guest article by Attorney Chuck W. Ray, Jr.1
This is a follow-up to the excellent piece in the January 2024 newsletter by Emil Betro on umbrella insurance. As Emil pointed out, reading your excess policy is a good idea. When you do that, you will almost certainly see that your umbrella policy is “form following.” This means that the umbrella insurer will pay on claims that are, in the first instance, covered by one or more primary policies. As a long-time trial lawyer and retired Alaska Superior Court judge, I can say it is unlikely that anyone, the author included, will actually know whether there will be any insurance coverage against a future event that is both unknown, and the result of very specific facts.
First, one’s insurance needs may be very complex. On the business side, policies may include coverage for premises liability, property (real and business property like construction equipment and inventory), transportation to/from suppliers and distributors, general liability (for which broadform and/or completed operations endorsements may be advisable), professional liability, employee dishonesty, and on and on. Then there’s the non-business side to insure an individual’s liability exposure as well as the value of realty and personalty, including vehicles, which in Alaska may mean watercraft, airplanes and snowmachines. Hopefully you have health insurance with secondary coverage to answer for potentially bank-breaking deductibles. There are also the less commonplace insurance policies, like trip insurance for that special vacation. Sometimes you have insurance that you’ve never really thought about at all; within their own obscure terms and conditions, many credit cards provide theft, travel, vehicle, liability and even health insurance. The list of situations in which insurance terms and conditions may be critical are nearly endless, but few of us can claim familiarity with the panoply of insurance policies that may come into play when the unexpected occurs.
Second, consumers rarely understand “the terms, definitions, conditions and exclusions” of their insurance products. A property and casualty policy I scrutinized during recent litigation was 94 pages of closely printed text describing the premises insured, listing the “forms and endorsements” making up the policy, setting out definitions, extensions, exclusions, modifications and specifying the events covered, subject to a host of exclusions, with definitions of terms often in conflict with previous definitions, and containing a section of “conditions” which, if not satisfied, might – or might not – forfeit the insured’s rights under the policy.
A possible solution to this confusion is to seek an insurance broker or agent (hereafter “agent”) to help select the best insurance package for your needs. Unfortunately, the rule in Alaska is that an agent generally has no duty to inform its customer on the appropriate types or limits of insurance.2 In broad terms, the agent “fulfills [their] duty to the insured by providing requested coverage.”3 The Court’s rationale is that the insured knows their business and personal situation better than the agent, so is in a position to tell the agent what insurance is required.
There are, however, exceptions to that rule that permit the customer to rely on the agent’s advice for placement of insurance policies if the agent and customer form a “special relationship,” where the customer can demonstrate her reliance on the agent’s superior knowledge of the customer’s insurance requirements. As with all important transactions, a written record of the communications between the agent and customer will be useful in the event of a dispute about the breadth of the agent’s role.
However, no one wants litigation with insurance companies, agents or brokers to sort out whether they actually had the coverage they needed. Obtaining proper coverage for your situation depends upon your personal, business and family relationships, and financial considerations. On one end of the spectrum are clients with meaningful assets they want to shield, but who do not require exotic wealth management tools. Those clients should have an informed and in-depth discussion with an agent after which they can likely settle comfortably into suitable insurance coverage recommended by the agent. Again, careful records are important in case it becomes necessary to establish your “special relationship” with the agent. On the other end are high net worth individuals who hold extensive assets, individually and/or through legal entities of varying complexity. Since there are few insurance specialists able to answer for all the requirements of a highly evolved business structure, access to risk managers and financial advisers to help navigate the “which policies and what limits” maze becomes a must. In addition, high net worth individuals might draw on the advice of their business and personal colleagues’ knowledge of their affairs or retain someone with specific, in-depth knowledge of the insurance world.
I close with an extremely important suggestion. If you experience an incident that is not some run-of-the-mill insurance claim like a fender bender, but something which obviously could expose your excess limits or even your personal assets, do not – repeat: do not – speak or write about that incident to anyone, perhaps most especially first responders, until after you have consulted legal counsel. In rare situations, there could be life-threatening injuries in play about which you must communicate with first responders, but impart only what is necessary for medical attention. Insurance policies typically require a written proof of loss or sitting down for a sworn interview with the adjuster or even insurer’s counsel. Whether you should engage counsel before providing information to anyone, including first responders, others at the scene, an adjuster, or perhaps even your own medical providers, will depend upon considerations of your personal wealth and the potential losses you might suffer from the incident at hand.
1The opinions expressed in this article are the opinions of the author and do not necessarily represent the opinions of Foley & Pearson, P.C. This article is for informational purposes and should not be construed as legal advice.
2Peter v. Schumacher Enterprises, Inc., 22 P.3d 481, 482-3 (Alaska 2001).
3Id. at 486.