The opening sentences in a January 2002 article by Greg Munro, U of M, School of Law, for "The Scholarly Forum" states "Trial lawyers are all too familiar with cases in which an insured has purchased coverage that wasn't appropriate for the client's situation, either because the basic insuring agreement in the policy did not cover a foreseeable risk in the client's affairs or the policy contained exclusions or conditions that made the coverage illusory for the client." While that article pertained more specifically to recommending Underinsured Motorist Coverage, it certainly emphasizes problems that can arise from the current media blitz of buying auto insurance in 15 minutes or less and saving money! Can an insurance buyer really make a valid coverage determination in 15 minutes? Pricing is certainly a factor in buying anything! But the quality of the buyer's purchase should also be a factor. Price comparisons on the internet should be relatively easy, but what about the coverage? This is where the need for a face-to-face with an insurance agent/broker is a must!

Inexpensive insurance, be it personal (auto, home) or business, will generally be an indicator of lower limits and/or restrictions or reduced coverage. Having a coverage explanation over the internet would seem to be a difficult and very one-sided situation. Insurance policies are basically unilateral contracts-the preparer, the insurer, having the upper hand! At least when buying a policy face-to-face there can be discussions and give and take, so that the ultimate product is what was requested by the buyer. Insurance is a contract of indemnity, but first and foremost it is a contract for defense. But for defense (and indemnity) to occur, these must also be the probability of coverage!

When evaluating the issues of 'who prepared the insurance contract' and 'will it provide the needed defense and indemnity', there are two factors to look at. Is the insurer a Standard insurer or a Proprietary insurer? For 'standard' insurers, in 1971 Insurance Services Office (ISO) was formed. ISO provides statistical, actuarial, and underwriting information for the commercial and personal property/casualty insurance and management industries. ISO gathers premium, claims and loss data that is filed with state regulators; the data is used to evaluate the price of insurance state by state. ISO offers technical services, policy language, consulting and fraud identification tools. All of this yields a more standardized contract for both commercial and personal insurance buyers. Proprietary insurers do not subscribe to the ISO standardization and therefore their contracts are unique to that insurer only. Determining what is or is not covered will take a definite and more complete examination—of all forms and endorsements to the contract. This is where coverage restrictions and reductions can greatly affect the insurance contract cost.

That is also why buying insurance on the internet could be an expensive experience. Saving minutes to purchase the illusory coverage referred to earlier can end up failing to provide the defense and indemnity originally desired. Insist on getting the coverage/limits requested and having them properly explained to you. It's your money and your livelihood. Make sure you control both.

(As a note: The article referred to at the beginning by Greg Munro, law professor at the University of Montana School of Law, is well worth the read! The complete title is "The Duty of the Agent or Broker to Recommend Underinsured Motorist Coverage with Adequate Limits". I agree with many of the points made-especially making Underinsured Motorist Coverage mandatory. However, his desire to expand the agent/broker duty had a different view, recently. Tim Ryles, PhD, Tim Ryles Consulting, in a May 2012 article for International Risk Management "So You Think You Are a Professional" states that "When disputes reach a court, a judge may view an agent as one engaged in an occupational pursuit just slightly above that of a short-order cook". Wonder how that would fit in with Mr. Munro's hope for an agent's duty expansion? Mr. Munro's article can be accessed at "Scholarship.Law.umt.edu/facualty").

Article By: Dennis Gambill - The author is an Insurance Litigation consultant. Adjunct professor at EMC for 8 years-Risk & Insurance. 40+ years-both MGA and agency experience.