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Coverage Gap Created by Inept Changes in Insurers and Policy Wording
Posted on June 28, 2022 by Barry Zalma
Switching insurance providers can be tricky and dangerous to the insured. A “Claims Made” policy provides different coverages than an “occurrence” based policy.
In Derek Slaughter, Gabriel Campana, And City Of Williamsport v. The Charter Oak Fire Insurance Company, State National Insurance Company, Inc., and Steven Helm, USDC, M.D. Pennsylvania (June 17, 2022) the USDC explained why changing insurers and policy types needs the assistance of a professional risk manager and insurance coverage expert.
The City switched providers for its public entity liability insurance in January 2019.
BACKGROUND
Specifically, Officer Helm sued Williamsport and its Police Chief in April 2017. Helm then filed a second, one-count suit in November 2018, raising the same claim based on similar conduct.
ANALYSIS
The court must enforce language that is clear and unambiguous; if language is ambiguous, it must be construed against the insurer and in favor of the insured.
Charter Oak
The 2017 and 2018 lawsuits were indisputably “first made or brought” prior to the Charter Oak coverage period.
Since the 2017 and 2018 suits were “first brought or made” prior to the Charter Oak coverage period, Helm’s 2021 suit does not trigger coverage.
State National
State National’s coverage obligations extend only to claims first made against Williamsport during the policy period; claims brought after the coverage period-even those that arise out of pending or prior litigation first brought during the coverage period-do not trigger coverage.
Read together, the Charter Oak and State National insurance policies leave the City without coverage. Despite maintaining public entity liability insurance without interruption, the City has no coverage for the officer’s 2021 suit.
ZALMA OPINION
Individuals, businesses, corporations, and governmental entities must never assume that a new policy will protect them in the same way as an earlier policy. It is essential that the insured, the city in this case, read both policies and if they don’t understand – as most people insured do not – employ an expert in insurance coverage and risk management before agreeing to replace one policy with another that may have different terms and conditions. The city failed.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].
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