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Comparing Apples to Oranges

Author: Bill Wilson

You've seen the commercials: "Call now and save 15% or more on your car insurance!" Unfortunately, when someone is selling substandard coverage or service, their only marketing ploy is price. So, their advertising campaign leads consumers to believe that the only difference between insurance companies is price. Here's proof that you can't compare apples to oranges.


This is a question our "Ask an Expert" service received:

Question"Our insured's auto was stolen and destroyed. The carrier denied the claim because his keys were in the car and there was no sign of forced entry. According to the adjuster, the policy does not cover theft without evidence of forcible entry."

Answer?Any time a claim is denied, the adjuster has an obligation to show explicitly in the contract where the loss is not covered, and the insured/agent should read the policy to determine whether coverage exists or not.

Under the current ISO PAP, there is no requirement of evidence of forced entry to substantiate a theft claim..."theft" is simply the unlawful taking of someone else's property. Likewise, there is no exclusion if a vehicle is stolen as a result of someone leaving their keys in the car.

According to several of our faculty members who have reviewed a lot of auto policies, it is very unusual for them to include policy language that excludes theft under these circumstances. Most of our faculty had never seen a policy this restrictive in recent times.

However, the policy in question is not an ISO form. According to this proprietary company form:

"This policy does not apply under Part IV to loss due to theft under Coverage D of Part IV if evidence exists that forcible entry was not required to gain access to the automobile and violation of the steering column and/or the ignition system is not present.

"Forcible entry means felonious entry by actual force and violence evidenced by visible marks on the exterior of the automobile and the destruction of the lockable steering column; or evidence of actual force to gain entrance to the premises on which the automobile is garaged at the point of entry."

Based on the above, it seems clear that the claim is not covered and there does not appear, under the contract, to be any recourse for the insured. This points out a valuable lesson that all (auto) policies are not equal. Anyone choosing coverage based solely on price may get what they pay for.

I took a look at the insurer's web site and the slogan says, "An Insurance Program with a Difference." So, the insured was warned. The personal auto insurance section indicates that they insure nonstandard exposures and that their policy forms are "nontraditional." That certainly appears to be the case.

I point this out, not in criticism of this insurer – they have the right to offer a contract that fits their underwriting standards and clientele, and to price it accordingly – but rather to illustrate that price is no basis for comparison between products or companies. It's incumbent upon the agent in particular, and the industry in general, to better educate consumers about what their premium dollar actually pays for.

Likewise, it's essential that agents be well-versed in the coverage variations among policies. Even a "deluxe" policy can include language that's more restrictive than a "standard" ISO form. In one HO condo claim, water from a broken water pipe in an upstairs unit resulted in extensive damage to the subject unit. The "deluxe" condo policy excluded water damage that originated outside the "residence premises." This term was defined as the unit itself. The ISO condo form, on the other hand, excluded water damage that originated outside the BUILDING, so it would have covered the loss.

It "pays" to read those policies!

​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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