Another point to remember: Binders are extremely important. They evidence coverage in lieu of a policy. It’s very important to review binders in detail at the C-Level prior to receiving your policy.

Here’s why: What’s printed on the binder relative to aspects of coverage is your coverage prior to receiving a copy of the full policy.

In addition: If the fully-formed policy appears to differ from what you understood was contained on the binder, then you have the binder to help clarify the coverage issue in question.

A $3.7 billion dollar difference. Most readers of the Guide will be familiar with the headline-making example of the Silverstein Real Estate Group’s involvement with the World Trade Center property. Coverage was in dispute because the terms and conditions of the binders in question were not clearly spelled out regarding the definition of an occurrence.

Lesson learned: If your policy is not written correctly from the start, then you are not making the most effective use of your firm’s time or money because it will not do what it was intended to do.

Always obtain a full and complete binder of insurance with coverage details outlined. Detail, Detail, Detail. It’s the details of coverage that are important!

• Most of the time exclusionary endorsements are clear to all parties prior to binding the policy.
• Other times they are obscure, buried in highly-confusing policy language, not known or fully understood at the C-Level until a loss occurs.

In either case: In the event of a loss, what’s in the contract is what the insurance company will go by. That’s why it is so important to have your policy reviewed and analyzed to make sure that it will do what you believe it’s intended to do.

Case in point:  A prominent real estate firm engaged us to review a property policy for a just-purchased building in Philadelphia. The $30,000,000 building was currently vacant and being renovated. To cover the building their broker sold them a new, separate policy.

Unlike previous policies that had been arranged for the real estate firm, this new policy contained a “protective safeguards” warranty, which required the client to have 24-hour security on the vacant premises and a fence surrounding the property. Lacking that, in the event of a loss there would be no coverage. Until we alerted them, the insured had no knowledge that the policy contained such a warranty.

Had a loss occurred with the above referenced provision in place, the insurance company could decline coverage based on this point and the claim would have been litigated. Not the kind of scenario you want to have happen. It would have been costly and time consuming for the insured to resolve the issue.

In the final article in this series, we’ll look at another important point you’ll want to remember.

If you are using an insurance policy as a means and maybe the only means, to transfer risk, then the answer could be your insurance policy!

Let’s see why…

Every word in this document means something and the insurance company knows what every one of those words mean and how to use them… potentially against you.

The insurance policy is a contract. 

Don’t let the word “policy” fool you into thinking otherwise. What’s contained in the contract will determine how much protection you have when a loss occurs – how, when and how much you will get indemnified (paid). 

Once you have a claim, your “policy” becomes a “contract”. See the difference?

We’ll go into a bit more detail in the next part of this series.