”), has shared with me the letter she sent to David Mattox (Texas Commissioner of Insurance) on the issue of mandatory arbitration provisions in homeowner policies. Here is a link to that letter for you to read.

We know an insurance company has submitted to the Texas Department of Insurance (“TDI”) a policy that requires mandatory arbitration if a dispute on a claim occurs. TDI won’t tell anyone which carrier submitted the new policy form or provide a copy of the proposed form on the basis of “trade secrets,” which is total bull corn. The bait and switch in this mandatory arbitration scheme is that the homeowner pays a lower premium if she agrees to waive her constitutional right to trial by jury and go to arbitration instead. The problem is that most people have no idea what a hellish and unfair experience arbitration can be. And the problem is that arbitration is final and not…


Setting Aside an Appraisal Award in Pennsylvania, Part 1

I was recently approached by policyholders that had suffered a rather severe water loss to their property. They wisely retained a public adjuster who submitted their claim to the insurance carrier. When it became clear that the insurance carrier was not interested in properly adjusting the claim, the policyholders decided to submit the claim to appraisal. The parties chose their appraisers and ultimately an appraisal award was entered that was not favorable to the insured. The award was not sufficient to repair the damages to the property and the policyholders wanted to file suit against the insurance carrier to recover funds sufficient to make the repairs to the property.

This begs the question, under what circumstances will the Pennsylvania courts set aside an appraisal award?

Pennsylvania law dictates that an appraisal award will be set aside in two circumstances. In the first instance-and one common among most states-an award can be set aside or modified in cases of…


Insurance Industry Pulling End Around on Texas Policyholders: Carrier Asking TDI to Approve Pre-Dispute Arbitration Clause in Policy Form

I am using this blog to get the word our to all persons in Texas who care about working Texans and Texas businesses who pay insurance premiums every day. Please read below from Alex Winslow of Texas Watch and please go on the Texas Watch website and oppose this type of policy. I emailed Alex and asked for a copy of the proposed policy, but guess what? Nobody except TDI has a copy, and TDI won’t share it based on some goofy theory of proprietary protection to the anonymous insurance company, who submitted it for approval. And Winslow thinks TDI will have a decision within the next few weeks. Therefore, TDI will decide on a new policy form that will completely change to rights of Texas policyholders (to their detriment) (a) without the public knowing which carrier submitted it, (b) without the public having an opportunity to see the policy form before it is approved, and (c) without the public having an opportunity to comment at hearing or otherwise before the form is…