Insurance Deterrence

Originally appeared in the March 2001 issue of the ABA Journal.

Harmless Error - A Truly Minority View on the Law

Insurance Deterrence

BY ANDREW J. McCLURG

Insurance companies enjoy a unique privilege among businesses—the ability to unilaterally alter contract terms in their favor simply by sending out an “Important Notice” notifying policyholders of the changes.

Just last year, customers of a major insurer received an Important Notice informing them that one of the most desirable features of their homeowner’s policy—guaranteed replacement cost coverage—was being eliminated. This was accomplished through a sophisticated legal maneuver known as: printing the words “this coverage is eliminated” on a piece of paper.

How do insurance companies get away with changing the rules in the middle of the game? I asked a contract law expert who said the technical explanation is “Because they’re insurance companies.”

I decided it’s time to fight back, so I sent my own . . .

Important Notice
to Insurance Company

Enclosed is my new homeowner’s policy. Several changes have been made. Some of these changes expand existing coverage, while others expand it even more. Still others have been left blank for me to fill in later. If you have questions about the changes, feel free to call me during normal business hours while I am away at work. Do not call during non-business hours as I will be very busy breaking up my furniture, which is covered under my new policy at 12 times replacement cost.

Premiums. Due to the rising costs of basic necessities such as the fireworks manufacturing equipment I am stockpiling in my insured dwelling, I regret to inform you that I have been forced to adjust my premium.

Please remove all the zeroes from my current premium amount and stick them on the end of my smoke detector discount. Deduct the new premium amount from the smoke detector discount and remit the balance to me in biannual installment payments.

Definition of “Insured.” A lot of my acquaintances feel they are wasting money paying for policies they are terrified to use because you have threatened to raise their premiums if they have the nerve to actually file claims. To reduce costs and improve efficiency, we’ve decided to consolidate.

The definition of “insured” in my policy is hereby amended as follows (changes in italics): “you and your parents, aunts, uncles, siblings, cousins, beer-drinking buddies, co-workers, dates, auto mechanic, hair stylist, dentist, personal trainer, people you wave to on the street and anyone who forwards you jokes by e-mail.

Fire Damage. For too long, you have arbitrarily denied coverage for one of the most common losses faced by millions of hardworking Americans—arson. Coverage for this occurrence is now included.

Vandalism. Your overly narrow definition of vandalism is amended to include red wine stains, crayon marks, home improvement projects gone awry, bad decorating decisions and holes in walls caused by policyholders smashing their skulls against them upon receiving Important Notices from insurance companies.

Additional Coverages. The coverage section of my policy is further amended to include “anything else that might go wrong.”

Reservation of Rights. As always, I reserve the right to change this policy whenever I want without bargain, exchange or consideration simply by sending you another Important Notice.

Since I mailed the above notice, I’ve received a flurry of Important Notices from my insurance company, all of which I’ve been dissolving in the leaking vat of sulphuric acid I maintain in my well-insured living room.

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Andrew Jay McClurg is a law professor whose teaching and research interests include tort law, products liability, legal education, privacy law and firearms policy. He holds the Herbert Herff Chair of Excellence in Law at the University of Memphis Cecil C. Humphreys School of Law.
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