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Why exclusions in insurance agreements can trigger disputes

| Dec 14, 2020 | Insurance Defense

Contracts are the backbone of any professional relationship, including those between insurance companies and the people they cover. However, while these agreements can be a critical tool in preventing disputes and misunderstandings, the fact is that almost any contract can be subject to conflicts.

For instance, insurance carriers typically have exclusions in their coverage agreements. These exclusions may seem relatively straightforward to an insurance company, but consumers can easily misinterpret them for a few reasons.

Failure to read the agreement

Coverage agreements can be more complicated to read and understand than other legal documents. Because of this, consumers or commercial business representatives might not give it the consideration it warrants. 

When someone does not read a contract or consult an attorney to examine it more closely, they can miss critical details and clauses that trigger conflict down the road. 

Differences in interpretation

Specific clauses or terms can lead to a dispute when parties disagree on what they mean. Currently, for instance, carriers and insured parties across Florida have been battling over whether COVID-19 falls under “virus exclusions,” which would bar business owners from coverage for damages by related losses.

While carriers would argue COVID-19 is, indeed, a virus, a court ruled that losses attributed to this coronavirus are not part of exclusions barring recovery related to “fungi, wet rot, dry rot, bacteria or virus.” 

Dissatisfaction with coverage

After a business sustains damage, owners can be quite upset to learn that insurance may not cover it. They may be embarrassed that they did not realize this or angry because they feel like they were duped.

Thus, some people attempt to cover up or misrepresent damage in the hopes of having it covered by insurance. They might claim the damage was accidental when it was intentional; they might exaggerate damages to collect more money. 

For these reasons, disputes regarding insurance coverage can and do arise for parties across Florida. Carriers can protect themselves from a costly legal claim by ensuring their agreements are clear, specific, and lawful and conducting due diligence when assessing eligibility for coverage.