Made with FlowPaper - Flipbook Maker
< Previous8 | INSIGHTS | Summer 2023 Advancements in technology allow insurers to access and exchange massive volumes of structured and unstructured data. By using big data and artificial intelligence, insurers can rapidly capture and analyze publicly available data, analyze policyholders’ personal information, categorize risk, prevent fraud losses, and optimize expenses. Today, insurers primarily use big data to influence underwriting, rating, pricing, marketing, and claims handling. But each of these uses has important ethical implications. Why Big Data Is Important Now From 2010 to 2020, the amount of data created, captured, copied, and consumed in the world increased 5,000 percent. 1 To emphasize the magnitude of that consumption, consider that between 2010 and 2021, global smartphone sales alone grew from 296 million to 1.4 billion. 2 Big data can include metrics such as social media posts created, Google searches completed, online items purchased, Netflix shows watched, apps downloaded, YouTube videos created and viewed, and much more. Compare that to traditional insurance rating data, which might’ve merely included metrics such as claims history, gender, marital status, driving record, age, and geographic location. This exponential growth in available information has set off an equally exponential growth in the demand for data consumption and insight. Our available data pool is larger than ever and growing rapidly. That sheer volume means it can’t be collected or stored using most of the conventional data analysis tools. In addition, 80 to 90 percent of new data is unstructured, 3 including items ranging from text to video to social media posts—making processing and extracting business value a complex endeavor. A large part of the challenge today is getting data into a format that’s clean and ready for analysis. Once that happens, the opportunities are limitless for this underutilized digital resource. Data Usage in Insurance In the late 19th century, Benjamin Rush was an executive and chairman of the board for the Insurance Company of North America (INA). One of his most important contributions to insurance was developing a risk classification system for marine risks from hundreds of years of marine insurance claims and underwriting data. This uniquely enabled his firm to identify and analyze marine risk, leading to its impressive profitability. Today, Rush would have been comfortable running an insurance company that uses data to more accurately assess and price risk—with one exception. He would’ve surely been disappointed in the limited way insurers use this data to help clients reduce risk. Rush strongly believed that insurers should use data for more than pricing and selecting risks. He adamantly supported its use to help policyholders better understand and modify their risks to prevent and reduce losses. In this respect, Rush was not only a company executive, but one of the earliest consumerists who insisted that data be shared with and used by policyholders. Rush often argued that insurers should place client interests before those of owners and employees—something that likely resonates with today’s CPCUs. He considered loss prevention to be good business, but further asserted the “moral responsibility” to use data to educate and incentivize policyholders to make modifications so they could become more resilient. 4 From 2010 to 2020, the amount of data created, captured, copied, and consumed in the world increased 5,000 percentINSIGHTS | Summer 2023 | 9 New Collection Areas and Tools Rush would be amazed by the vast landscape of data and tools available to insurers today. Big data has integrated itself across all verticals, including geographic information system (GIS) location-specific data telematics in the autos space, sensors monitoring ergonomics in workers compensation, environmental and activity tracking sensors in home and business property, satellite images for wildfire and flood risks, real- time social media maps to analyze disaster response for catastrophe losses, and more. Data isn’t the only area that has seen growth. New techniques for analyzing collected data are being developed constantly. Insurers can use natural language processing to extract meaning from claims and call center notes, medical records, and social media posts to understand customer behavior and enhance customers’ experience. They can use pattern recognition to identify damage severity and auto-adjudicate a claim. Most importantly, insurers can use predictive analytics to identify potential risks before damage occurs, creating a potential win-win for the insured and insurer and supporting a path to AI-driven resilience. Ethical Considerations The integration of algorithms and emerging use of artificial intelligence has made regulating insurance rating and underwriting increasingly complex. These technological advancements can help insurers more accurately price insurance products for individuals with varying risks, which can reduce costs and benefit consumers. However, insurers must be careful about making classifications that might be socially suspect. Such classifications pit the value of actuarially sound pricing (which may or may not benefit society, or most policyholders) against the rights of individuals who are adversely affected in ways that are considered socially suspect or unfairly discriminatory. 5 The Patient Protection and Affordable Care Act of 2010 (PPACA), together with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), forbids insurers from considering preexisting conditions in the underwriting process. PPACA also forbids health insurers from taking gender into account. 