Early in my career, while waiting in a district court for my case to be called, I overheard and exchange at the bench between two attorneys and the judge. The case evidently involved the interpretation of an insurance policy. After listening to a few minutes of argument, the judge turned to the unfortunate insurance company attorney and said, “I have read through this policy, and I do not understand it. You work for the insurance company, and you do not understand it. How in the world is a consumer supposed to understand it? You people need to get your act together.”
I always remember that judicial scolding when I have a case involving an insurance company.
Insurance policies since then have gotten a bit more reader-friendly. “Party of the first part” has been replaced by “you.” “Whereas” and “heretofore” seldom show up. Definitions are contained in one section instead of being sprinkled throughout.
This change was not spontaneously done as an act of kindness by the insurance companies. It was forced upon them by states enacting a version of the model Insurance Policy Language Simplification Act. Texas implemented its version through insurance regulations.
You pay insurance premiums in exchange for an assurance that you will be reimbursed by the insurance company in case of a loss. For that to happen, the insurance company must have the money on hand to pay you.
Insurance companies carry ratings on how likely they are to remain solvent and pay out on claims. There are several ratings companies. The best known are AM Best Co, Fitch Ratings, Moody’s Investor Service, Inc., Standard & Poor’s and Weiss Ratings. You should always check out an insurance company’s rating before buying their products.
If an insurance company does fail and is unable to pay its claims,