What lies beneath

In the Indian market, I find quote comparisons by brokers usually do not go deep into policy wording differences. This approach works for property classes of business where wordings are standard, but not for liability lines where the wordings are not standard.?

There must be comparisons made on the following three aspects:

??Base policy form comprising of insuring clause, definitions, coverages, exclusions and other terms and conditions. This refers to the coverage residing in the policy form by default. As the form changes, so does the cover.?

??Indirect or non-affirmative coverage through carve backs of exclusions. Carve backs do not create coverage, but only reduce the scope of the exclusions whereby there is indirect coverage available for the situation on hand.?

??Direct or affirmative coverage by extensions or add ons. These are extensions whereby additional coverage is dove-tailed onto the policy form.?

Let’s take an example to understand how the base policy coverage itself changes from one policy form to another.?

The Commercial General Liability (CGL) would have an aircraft, motor vehicle or watercraft (AMW) exclusion. This is because the intention of the CGL policy is not to cover liability risks arising out of the usage of such crafts or vehicles. These must be covered under separate policies such as motor vehicle, aviation or hull insurance policies.?

AMW Exclusion Type A :

“This insurance does not apply to Bodily Injury or Property Damage arising out of the ownership, maintenance, use (use includes operation and Loading or Unloading) or entrustment to others of any:

? aircraft;

? Motor Vehicle; or

? watercraft;

owned or operated by or loaned or rented to any Insured.

This exclusion does not apply to:

? a watercraft while ashore on premises owned by or rented to You;

Or

? the parking of a Motor Vehicle on premises owned by or rented to You, provided the Motor Vehicle is not owned by or loaned or rented to You or the Insured.”

AMW Exclusion Type B:

“This insurance does not apply to:

(i) Bodily injury or property damage arising out of the ownership, maintenance, use, operation, loading, unloading or entrustment to others of any aircraft or watercraft owned or operated by or loaned or rented to any Insured.?

(ii) Bodily injury or property damage caused by or in connection with or arising out of the ownership or possession or use by or on behalf of the Insured of any trailer or licensed motor vehicle; provided, however, that this exclusion does not apply to liability in respect of the loading, unloading or collection of goods onto or from such trailer or licensed motor vehicle."

Both exclusions appear similar but Type A does not cover property damage or bodily injury caused by loading, unloading or collection of goods from a motor vehicle.?

Let’s say a truck carrying raw materials is brought to a factory. During unloading of goods, one sack falls on the driver of the vehicle who is a third party. He is critically injured and renders him unfit to drive on a permanent basis. There is total disablement to the third party.?

Under Type A, the above loss would not be payable. The exclusion does have a carve back but that is only for parking and not loading or unloading.?

Under Type B, there is a carve back for loading, unloading or collection of goods, so coverage is available for the liability arising of the accident described above.?

To conclude, a broker must not make comparisons based on quote slips from the insurers alone, but include the policy form differences also. RTFP (Read the f***ing Policy). Not doing so would mean the comparison would not be on an apple to apple basis. What one may assume to be covered may not be so. Of course, one can become wiser in hindsight at the time of claims, but that is usually too late to be of use.