6 Likewise, the Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits all health insurers from denying coverage or charging different premiums to insureds based on genetic information. 7Do insurers have an ethical responsibility to use big data to help policyholders become more resilient to loss? Proponents of laws limiting insurers’ ability to classify risks typically rely on fairness-based arguments focused on benefiting society. For example, such proponents might argue that spreading risk within groups or communities strengthens the fabric that connects individuals by having them cross-subsidize each other’s risk. This is more commonly embraced in group health insurance than in property-casualty insurance. Fairness for regulators looks at how an individual is affected by pricing and weighs nonmathematical considerations, such as whether individuals harmed by the rating have control over the rating variable, whether certain protected groups are disparately affected, and whether using the variable will create an adverse effect on society. As an additional hurdle, the McCarran- Ferguson Act shifted insurance regulation to the states. This resulted in varying laws and regulations across the country, often leading to inconsistency and confusion. Insurers are wise to proactively discuss their data ethics practices. Avoiding such conversations exposes them to future legal and reputational risk, as laws and societal expectations catch up to the rapid advancements in technology. The collection of big data also exposes insurers to a growing area of risks in customer privacy. This includes the responsibility of securely storing and managing data, monitoring how data is used, identifying the sensitivity of data, designating who should own and update data, and creating roles responsible for clarifying who is accountable for the ethical use of data in insurance—which, in turn, includes collection and analysis, as well as transparency of decisions. The Ethical Imperative for Resilience So, the question we’re posing concerns Benjamin Rush’s credo: Is it the moral responsibility of insurers to use big data to make policyholders today more resilient? For our purpose, we use the terms “ethics” and “morality” interchangeably, as the differences are a matter of semantics—with ethics coming into fashion at the end of the 19th century as the word for distinguishing between right and wrong actions. To bring this forward to modern times, we’ll slightly modify Rush’s credo and ask: Do insurers have an ethical responsibility to use big data to help policyholders become more resilient to loss? Let’s examine this through the lens of three major approaches to ethics: utilitarian ethics, which emphasizes the consequences of actions; deontological ethics, which emphasizes the application of duties or rules to the given circumstances; and virtue ethics, which emphasizes the excellence of character (virtue) to the circumstances. The three approaches may lead to similar actions— but not always. For example, the utilitarian approach taken by consequentialists (such as Jeremy Bentham or John Stuart Mill) places the rights of the majority over the rights of the minority, favoring actions that promote “the greatest good to the greatest number of people.” But deontologists, such as Emmanuel Kant, approach an action as fulfilling their duty to do what’s right, regardless of the consequences. The CPCU pledge of “placing the interests of others above my own” is an example of a deontological approach to ethics. This approach might benefit the majority of people, but it wouldn’t have to. Virtue ethicists, such as Aristotle, look to agreed-upon virtues like charity, courage, and honesty as the foundation for determining the appropriate action. Where deontologists would look to a moral rule such as, “Do unto others as you would have done unto you,” a virtue ethicist would simply look to whether the action was promoting a virtue such as being charitable or benevolent. In response to the question of ethics and resilience, consequentialists would ask, “Do the benefits outweigh the costs?” Although there are significant costs in collecting and analyzing big data, consequentialists would probably conclude that the benefits do outweigh them and that insurers thus have an ethical responsibility to use this data to help make policyholders more resilient. 10 | INSIGHTS | Summer 2023Deontologists would consider how our ethical systems interlock with new technologies and apply a rule that those with power (i.e., the combined analytical capability from technology, big data, and know-how) use it to help those with less power (insured policyholders). At a recent Katie School Executive Forum in Chicago, Jennifer Pack, vice president of risk management for Hyatt Hotels, stated that “insurance companies now have access to enormous data, while companies like Hyatt are just a population of one. They need to bring their resources to help educate policyholders about their risks, and this would help make the whole community more resilient.” Finally, virtue ethicists might employ modern virtues, including resilience, empathy, patience, sacrifice, forgiveness, hope, confidence, politeness, humor, and self-awareness. Looking beyond the obvious virtue of resilience, the use of big data may help policyholders and reduce the mistrust between policyholders and insurers in the exchange of information. Using data for improved resilience, instead of merely for