Page 3: Avoiding Insurance Disputes
Insurance Coverage Analysis
In parallel with the loss assessment work, analysis of all relevant insurance coverage should
be carried out. Several aspects need to taken into consideration.
For example, the date when the loss was discovered may not be the date when the loss occurred. Damage resulting from a progressive failure, or discovered during a routine inspection, may create uncertainty as to when the loss was actually sustained. In these circumstances, it is important to notify the insurers of all policies that might respond to the loss. For exploration wells,
it is important to remember that the spud date, rather than the date of loss, usually determines which policy should apply.
Interesting situations can arise when there is no clear contractual responsibility for the loss, or when there is confusion over who is responsible for providing the insurance. For a particular policy to respond, it is necessary for the claimant to demonstrate that they are insured under the policy, they have an insurable interest in the loss, and they have the responsibility for the cost of the remedial work. It is also necessary to establish that the damaged property forms part of the insured property and there is no other policy that provides overlapping coverage.
Once the insurers of the relevant policy or policies have been notified, the principal policy issues must be identified. In most cases, there will be one or more grey areas of coverage. These may affect the recovery of the claim as a whole or particular aspects of the claim. A clear strategy for handling any contentious issues should be developed before any discussions are held with the loss adjuster.
Following a full coverage review, an assessment of recoverable costs should be carried out using updated cost estimates. The cost implications of potential coverage issues should then be assessed to see how they impact upon the recoverable claim.
In some cases, a contractor, manufacturer or other third party may have been responsible for all or part of the loss. The assured will have a duty to assist insurers with any legal action taken against the responsible party to recover sums that have been paid to the assured in settlement of the claim. This can be burdensome, and can interfere with contractual relationships; so careful handling is required.
