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Investigate and Pay: Insurance Contract Basics

Posted on: November 8, 2022

LEGALLY REVIEWED BY:
Chi Hung Nguyen
November 8, 2022
Insurance Contracts and multiple policies
Insurance Contract

If you have an insurance policy, you and the insurance company or provider are likely in a contractual relationship. Enforceable contracts are binding, and, as a contract, insurance policies’ have certain parts, duties and rules that are important to understand Insurance Contract in the event of a car accident.

What is an “insured”?

There are several types of types of insureds: named insureds, additional insureds, and any person or entity expressly defined as an insured in a given insurance policy. They are the people covered by insurance. Similarly, an insurance provider is typically referred to as an “insurer.”

What is an insurance contract?

 Insurance contracts are like any other written contract, and must have the legal formalities in order to be valid. Contracts identify the who is a party, or person with responsibilities, under the contract and each of their obligations.

Generally, insurance contracts have the same basic 3 parts:

Application: This is typically a form containing all the questions the insurance company wants answered regarding potential risks.

Declaration Sheet: This document has the policy holder’s name, description and location of person or property that is covered by insurance, the policy’s coverage limits, deductibles and endorsements that expand or limit coverage.

Policy: This is the booklet containing insurance agreements, definitions of words and phrases, conditions, exclusions, including printed endorsements that expand and/or limit coverage, and an outline of the duties and responsibilities of both the insured and the insurance provider.

What are the different types of insurance providers and insurers?

Facilitative Reinsurer: this is an insurance provider that offers coverage under an individual reinsurance agreement.

Mutual Company: this is an insurance provider that is set up to return profits to policy holders in the form of additional benefits or returned premiums. This is also called a  “reciprocal insurance exchange.”

Stock Company: this is an insurance provider that is set up to earn profits for its stockholders instead of its policyholders.

Non-Profit Health Insurer: this is an insurance provider that provides its subscribers with medical and hospital coverage. An example of this is Blue Cross.

Syndicate: this is a group of underwriters qualified by state regulations to offer certain types of insurance.

Reciprocal Insurer: this is a group of separate insurance providers held under a central holding corporation like Farmer’s Insurance Exchange and Inter-Insurance Exchange of the Auto Club.

Reinsurer: this is an insurance provider that accepts some of the risk of another insurance provider in exchange for a portion of the premium. This lets the first insurance provider reduce its statutory reserve requirements and take on new business.

Treaty Reinsurers: this is an insurance provider who offer automatic placement through pre-existing arrangements between them, covering all or a specific class of risks.

Excess Insurer: this is an insurance provider who covers risks above that already covered by a “primary” insurance provider. A common example of this is for underinsured and uninsured car insurance policies. While the average person has one auto insurance policy that provides insurance coverage for  their household’s vehicles, many motorists have overlapping or multiple policies that can cover damages. The additional insurance coverage increases coverage limits and the second insurance provider is called the “excess” insurer. Typically, these excess insurers provide insurance after the primary insurance policy is exhausted, or used up.

Underinsurance occurs when a person is involved in a car accident, but their insurance policy is not enough to cover the full cost of all the value of the vehicle or damages suffered. But even if the amount of damage is greater than the amount covered under an insurance policy, the insurance company still generally owes a duty to investigate before denying a claim, a defense and to define its own obligations. Cases where jurisdictions do not impose a duty to investigate are rare. Then, if liability is clear, the insurance company must make a prompt payment up to the insurance policy limits or it can face liability for failing to make a prompt payment.

There are many lawsuits and cases that can serve as examples of bad faith conduct by insurance companies. In one fatal car accident case in Oklahoma, the parents of the deceased driver made a claim with the at-fault and underinsured driver’s insurance company for the death of their child. The case should have been settled in 60-90 days for the $10,000 policy limits even though the at-fault driver was underinsured and the damage as well as their loss was clearly worth much more. Instead, the insurance adjuster failed in carrying the duty to investigate, and told the parents of the deceased driver that the insurance company would not pay until the city paid first because the vehicle was technically owned by the city.

In this case, the insurance company wrongfully failed to investigate and delay payment of the parents claim by telling the parents to exhaust the city’s policy funds before seeking the underinsurance funds. The city had a policy for $50,000 while the underinsured motorist coverage on the truck was $10,000. The value of the claim was greater, and the parents brought suit against the insurance company for bad faith. Unfortunately, there are many examples of bad faith conduct by insurance companies. With the help of an attorney, the parents of the deceased driver turned a $10,000 policy limit exposure into a judgement of over $2,000,000.

An insurance companies’ failure to fulfill its contractual duties under the insurance policy, like the duty to investigate and provide prompt payment, can also relieve claimants of their own duties such as the obligation to give notice to insurance companies.

Contact an experienced personal injury lawyer

Navigating complex personal injury cases and handling insurance companies can make the recovery process even more difficult. Experienced attorneys strategically weigh the cost and benefits of each case to minimize the time and expense involved while maximizing their clients’ compensation.

Are you trying to secure your financial recovery with the help of experienced attorneys? If so, we can help.

The Pusch & Nguyen Law Firm has helped countless Texans handle their insurance disputes. Our experienced trial lawyers have gone up against some of the biggest names in the insurance industry while successfully bringing home payouts for clients. Our successful reputation speaks for itself, and with offices in both Houston and San Antonio, we are well equipped to assist Texans who are in dire need of our services. Register online for a free case evaluation or call us today at 713-528-8108 (Houston) or 210-702-3000 to schedule an appointment with a member of our team.

 

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