classifying insureds into smaller and smaller baskets for pricing purposes, would arguably be a virtue of empathy and justice. Overall, we would argue that a reasonable application of any ethical approach would support the one taken by Benjamin Rush. We further conclude that, yes, it is the ethical responsibility of insurers to use their data for resilience. Promoting Resilience Through Data Insurers can use big data to mitigate risk and change how consumers view insurance and insurance pricing. They can use telematics to help truckers learn to be better drivers. And in-home hazard-detection devices can alert homeowners of problems before they become serious. Sensor-enabled wearables on smart helmets and vests can provide real-time feedback and help prevent workplace injuries. Similarly, drone images can monitor workplace safety, and satellite images can be used to detect areas at risk for wildfires. This new wave of technology presents insurers with an opportunity to partner with insureds to better understand and modify insureds’ risks—and ultimately, to prevent and reduce their losses. As CPCUs, we have an opportunity to be proactive, regardless of our individual views on whether loss prevention is a moral responsibility. From the perspective of these two authors, at least, the results are clear: The use of big data in insurance is not only good business, but an incredible opportunity to educate and incentivize policyholders to become more resilient—and change the reputation of insurers from claims facilitators to partners in preventing losses and tragedies. 1.Gil Press, “54 Predictions About the State of Data in 2021,” Forbes, December 30, 2020. 2.Statista, “Number of smartphones sold to end users worldwide from 2007 to 2021,” 2023. 3.Dwight Davis, “AI Unleashes the Power of Unstructured Data,” CIO, July 9, 2019. 4.International Insurance Society, “Insurance Hall of Fame: Benjamin Rush,” 2023. 5.Ronen Avraham, Kyle D. Logue, and Daniel Benjamin Schwarcz, “Understanding Insurance Anti-Discrimination Laws,” Law & Economics Working Papers, 52, 2013. 6.ACA § 1201, 124 Stat. at 156–60 (adding § 2705 to the PHSA) (to be codified at 42 U.S.C. § 300gg-4). 7.Genetic Information Nondiscrimination Act of 2008, Act, Pub. L. No. 110-223, 122 Stat. 881, 883, 888 (codified as amended at 29 U.S.C. § 1182(b) and 42 U.S.C. § 300gg-1(b)) (adding § 1182(b) to ERISA and adding § 300gg-1(b) to the PHSA). Special thanks to the Ethics Committee for its contributions to this article.Ongoing professional education has always been a part of the CPCU Code of Professional Conduct. Keeping in line with most highly regarded professional designations, that requirement was formalized in 2015 to require 24 hours of CE every two years to remain a CPCU in Good Standing. Digital badges that showcase your Good Standing status to your network are now available to all CPCUs who are in Good Standing. Simply earn and report your 24 hours of CE and complete the renewal process. The $189 reporting fee is waived for members of The Institutes CPCU Society! AreyouinGoodStanding? TheInstitutes.org/GoodStanding CPCU is a registered trademark of The Institutes Designations, LLC. All rights reserved. You Worked Hard (Really Hard!) for Your CPCU Make Sure You Stay in Good StandingINSIGHTS | Summer 2023 | 13 How to Properly Deny Claims When insurers receive a claim or suit from an insured or third party, they must first make sure that subsequent actions by all parties are in accordance with the conditions required by the policy and applicable laws and regulations. Violating such conditions and guidelines can lead to unintended consequences. For example, courts could refuse to uphold claims denials and possibly recognize bad faith suits, instead. Or an insurance department could find that the insurer broke a law and subsequently impose regulatory penalties. This article discusses how to avoid such outcomes by discussing important, but basic, dos and don’ts, illustrated through real-life examples. by Bill WilsonAll states have unfair claim settlement practices and bad faith laws. But sometimes, insurers and their representatives inadver- tently violate those laws—particularly when they edit, omit, or fail to clarify their policy language. For example, a well-intentioned adjuster trying to paraphrase policy language in a written claims denial to make it more understandable to the insured could end up misstating what’s covered in the actual policy. To avoid the unwanted consequences of such actions, insurers can employ several tried-and-true practices—and avoid several others. Unfair Claim Settlement Practices and Bad Faith In addition to the policy itself, various state unfair claim settle- ment practices laws govern how insurers should deny claims. Through model legislation, the National Association of Insurance Commissioners (NAIC) defines over a dozen acts that constitute unfair claims practices. Some of these include: •Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue •Not attempting in good faith to effectuate prompt, fair, and equitable claim settlement in which liability has become reasonably clear •Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them •Refusing to pay claims without conducting a reasonable investigation •Attempting to settle or settling claims for less than the amount a reasonable person would believe the insured or beneficiary was entitled by reference to written or printed material accompanying or made part of an application •Failing in the case of claims denials or offers of compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions