Understanding First-Party Coverage Issues
First party coverage refers to coverage payable to the insured or a third-party beneficiary for loss or damage to the insured or beneficiary. First party coverage can focus generally on a type of loss or damage (e.g., property damage) or even a specific kind of property or interest (e.g., creditor interest in indebtedness). It can also be risk specific (e.g., flood) or some combination of each (e.g., product recall). The most common forms of general loss or damage are health, life, property damage or loss of business income (also known as business interruption insurance). Other more specific examples include:
- Accounts receivable coverage
- Animal or livestock mortality
- Aviation (including accident and hull)
- Builder’s risk (including delayed completion coverage)
- Commercial auto (including fleet, motor carrier, and truckers)
- Commercial or manufacturers output
- Cost of suit coverage
- Credit and financial guarantee
- Crop and hail
- Data processing coverage
- Dependent properties time element (including contingent business interruption and extra expense)
- Difference-in-conditions
- Earthquake
- Efficacy
- Equipment breakdown (also known as boiler and machinery)
- Electronic data processing
- Exhibitor
- Financial interest
- Flood
- Inherent defects
- Intellectual property infringement abatement
- Mine subsidence
- Mortgage impairment
- Ocean and inland marine (including cargo, fine art, floater, jewelers block, and valuable papers and records)
- Political risk (including confiscation, expropriation, nationalization, and deprivation, force majeure and trade disruption)
- Product recall and tampering
- Rectification
- Strike
- Systems performance
- Tax interruption
- Tax opinion
- Terminal
- Terrorism
- Utility service interruption
- War risk
- Vendors single interest or dual interest
Certain first party policies, in addition to providing first party coverage, provide some liability coverage as well (e.g., commercial auto). Whether first party or liability coverage, applicable law usually affords insureds common law and statutory protections, such as the common law principle that ambiguous policy provisions must be interpreted to favor the insured.
However, courts and legislators have recognized that, absent court intervention, an insurance company’s exclusive control of the claims resolution decision gives policyholders and other insureds little leverage should a dispute arise over benefits due them under a policy. Accordingly, applicable law affords additional protections to first party claimants (i.e., policyholders and other insureds) in recognition of the special relationship that arises between them and their insurance company. These include such special protections as bad faith claims, certain claims resolution deadlines, prompt payment penalties, and more. Come discover how a policyholder advocate can use well-settled principles of insurance law to put power over your claim back into your hands.