The Insurance & Risk Report
December 2014
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 I Can Buy Insurance For That? 
Lease Gap Insurance
Many insureds think that full collision coverage is adequate for vehicles they are leasing.  However, where there is a difference between what you owe on the lease and the value of the damaged vehicle, collision coverage alone may not be enough.  Lease gap coverage is available through most auto insurers. 
Our Experts Have Been Published In The Following:
  • Insurance Law & Practice (ICLE)
  • Michigan Lawyers Weekly
  • The Michigan Bar Journal
  • The CPCU Journal
  • The Michigan Agent Magazine
Looking to Assess a Claim Denial?
Commercial or personal lines claim denial or reservation of rights?  We can help assess the viability of the insurer's decision and provide input on the claims process.  Call us at 248-321-8941 for additional information.
Hale Photo
Michael S. Hale, J.D., CPCU, AAI
Many buyers of insurance believe that insurance policies are fungible "commodities" that are able to be easily compared based upon price alone.  However, these policies are first and foremost legal contracts which have been carefully drafted by various industry organizations and insurer legal departments.
In this edition, we use some examples to illustrate the point that buying insurance policies is different than buying janitorial supplies.
Also referenced is a new Michigan Supreme Court case that reaffirms the principle that courts will enforce clear policy language and conditions.
We also touch upon a recent case involving an employee who claimed retaliation for filing a workers' compensation claim.
We hope that you find these articles of interest. If we can be of assistance to you, please contact us. 
Apples to Apples?
Buying Insurance is Different than Buying Groceries
Do you buy insurance the way that you buy meat?  One store may offer a by-the-pound price break for the same kind of sirloin, making its product appear more attractive.  Many businesses treat the insurance buying process the same way in attempting to compare quotes and policies "apples-to-apples." 
The insurance industry is one of the few businesses where a product is purchased without the buyer having access to the details for weeks or months later.  Most policies are not issued and delivered until well after they are purchased yet the law says these legal contracts are binding upon the policyholders nonetheless.
Here are but a few examples of what we see in comparing policies offered by various insurers:
  • Coinsurance versus no coinsurance?  An underinsurance penalty provision is found in one property policy where another insurer waives this condition.
  • Stand-alone dwelling limit or  is limit supplemented by the other structures limit?  One policy allows the homeowner to add the 10% other structures limit to the dwelling limit where there are no other structures.  Another does not.
  • Tenant coverage for water damage liability.  One policy includes liability coverage for negligence causing water damage whereas another limits such coverage to fire only.
  • Employee dishonesty investigation costs.  One policy provides $100,000 in investigation costs to prove what happened where another only covers this up to $10,000. 
  • Sewer or drain back-up.  One policy provides full limits for this kind of claim whereas another only provides $10,000 in coverage.
  • Surface water excluded or not?  At least one policy has no surface water exclusion whereas most others exclude this.
  • Foundations.  One policy covers the foundation of the building where another excludes this from coverage.
  • Discrimination.  One policy includes coverage for certain types of nonemployment discrimination claims where another does not.
  • Wage and Hour Claims.  One employment practices policy includes coverage for defense costs for Fair Labor Standards Act claims where another does not.

Lesson:  Insurance policies are not fungible commodities.  In an industry where the product is usually not received until weeks after it is purchased, it is important for businesses to retain competent insurance professionals who can  advise management of available options.  Most of all, don't buy insurance the way you buy apples and oranges.

Michigan Supreme Court:  Insurer Does Not Have to Pay Replacement Cost for Damaged Contents
It is not an every day occurrence for the Michigan Supreme Court to address garden variety insurance issues.  However, in a November 18, 2014 Opinion it reversed the Michigan Court of Appeals in a fire case, holding that the insurer did not have to pay replacement cost for damaged contents and instead could pay the lesser actual cash value amount.
There, the court determined that a statutorily mandated appraisal award on the amount of the contents loss was conclusive.  Given that the insured homeowner did not submit a proof of loss as required by the policy, the insurer only was required to pay the actual cash value of the damaged contents as opposed to the replacement cost.
Lesson:  This case is another clear indication that courts in Michigan (and here the highest court in the state) will enforce clear language of insurance policies.
Melissa L. Hirn, Esq.
    Termination for Filing WC Claim?
Court Finds Legitimate Nondiscriminatory Reason
In an October 21, 2014 Opinion, the Michigan Court of Appeals affirmed a trial court's dismissal of a lawsuit by an employee claiming she was fired because she filed a workers' compensation claim.
The employer was able to refute the claim to the court's satisfaction by showing that there was a legitimate nondiscriminatory reason for the action i.e. poor job performance.
Lesson:  Prior to terminating an employee who has filed a workers' compensation claim, be certain you are able to show a legitimate nondiscriminatory reason for the firing.  This underscores the importance of proper documentation practices.

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