This last item is particularly prevalent: While many written claims declinations cite policy language, far too many of them do not adequately explain why or how that language applies to support the denial. Many states have adopted the NAIC model act, sometimes with modifications. Other states have even more stringent and/or specific provisions for what constitutes unfair claim settlement practices, methods of competition, or deceptive acts. For example, Florida includes, “failing to promptly provide a reason- able explanation in writing to the insured of the basis in the insur- ance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement.” And the California Code of Regulations, Title 10, Chapter 5, Subchapter 7.5, says: Where an insurer denies or rejects a first-party claim, in whole or in part, it shall do so in writing and shall provide to the claimant a statement listing all bases for such rejection or denial and the factual and legal bases for each reason given such rejection or denial which is then within the insurer’s knowledge. Where an insurer’s denial of a first-party claim, in whole or in part, is based on a specific statute, applicable law or policy provision, condition or exclusion, the written denial shall include reference thereto and provide an explanation of the application of the statute, applicable law or provision, condition or exclusion to the claim. Every insurer that denies or rejects a third-party claim, in whole or in part, or disputes liability or damages shall do so in writing. The NAIC model law has a provision that’s similar, but lacks the important requirement of an explanation for how the cited policy terms apply to eliminate coverage. New York statute 3420(d)(2), meanwhile, requires written disclaim- ers (not reservation of rights) in cases involving bodily injury and wrongful death. Failure to incorporate mandated language in insurance contracts or follow statutorily mandated procedures can set back a claim denial and result in substantial statutory penalties against the insurer. Sometimes unfair claim settlement practices can approach the level of bad faith. In Burge v. Farmers Mut. of Tennessee, No. M2016-01604, 2017 WL 1372864 (Tenn. App. Apr. 13, 2017), the court affirmed an award that included bad-faith damages after the insurer repeatedly did not explain to the insured the basis for the claims denial. In Mariscal v. Old Republic Life Ins. Co. (1996), 32 Cal.App.4th 1617, 1620 [50 Cal.Rptr.2d 224, bad faith was shown, according to the court, by the insurer’s failure to properly investigate the claim. According to the court: When investigating a claim, an insurance company has a duty to diligently search for evidence which supports its insured’s claim. If it seeks to discover only the evidence that defeats the claim, it holds its own interest above that of the insured. While largely unsuccessful, failure to properly investigate claims has been an important part of coverage lawsuits by insureds on A well-intentioned adjuster trying to paraphrase policy language in a written claims denial to make it more understandable to the insured could end up misstating what’s covered in the actual policy 14 | INSIGHTS | Summer 2023The enforceability and relevance of a denial and reservation of rights letter is not gauged by its weight or verbosity COVID-19 business income claims. Even if it doesn’t approach the sta- tus of bad faith, an insurer has an obligation to properly investigate a claim from the standpoint of both its and its insureds’ interests. Insurers would be well-advised to incorporate state and federal statutory and case law prescriptions for what constitutes fair claim- settlement practices and good faith into their procedural manuals. Needless to say, the spirit of such laws should also be instilled in all claims personnel at every opportunity, given that the property- casualty insurance industry is founded on uberrimae fidei (duty of utmost good faith). Claims Declinations and Reservation of Rights Letters The first rule in resolving a claim is to require a written declination of coverage. This is not only a good idea, but also probably the law. Further, courts have often found this to be relevant in evaluating the enforceability of denial and reservation of rights letters. Most legal experts also advise that detailed denial letters cite policy language and its relevance to the claim at hand. In one claim, an insurer sent a written denial letter that stated, “You have no coverage for this loss.” That is no more acceptable than an oral declination. While any claims denial is a bitter pill for a policyholder to swallow, it may go down easier if the adjuster clearly explains why the claim isn’t covered in a way the claimant can understand. They may not like it, but they may be able to see reason. If an insurer includes a reservation of rights with the denial (and they almost certainly will), they may cite additional policy language that might apply as the investigation continues. However, the insurer should not include a laundry list of policy language excerpts that come close to copying and pasting the entire insurance contract into the letter. The enforceability and relevance of a denial and reservation of rights letter is not gauged by its weight or verbosity. Insurers seek to eliminate claims based on waiver and estoppel by issuing nonwaiver agreements or reservation of rights letters. These documents advise the insured of existing coverage questions. If the insurer undertakes an unconditional defense, it may be estopped from later denying coverage by