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Has Value of Your Insurance Been Left to Chance Policyholders are forced to play a game of Russian Roulette every time they submit a sizeable claim to their insurance company. They have no way of knowing whether the claim will be paid or coverage will be arbitrarily denied, leaving the company (or its risk manager) to take a bullet in the head. This uncertainty results from two things: (1) insurance companies routinely deny all manner of valid claims; and (2) whether the policyholder can enforce its rights in court or through settlement often depends upon which state's law governs the claim. Two States, Two Different Results Late notice is not the only insurance coverage issue that is addressed in a variety of ways by the different states. Commonly used exclusions have been subject to varying interpretations, and the states apply a number of different standards for deciding whether an insurance company has acted properly in its denial of coverage. These issues not only dictate the way courts resolve coverage cases, but can also influence insurance company's behavior when they make coverage determinations. As the above example demonstrates, a policyholder has the greatest chances of (sooner or later) recovering from its insurance company when favorable law is applied to its insurance claims. Typically, the policyholder waits until a coverage claim arises, and then argues for the law of a state in the context of that claim. This approach offers the benefit of allowing the policyholder to make an "up to the minute" determination of which state's law is most favorable at the time that law is to be applied. The policyholder can argue its position under choice-of-law principles and assert that the failure of insurance policies to contain a choice-of-law provision creates an ambiguity that should be construed in favor of the policyholder's choice-of-law. For some policyholders this may be the best approach. However, typically this approach is followed simply because the policyholder is unaware that it may be able to take steps earlier to influence choice-of-laws outcomes, rather than on the basis of informed decision-making. Negotiating a Better Policy Consider the Options Carefully |
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