MANDATED BENEFITS FOR P & C?!
We’ve all become very aware of so-called “Mandated Benefits” in
health insurance and have seen how such mandates have contributed to the
problems in the health insurance market.
Are we now headed down that same road with property/casualty contracts?
The recent law court decision, Butterfield vs. Norfolk & Dedham
says that uninsured motorists benefits can be found where the person
injured (fatally) need not be an “insured” under the policy.
Anyone who is an heir to the decedent and has a right of recovery under
the Wrongful Death Statute now has a basis for an uninsured motorist
claim!
Despite the plaintiff bar spin, that this has always been the case,
and it’s no big deal, it is a finding of coverage where no one
expected or intended coverage to exist. And when you consider the fact
that our average U/M claim is approximately six times larger than our
average B. I. liability loss, it doesn’t take many to become a
big deal.
No matter that there is no effective way to evaluate or price this exposure,
we now have, in effect, a mandated benefit without premium.
Now come the hurricanes, and with them, a brewing “storm” over
the wind vs. flood coverage question. The Mississippi Attorney General
and others have called on the courts to throw out the flood exclusion
on property contracts and declare that all damage from the storms is
covered. These attempts at rewriting contracts retroactively not only
suggest the spectre of “mandated benefits” without any corresponding
rate consideration, they also threaten the very foundation of any and
all contracts, insurance or otherwise!
For this reason, I suspect the lawsuits will not prevail, but I also
believe the question will not go away, and we may be moving in the direction
of a broadened definition of “all risk” coverage in the
future.
Hopefully, such a change will have an actuarial basis, rather than
a social or political outcome.
Walter C. Smythe, CPCU, AAI, CIC
psmythe@patrons.com
President