effectively having waived the coverage issue. A reservation of rights establishes the basis for a conditional defense when it appears there is coverage, but that could change as the investigation proceeds. It also may establish additional contractual premises for potentially denying a claim beyond those cited in a declination letter. A typical reservation of rights letter might include a statement such as: We will continue to handle this claim even though a coverage question exists. However, no act of any company representative while investigating or negotiating the settlement of this claim or defending a lawsuit shall be construed as waiving any of our rights. We reserve the right, under the policy, to deny coverage to you or anyone claiming coverage under the policy. There may also be other reasons why coverage does not apply, and we do not waive our right to deny coverage for any other valid reason that may arise. The policy language citations in a reservation of rights letter should not: •Generalize or paraphrase policy language •Include policy language excerpts that misrepresent the intent of the language •Copy and paste most of the policy exclusions, especially those that realistically have nothing to do with the claim To demonstrate these points, here are five illustrations from actual claims I’ve consulted on, four of which are claims denials and one a coverage inquiry. In one example, the claim was actually not covered, but the adjuster cited the wrong policy provisions in the denial. In that case, the agent did the ethical thing by pointing out why the cited exclusions didn’t apply but adding that there was another basis for the denial, supported by governing case law. Example 1: Selectively editing policy language An insured covered by a cybercrime policy had a bank-wired transfer intercepted and monies stolen. In the declination letter, the adjuster cited policy language saying the fraud must be “…related to the use of a computer inside the insured’s premises or the premises of the bank.” Although the adjuster included quotation marks in its letter, implying that the cited language was verbatim from the insurance contract, the policy language actually said ( emphasis added): …related to the use of any computer to fraudulently cause a transfer of that property from inside your premises or from a banking institution or similar safe depository to a person (other than a ‘messenger’) outside those premises or to a place outside those premises. So, the computer used for the fraudulent transfer did not have to be located inside the insured’s or bank’s premises, despite what was represented as the requirement. INSIGHTS | Summer 2023 | 15 16 | INSIGHTS | Summer 2023 How did this misinformation happen? It’s possible that the adjuster was attempting to paraphrase the policy language in a way that made it clearer to the insured. However, the only thing made clear was that the adjuster did not understand the paraphrased policy provision. Example 2: Selectively omitting policy language A condo owner rented the community’s clubhouse for his child’s birthday party. The property management company required at least $300,000 of liability insurance. Fortunately, this was a coverage inquiry, not a claims denial, though the agent may have made the mistake of posing the question to the Underwriting, rather than the Claims, Department. An underwriter responded that while the insured’s limits were adequate, there would be no coverage under his homeowners policy and that the agent should procure a special events policy for the insured. In the email response, the underwriter cited this liability exclusion: e. Arising out of a premises: (2) Rented to an “insured” The problem with this policy language citation is that it does not include the exception to the exclusion that appeared at the end of a list of three categories of excluded premises: e. Arising out of a premises: (1) Owned by an “insured”; (2) Rented to an “insured”; (3) Rented to others by an “insured”; that is not an “insured location”; The definition of “insured location” includes “any part of a premises occasionally rented to an ‘insured’ for other than ‘business’ use.” In other words, the clubhouse is an “insured location,” so the exclusion does not apply. It is unknown whether this was an oversight or a deliberate attempt to conceal relevant policy language. The moral for everyone involved is RTFP (otherwise known as, read the fine print)! Example 3: Including policy language irrelevant to the loss An insured left home for work at 7:30 a.m. and, when she returned home at 4 p.m., water was running from underneath the front door. Much of the first floor of the house had flooded due to a burst water pipe in the kitchen. There had allegedly never been a water leak known to the insured prior to this occurrence. In his denial letter, the adjuster cited over a dozen exclusions— everything from wear and tear; to pollution, to birds, vermin, rodents, and insects; to “water damage” from neglect; to faulty construction. Many of the citations were simply blocks of exclusions copied and pasted into the letter. But clearly, the loss had nothing to do with birds and pollution, just to name two. In addition, while citing exclusionary provisions completely unrelated to the claim, the adjuster omitted critical parts of the policy language. For example, in one listing of eight exclusions (from wear and tear, to agricultural smudging smoke, to the “animals” exclusion), the adjuster neglected to reference the critically important coverage-granting paragraph at the end of the listing: