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In this issue:

Ambiguous is as Ambiguous Does
(By Robert N. Hughes, CPCU, ARM)
Are insurance contracts ambiguous? Of course they are. It is almost impossible to write a document as detailed and lengthy as most insurance contracts are and not have words and phrases contained therein which are "reasonably capable of being understood in more than one sense." What most policyholders do not understand is that there is a doctrine of law called contra preferentem, which holds, in simple terms, that a contract is to be construed against the person preparing the terms thereof. (Read article)

In previous issues:

The Convergence of Contracts and Coverage: Compatibility or Catastrophe
(Robert L. Carson, Jr., CPCU, ARM, Robert Hughes Associates Inc.)
For many years we have insisted that the four parts of an oil and gas operator's risk-management program consist primarily of the four C's: Contracts, Coverages, Costs and Claims. The areas are still prevalent, but more and more it is becoming clear that there are only two Cs — Contractscoveragesclaims and Costs. The separation of contracts and coverages is becoming less distinct, and even less so between coverages and claims. (Read article)
Post-Katrina
(Amy v. Puelz, Ph.D and Robert Puelz, Ph.D, Robert Hughes Associates Inc.)
After a natural disaster such as Katrina, many individuals and businesses finally call upon the language of their insurance policies to speak to the issue of whether damage suffered is covered and, if so, how much will the insurer pay? If the insurer does pay, the question of how insurance rates and contracts will be affected by catastrophic claim payouts is of concern. (Read article)
The MacArthur Saga
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
"Here's the story," she said " it is the 1980s. Asbestos claims have destroyed the mighty Johns Manville and most of the other asbestos products manufacturers. Plaintiffs' attorneys representing parties suffering from asbestos-related disease such as mesothelioma and asbestosis have begun pursuing the companies that sold and installed asbestos-containing products. The liabilities are gigantic. The installer companies' assets are disappearing rapidly. Insurers are running for cover. We represent one of those installers." (Read article)
The Starr in Their Crown: The State of AIG Today
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
A brief history of AIG, the insurance industry's latest major train wreck, tells the story of the company's founder, C.V. Starr. Those references to Mr. Starr triggered an unusual combination of admiration and pity that seems to reflect almost everyone's current feelings about the state of AIG and its own "Casey Jones standin' at the throttle," Maurice R. "Hank" Greenberg. Who would have thought that the ultimate result of Mr. Starr's opening a little insurance agency in Shanghai in 1919 would have been the establishment of one of the world's largest insurance entities? (Read article)
"Sophistication" of Policy Drafter Can Affect Coverage
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
The law in many states provides that an insurance policy nondrafter who is a "sophisticated" buyer is deemed to be on equal footing with the drafter, and contra proferentum does not apply. The term sophisticated is itself ambiguous, but the meaning that apparently applies in this case is "finely experienced and aware." So if insurers can convince a court that their policyholder is a "sophisticated" buyer, they might not have to suffer the consequences of having sold ambiguous contracts. (Read article)
Risk Transfer? Maybe, Maybe Not
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
While there are arguments among insurance professionals about the nature of risk, a large contingent adheres to the proposition that "risk" equals "uncertainty." (One of the principal ramifications of this interpretation is the idea that as frequency increases, risk decreases and, accordingly, so does the need for insurance. Therefore, according to the proponents of this theory, once the frequency of occurrences reaches the level of complete predictability, there is no longer any risk, and the exposure is not a proper subject for insurance.) (Read article)
How Quickly We Forget
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
The horrors of the images from 9/11 seem to have passed beyond memory into a sort of unreal never-never land. So, too, will the images of Katrina, Rita and Wilma pass into obscurity for most of the populace. Not so, however, for those in the affected areas, who must now try and put things back together, including collecting payments due from insurers who may or may not be willing or able to respond as promised. Those involved in the process will range from persons and/or businesses that receive rapid response and payment to those (mostly businesses) that will be litigating their claims years into the future. While some of the difficulty will be inevitable and, from the standpoint of the insured, unavoidable (due primarily to the instability and/or insolvency of their insurers), some problems may be avoided or mitigated by applying a little knowledge and a lot of planning. (Read article)
More Holes in the Parachute: The "Known Loss" Doctrine
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
Insurance companies are beginning to attempt to contort the perfectly logical "known loss doctrine" into a justification for refusing to defend or indemnify their general liability policyholders. (Read article)
Holes in the Parachute: Common Insurance Company Defenses
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
Here are some of the excuses (holes in the insurance parachute, if you will) insurance company attorneys are offering for their clients' denial of coverage to their policyholders and how you might avoid being the subject of such excuses if you are unfortunate enough to have a large liability claim. In other words, I'm going to teach you the principles of "defensive driving" as they apply to your insurance program. (Read article)
Excess Underwriters At Lloyd's, London, et al. v. Frank's Casing Crew & Rental Tools
(A roundtable discussion sponsored by Cook & Roach)
The Texas Supreme Court's decision in Excess Underwriters At Lloyd's, London, et al. v. Frank's Casing Crew & Rental Tools in 2005 is one of the most important insurance coverage cases in recent history. There are questions as to what the justices were thinking, especially considering Stowers Mahon, et al. v. Stowers, et al. And Texas Association of Counties County Government Risk Management Pool v. Matagorda County. On Dec. 22, 2005, a panel of four talked about the ruling and just what it means for insureds and insurers in the Lone Star State. (Read transcript)
Will the Parachute Open?: Avoiding "Coverage Nullification Through Litigation"
(Robert N. Hughes, CPCU, ARM, Robert Hughes Associates Inc.)
Many consultants are spending a great deal of their time serving as expert witnesses in insurance coverage cases. One of the most amazing aspects of the phenomenon is the effect that the insurance companies' affirmative defenses would have, if successful, on coverage that was negotiated and paid for years ago in some cases, decades. This begs the question, "How do you know what coverage you really have?" or, "Is that parachute really going to open?" (Read article)
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