An insurance policy is a contract. Thus, disputes over the meaning of language and the validity of a claim for benefits require consideration of applicable contract law.
For purposes of clarity, insurance carriers and the insurance commissioner’s office have worked toward a uniform approach that you must follow when reading your insurance policy. Here, we are discussing the four main coverages that are described in the policy jacket (liability, medpay, uninsured/underinsured motorist coverage, and collision coverage).
The definitions are always the starting point as you seek to read and understand your policy. Unless indicated clearly in the policy, all bold terms contained in the policy jacket are defined exactly the way the definition appears at the front of the policy jacket. Therefore, if you are reading a single section to understand a specific coverage type, you must pause at every bold-type term and go back to the definitions at the front of the policy. Read the definition of the term carefully and then apply the full text from the definitions section as though it were inserted in full where the bold-type term appears later in the policy contract.
As you begin reading each coverage section, you will find the insuring agreement, which provides a broad statement of all coverage provided under that section. For example, under the liability section of the policy, the insuring agreement will broadly describe everything that the policy may cover after an insured driver causes an accident.
Immediately following the insuring agreement, you will then find the exclusions. Exclusions limit the coverage provided by the insuring agreement. To properly understand your policy, consider that the insuring agreement describes everything that might be covered. Thereafter, carefully read each exclusion to see if coverage for your specific occurrence has been carved out and eliminated by the policy exclusions.
Following this approach to reading a policy will allow you to determine whether your insurance should apply to provide benefits to you or another accident victim. Please return to chapter 1 for a careful discussion of what is paid by each coverage type, how to stack multiple policies, how to maximize coverage, and a discussion of all other sources of payment that may assist you following a collision.
Answering Coverage Questions
Insurance adjusters will deny coverage if the accident falls within one of the coverage exclusions in the policy, if the driver of the vehicle was not a permissive user of the vehicle, if the vehicle is not an insured vehicle as that term is defined under the policy, or if the accident falls outside the policy coverage period. Whenever a claim denial occurs, the insurance carrier will advise the victim early and should offer a written explanation of the grounds for denial. This denial should be reviewed alongside the full text of the policy to confirm that the denial is appropriate. A coverage denial is different from a liability denial, where the insurance carrier disputes that their insured driver caused the subject collision. In all cases involving coverage disputes, the victim should secure advice and a legal opinion from an experienced insurance coverage lawyer. If there is a valid question concerning application of coverage, a civil action can be filed to put the coverage issue in the court’s hands. These actions are called declaratory judgment actions; here, the agreed-upon facts are presented to the court, and the court then applies North Carolina insurance and contract law to the facts and the policy language to render a reliable decision on whether coverage should be afforded to cover accident losses.