Rewriting The Insurance Policy Technique: What Does It Mean?

Insurer practices should be simple. You pay money for protection against a risk that should be clearly explained in the policy. However, insurers often have strange practices that are far from simple. Rewriting the policy technique is one of those practices, but what does it mean?

We asked Charles Surrano, an insurance attorney from Arizona and member of the Advocate Law Group network who has practiced in the industry for 30 years to explain the concept. “I think I invented that term, actually. Maybe not, but I’ve certainly used it a lot – because I’ve seen it a lot. It is seen quite prolifically in the area of disability insurance, particularly in own occupation policies.”

He provided an example of an insurer selling a disability policy to a specialized doctor. Years ago, insurance companies sold policies that may have declared the doctor totally disabled if he experienced an event that prevented him from performing his specialization. In other words, the doctor wouldn’t have to do something else if he couldn’t perform that specific job, his disability insurance would kick in. Surrano said that the policies were written in such a way that was consistent with that understanding.

At some point in time, things changed. Surrano explained, “Years later, when there were too many claims, the industry realized that it had really underestimated the level of claims it was going to have to deal with. They started trying to look for ways to limit that exposure. One of the ways they came up with was to then retreat from the very policy provisions and the representations of what those provisions meant and start, as we say, ‘rewriting the policy’.

Using the same example, Surrano said that the same specialized doctor who would have been totally disabled under the policy 10 -15 years ago, wouldn’t be today. He said, “all of a sudden, [insurance companies say that this doctor] can do some of the other duties that doctors do, like examine patients, review charts, write prescriptions, order up tests, that sort of thing. All of a sudden, he’s not totally disabled. He’s, at best, residually disabled, which is not the way the policy was written. It’s not the way the policy was sold. It’s really a limitation on what the insurance company will then have to pay.”

Case Studies: Rewriting The Insurance Policy Technique

Case Study 1: Disability Insurance

John, a specialized doctor, purchased a disability insurance policy years ago that provided coverage in case he became totally disabled and unable to perform his specific job. However, when John later filed a claim after experiencing a disabling event, the insurance company attempted to rewrite the policy provisions. They argued that John could still perform other duties that doctors typically do, such as examining patients and reviewing charts. As a result, the insurance company reduced John’s claim, limiting their payout.

Case Study 2: Homeowner’s Insurance

Sarah, a homeowner, had a comprehensive homeowner’s insurance policy that covered damages caused by natural disasters. When her house was severely damaged in a storm, Sarah filed a claim expecting full coverage for the repairs. However, the insurance company invoked the rewriting of the policy technique, claiming that certain damages were not covered under the policy. They argued that the storm damage fell into specific exclusions or limitations, resulting in a reduced claim amount for Sarah.

Case Study 3: Auto Insurance

Emily, a responsible driver, had an auto insurance policy with comprehensive coverage, including protection against theft. Unfortunately, Emily’s car was stolen, and she promptly filed a claim with her insurance company. However, the insurer utilized the rewriting of the policy technique, asserting that the circumstances of the theft did not meet the specific criteria outlined in the policy. As a result, the insurance company denied Emily’s claim or offered a significantly reduced settlement amount.