If any of these cause water damage not otherwise excluded, from a plumbing, heating, air-conditioning, or automatic fire-protective sprinkler system or household appliance, we cover loss caused by the water…. The cited exclusion for faulty, inadequate, or defective construction also had a similar exception: “However, any ensuing loss to property described in coverages A and B not excluded or excepted in this policy is covered.” In addition, although no history of damage existed, the adjuster cited an exclusion for “constant or repeated seepage or leakage of water…over a period of weeks, months, or years….” Also cited was the “neglect” exclusion, even though the insured reported the claim the day the leak occurred and within two hours of discovering it. What might have contributed to this flawed understanding is the following sequence of events: •August 19Water damage loss occurred. •August 27Adjuster issuing the declination was licensed by the state as an adjuster. •September 22Date of the denial letter. The insurer ultimately paid the claim when the agent took it to the supervisory level of the insurer’s claims department. Clearly, the basis for the denial was not the insurance contract, but rather the likelihood that the newly licensed adjuster was not adequately trained, had little or no field experience, or simply lacked the cognitive faculties to evaluate the meaning of insurance contract language within the context of an actual claim. My experience has been that claims denials that cite exclusions while ignoring exceptions to the exclusions, as in the last two examples, are not uncommon. Not that this is a valid excuse, but often the exceptions are placed at the end of a series of exclusions, making them easy to overlook. Example 4: Including irrelevant policy language while omitting language that actually excludes the loss A dentist’s computer system was hit by ransomware that encrypted all of his customer files (personal information, x-rays, insurance information, accounting records, etc.), including backups. The dentist experienced significant business income, extra expense, and accounts receivable losses. In a voluminous denial letter, the adjuster cited exclusions for everything from “wear and tear” and “mechanical breakdown” to “faulty workmanship.” None of the cited exclusions were relevant to the claim. What was not cited but was relevant was that no “direct physi- cal loss” resulted, although required by the policy form’s insuring agreement to trigger coverage. So, the loss wasn’t covered, but not for any reason cited in the denial letter. INSIGHTS | Summer 2023 | 17 Example 5: Not explaining how the language excludes the loss A crane inspector overloaded a crane during a test, causing it to collapse and resulting in property damage. His CGL insurer denied the claim. The written denial doesn’t really say why the loss isn’t covered, and the reservation of rights paragraph is so broad as to presumably allow denial by some sort of divine intervention at a later date. The 10-page letter cites, word for word, the Coverage A Insuring Agreement, Exclusions j.(1)-(6), k., l., m., n., and t. (And for the record, Exclusion n. is for product recall, which is not even remotely applicable to the claim.) The letter goes on to cite, verbatim, every definition referenced from the insuring agreement and exclusions, but again, never says which exclusions apply and why. It is unknown whether this approach resulted from laziness, indecisiveness, or ignorance, or if it was a “just in case” tactic or, worse, a deliberate attempt to obfuscate. The lesser of these evils is not reassuring. Is this a legitimate denial and reservation of rights letter? In his Coverage Opinions newsletter (Vol. 6, Issue 9), attorney Randy Maniloff, who has written and spoken about reservation of rights issues for years, discusses Harleysville Group Insurance v. Heritage Communities, 803 S.E.2d 288 (S.C. 2017), where the state Supreme Court opined: [I]t is axiomatic that an insured must be provided sufficient information to understand the reasons the insurer believes the policy may not provide coverage. We agree with the Special Referee that generic denials of coverage coupled with furnishing the insured with a copy of all or most of the policy provisions (through a cut-and-paste method) is not sufficient. 1 Often the exceptions are placed at the end of a series of exclusions, making them easy to overlook Rules of the Road To summarize, by following these three basic guidelines, insurers can properly deny claims: 1.All claims denials should be in writing; never present or accept an oral claims denial. 2.All claims denials should cite the specific policy language—and only that language that applies to the present denial. Unless realistically supporting a reservation of rights, a denial letter should not consist of inapplicable verbiage or of a litany of policy exclusions and limitations that have been copied and pasted in full. 3.All claims denials should explain why and how the cited insurance contract language works to exclude coverage in the subject claim without generalizing or paraphrasing policy language or excerpting policy language that misrepresents the intent of the coverage. And, most importantly, never forget that you cannot resolve coverage or claims issues without applying the RTFP doctrine. For more information on this topic, contact the author at Bill@InsuranceCommentary.com. 1.More information on the “adequately inform” standard required by many courts can be found on Randy Maniloff’s website, coverageopinions.info.Next >