Insurance companies will often deny or partially deny coverage, and claim the reason is the issue of coverage. Yet that labeling is sometimes misplaced. Whether something is truly a coverage issue is important. That is because insurers usually articulate a coverage position as one that shuts down the claims process.
A coverage issue means the insurance company’s policy does not cover the loss event, or part of the claimed damage. Either the policy never covered the event in the first place, or more likely, an exclusion in the coverage section of the policy results in no coverage. Water losses have all kinds of potential exclusions. For example, surface water runoffs and leakage and seepage over time are typical exclusions in an all-peril policy. These are true coverage issues because the terms of the policy do not cover such losses.
With both examples, the fact of surface water runoff and the fact of leakage and seepage over time are not disputed. Typical coverage issues do not involve disputes about what happened and when. Typical coverage disputes assume both parties agree on the facts, and that leads to application of policy terms. That is a clear coverage issue. A clear coverage issue is simply application of the policy terms to facts.
A dispute between property owners and insurance companies over what they see on-site is rarely a coverage issue. If the insurance company says the hail damage occurred five years ago, and the property owner says it occurred six months ago, that is a dispute about a fact and not what the policy states. Nobody disputes the language of the policy in this scenario. Whether the hail fell one or five years ago is a disputed fact, and not a coverage issue. That is important because such a disputed fact should not shut down the claims process. I often see insurers say this is a coverage issue. I disagree. A dispute about what caused something is a fact issue and not one of coverage.
Application of state law is kind of a coverage issue. For example, in Minnesota, insurance carriers offer policies that cover repair bills driven by ordinance and law requirements. Whether an insurer’s policy requires coverage or repairs that are solely the result of a local ordinance is a coverage issue. Yet state statute for replacement cost policies override the insurance policy. State statute requires an insurer to pay for portion of the property which is damaged up to current building code requirements. That statute exists no matter how the coverage reads in the policy. I think of this as a quasi-coverage issue because if the policy offers more coverage than what state law requires you have a coverage issue. If the policy offers less coverage than what state law requires you have a different issue because coverage does not control.
Feel free to email me if you have any questions when an insurer shuts down the claims process due to an alleged coverage issue. My email is ed@beckmannlawfirm.com.