Insurance Has Become a Self-Service Market
Since the early 1980s, insurance has become a self-service market. A growing number of insurance companies market directly through the mail, over the phone and even via computer on-line systems. These companies usually take a modular approach to structuring policies: They begin with a few basic forms and adjust them to specific customers by means of exclusions that limit coverage and endorsements that either limit or expand it.
The number of independent agents selling insurance has shrunk because the industry treats these modular insurance policies more like a financial-services commodity and less like customized financial protection. The middlemen, as in so many other industries, are being squeezed out of insurance by a deregulated and competitive marketplace.
In the wake of these changes, consumers have to do more of their own analysis. They need look for terms and conditions that best meet their needs. This means that disputes between policyholders and insurance companies over what policies cover and don’t will become a regular feature of the insurance business.
The 1992 Nebraska Supreme Court decision Don and Kristi Thorell v. Union Insurance Co. serves as a sort of primer for coverage disputes.
A Primer on Coverage Disputes
The Thorells owned a ranch-style house near Loomis, Nebraska. The house had a walkout basement which opened to the west. There was a three-foot semicircular berm approximately 300 feet to the west of the house. It was constructed in 1984 to prevent water from coming into the house.
On the evening of June 28, 1987, while the Thorells were out of town, high winds followed by a severe rainstorm struck the area. More than four inches of rain fell in less than an hour. After the storm, a neighbor who lived west of the Thorells’ house saw water moving eastward toward the Thorells’ property.
Asecond neighbor and then the Thorells’ son, Mike, checked the Thorell home between 10 and 11 p.m. on June 28, and both noted about four feet of water in the basement. The neighbor also recalled seeing a 2 x 4 board floating in the water and hearing the sound of water running on the west side of the Thorells’ home. Both the neighbor and Mike Thorell were able to see water west of the Thorells’ house.
Before the storm, some 2 x 4’s and 2 x 6’s had been stacked on an L-shaped deck built around the southwest corner of the house. The deck was approximately 10 feet off the ground.
The following morning, Mike Thorell returned to his parents’ home. A picture window, which was one of four windows on the west side of the walkout basement, was broken, and the interior of the basement was extensively damaged by mud and water. When the water receded, it left several inches of mud on the basement carpeting.
The Thorells made a claim under their homeowners policy to repair and refurbish the basement and exterior of the house and replace damaged contents. Union denied coverage, arguing that the damage to the Thorell home was not covered by the homeowners policy because it had been caused by “surface water” or a “flood” and the policy specifically excluded damage from these occurrences.
The Thorells sued. They argued that the initial damage to the house was caused by wind propelling a 2 x 4 from the deck and through the basement window, which allowed the entry of rain all of these things were covered perils under the policy with Union.
The trial court found that Union’s insurance policy was ambiguous on the coverage for the contents of the house. The jury returned a verdict for the Thorells in the amount of $55,217.50 for damage to the contents of the house.
The trial court found that the terms of the policy weren’t ambiguous in regard to coverage of the dwelling itself. The Jury found that the damage to the dwelling was not covered by the policy.
Union appealed from the verdict in favor of the Thorells for damage to the contents. The Thorells appealed from the verdict in favor of Union in regard to their claim for damage to the house.