By Ryan Suerth and Chris DePino

If Tropical Storm Irene could ever be credited with anything positive, it would be that she blew the cover off a systemic consumer protection problem: When catastrophe strikes, insurance policyholders are at the mercy of insurance companies.

While the numerous insurance-related stories stemming from Irene involve varying degrees of loss, those who submitted insurance claims share one important commonality — an inequitable insurance claim process.

Consumers purchase property insurance so that, in the event of a loss, they will be placed back into the same financial position they occupied prior to the loss. With the exception of a policy deductible, policyholders should be able to expect that paying for insurance means the repair or replacement of property with zero cost to the policyholder.

Sadly, this is an almost certain impossibility because insurance companies possess all the power in the process.

The claim process begins with the involvement of insurance adjusters hired by the insurance companies to investigate, evaluate and calculate policyholders’ claims.

These adjusters do not represent the interests of the policyholders. But someone who has just lost a home is understandably overwhelmed, and can be lulled into a false reliance on the insurance company’s adjuster. There is no red flag until after the policyholder receives a check for less than the amount needed to restore a property. Or, in some cases, there is a claim denial.

It is reasonable to be skeptical about the amount determined to be covered under an insurance policy when it is determined by someone other than an advocate for the policyholder. Admittedly, policyholders can submit their own proof of loss — estimates and receipts for the repair or replacement of property — but this can be a daunting task, especially for those dealing with the emotions of catastrophic loss.

In Connecticut, policyholders can seek the assistance of a licensed public insurance adjuster who will represent the policyholder’s interests in the preparation and negotiation of their insurance claims.

Public adjusters pride themselves on the ability to recover money for the policyholder over and above the amount established by the insurance company’s chosen adjuster. For this result, the policyholder pays a commission.

The need for this service highlights the financial inequity of the process. In order for a policyholder to obtain independent assistance with his claim, it costs him a portion of the money rightfully owed by the insurance company.

The inequity of the process is worse when insurance companies deny all or part of policyholders’ claims. In such instances, the policyholder is left with little choice but to resort to costly and time-consuming litigation to enforce their rights.

In situations where a claim is relatively small, it makes no financial sense to pay a lawyer to pursue an insurance company if the attorney’s fees are going to exceed the amount in dispute.

In Connecticut, unlike some states, policyholders are not typically entitled to recover their attorney’s fees if they successfully sue their insurance company. This aspect of Connecticut law prevents policyholders from enforcing their rights in court, and effectively lets insurance companies off the hook when they have wrongfully denied coverage.

In the end, policyholders must make difficult financial decisions in order to protect their interests. Despite the purchase of insurance, they may never be made financially whole after a loss.

Policyholders are essentially forced to take what the insurance company decides it owes under the policy, and not a penny more. In a state commonly referred to as the “Insurance Capital of the World,” consumers deserve better. Our elected officials need to act to ensure that policyholders truly get the full benefit of their insurance policy, especially in the event of another disaster like Irene.

Ryan Suerth is a lawyer who represents policyholders whose insurance claims have been denied. Write to him at 837 Boston Post Road, Suite 10, Madison 06443. Email: rsuerth@ryansuerth.com. Chris DePino is a public insurance adjuster who assists policyholders with calculating, submitting and negotiating insurance claims. Write to him at 1160 Townsend Ave., New Haven 06512. Email: chris@depinoadjusters.com.

When shopping for an insurance policy, whether for auto, property, general liability, or some other risk, most policyholders do not have the right to negotiate the language to be included in their policy.  Insurance policies are, typically, standard forms drafted by the insurance companies or some insurance-related organization.  Whether an insured’s claim is covered, or not, is based almost entirely on the language contained in these form policies.

Insurance policies have been described as “contracts of adhesion . . . because the contract is drawn up by the insurer and the insured, who merely adheres to it, has little choice as to its terms.”  Aetna Cas. & Sur. Co. v. Murphy, 206 Conn. 409 (Conn. 1988).  It is for this very reason that courts often construe language in insurance policies against insurance companies.  This canon of insurance coverage law, known as contra proferentum, helps level the playing field for insureds involved in disputes over insurance claims with their insurers.  See Hansen v. Ohio Cas. Ins. Co., 239 Conn. 537 (Conn. 1996) (“This rule of insurance construction dictating that ambiguities be resolved in favor of the insured is sometimes referred to as the contra-insurer rule”).

Any insurance policyholder hopes that their involvement in the insurance process will end with the purchase of the policy.  They hope to never need to file an insurance claim, and if they do, policyholders are hopeful that the insurance they paid for will cover their claim.  Accordingly, insurance policies are locked away in file cabinets or perhaps even thrown in the garbage.  Understandably, it is not until an insured receives a claim denial from their insurer that they become interested in what the policy says, or does not say.

Reading an insurance policy can be like piecing together a puzzle, as a typical policy consists of a variety of parts (e.g., declarations, insuring agreement, and endorsements).  Even for experienced readers of insurance policies, the language included in some policies can leave some scratching their heads in an effort to find the meaning and applicability of certain policy provisions.  It should come as no surprise that the interpretation of insurance policy language, and its applicability to certain claims, is a regularly litigated issue.  In some instances, coverage for a particular claim can come down to the meaning of a single word in an insurance policy.  See Beach v. Middlesex Mut. Assur. Co., 205 Conn. 246 (Conn. 1987) (interpreting the word “collapse” in a homeowners insurance policy as including “a substantial impairment of structural integrity of a building” and finding coverage when “no actual caving-in occurred”).

Contra proferentum can be a useful tool for policyholders who disagree with the basis upon which their insurer has denied a claim.

[W]hen the words of an insurance contract are, without violence, susceptible of two [equally reasonable] interpretations, that which will sustain the claim and cover the loss must, in preference, be adopted.

Travelers Ins. Co. v. Namerow, 261 Conn. 784 (Conn. 2002).  Insurers are often held to an even higher standard when they deny claims based on policy exclusions.  Liberty Mutual Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767 (Conn. 2009) (“The court must conclude that the language should be construed in favor of the insured unless it has a high degree of certainty that the policy language clearly and unambiguously excludes the claim”).  Perhaps the U.S. Court of Appeals for the Fifth Circuit said it best when it stated:

The inclusions and exclusions of an insurance policy do not always embroider a neat design. Our duty is to apply only enough judicial stitchery to the parties’ material to piece together a coherent pattern.  In this role we do not construct a policy out of whole cloth, nor weave threads into the fabric which the parties themselves have not included.  Where a stitch or two may have been dropped in executing the exclusionary trim, it goes against the tailor, the insurance company.

Peach State Uniform Service, Inc. v. American Ins. Co., 507 F.2d 996 (5th Cir. 1975).

The moral of the story is that when faced with an insurance claim denial, insurance policyholders should 1) read the policy themselves, 2) seek input from someone familiar with insurance issues (e.g., attorney, public insurance adjuster, insurance broker, or all of the above), and 3) challenge the insurance company if the policyholder feels the denial was unjustified, armed with the knowledge that if the policy is unclear, the insurance company should pay the claim.

Ryan M. Suerth is a Connecticut attorney whose primary practice is litigating insurance claim denials against insurance companies on behalf of policyholders.  He can be reached via email at rsuerth@ryansuerth.com, or directly via phone at 203-245-7621.

This post is for informational purposes only and is not intended to be considered legal advice.  If someone has a question regarding their insurance claim, or other legal issue, they should contact an attorney. 

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