19 min

Contract Interpretation and the World Trade Center Zalma on Insurance

    • Business

A Video Explaining the Doctrine of Reasonable Expectations   

https://zalma.com/blog

The act of infamy at the World Trade Center (WTC) in New York City on  September 11, 2001, is responsible for a great deal of insurance  litigation concerning, among other things, the meaning of the term  “occurrence” in first party property policies and the methodology  required of insurers when interpreting a policy of insurance. In the WTC  policies, “occurrence” was defined as follows:  “Occurrence” shall mean all losses or damages that are attributable  directly or indirectly to one cause or to one series of similar causes.  

All such losses will be added together and the total amount of such  losses will be treated as one occurrence irrespective of the period of  time or area over which such losses occur.  Because WTC insurance issues are surrounded by the horrendous facts of  the attack, and due to the fact that some policies had yet to be printed  and delivered to the insured before September 11, 2001, the decisions  rendered in interpreting the policies had far-reaching impact. The  rulings in the WTC cases, combined with a decision of the California  Supreme Court, are changing how insurance policies are interpreted.  Since policy interpretation is essential to the presentation of any  insurance claim, the following detailed discussion is important to all  those concerned with insurance claims.  

“Reasonable expectations” does not mean, however, that the expectations  of the insured can change or modify the clear and unambiguous language  of the policy of insurance. The Third Circuit found, in Canal Insurance  v. Underwriters, against the insured’s claim of reasonable expectations,  finding that in the context of the case before it “the refusal to look  beyond the plain meaning of the unambiguous exclusionary language to  Singh’s reasonable expectations is consistent with the interpretation of  Pennsylvania case law in our Circuit.”  For example, a case decided over 200 years ago made the point that the  reasonable expectations of the insured include the understanding that  “every [insurer] is presumed to be acquainted with the practice of the  trade he insures…. If he does not know it, he ought to inform himself.”  Similarly, more than 150 years ago the US Supreme Court in Hazard’s  Administrator v. New England Marine Insurance Co., 33 U.S. 557 (1834)  adopted the rule. It concluded that “no injustice is done if insurers  are presumed to know their insureds’ industry because it is part of  their ordinary business.”  

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an  insurance consultant specializing in insurance coverage, insurance  claims handling, insurance bad faith and insurance fraud almost equally  for insurers and policyholders.  

He also serves as an arbitrator or mediator for insurance related  disputes. He practiced law in California for more than 44 years as an  insurance coverage and claims handling lawyer and more than 54 years in  the insurance business. 

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.








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Support this podcast: https://anchor.fm/barry-zalma/support

A Video Explaining the Doctrine of Reasonable Expectations   

https://zalma.com/blog

The act of infamy at the World Trade Center (WTC) in New York City on  September 11, 2001, is responsible for a great deal of insurance  litigation concerning, among other things, the meaning of the term  “occurrence” in first party property policies and the methodology  required of insurers when interpreting a policy of insurance. In the WTC  policies, “occurrence” was defined as follows:  “Occurrence” shall mean all losses or damages that are attributable  directly or indirectly to one cause or to one series of similar causes.  

All such losses will be added together and the total amount of such  losses will be treated as one occurrence irrespective of the period of  time or area over which such losses occur.  Because WTC insurance issues are surrounded by the horrendous facts of  the attack, and due to the fact that some policies had yet to be printed  and delivered to the insured before September 11, 2001, the decisions  rendered in interpreting the policies had far-reaching impact. The  rulings in the WTC cases, combined with a decision of the California  Supreme Court, are changing how insurance policies are interpreted.  Since policy interpretation is essential to the presentation of any  insurance claim, the following detailed discussion is important to all  those concerned with insurance claims.  

“Reasonable expectations” does not mean, however, that the expectations  of the insured can change or modify the clear and unambiguous language  of the policy of insurance. The Third Circuit found, in Canal Insurance  v. Underwriters, against the insured’s claim of reasonable expectations,  finding that in the context of the case before it “the refusal to look  beyond the plain meaning of the unambiguous exclusionary language to  Singh’s reasonable expectations is consistent with the interpretation of  Pennsylvania case law in our Circuit.”  For example, a case decided over 200 years ago made the point that the  reasonable expectations of the insured include the understanding that  “every [insurer] is presumed to be acquainted with the practice of the  trade he insures…. If he does not know it, he ought to inform himself.”  Similarly, more than 150 years ago the US Supreme Court in Hazard’s  Administrator v. New England Marine Insurance Co., 33 U.S. 557 (1834)  adopted the rule. It concluded that “no injustice is done if insurers  are presumed to know their insureds’ industry because it is part of  their ordinary business.”  

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an  insurance consultant specializing in insurance coverage, insurance  claims handling, insurance bad faith and insurance fraud almost equally  for insurers and policyholders.  

He also serves as an arbitrator or mediator for insurance related  disputes. He practiced law in California for more than 44 years as an  insurance coverage and claims handling lawyer and more than 54 years in  the insurance business. 

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.








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Support this podcast: https://anchor.fm/barry-zalma/support

19 min

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