Horror Stories

Employer Is Tagged For Error

dukeA night watchman was insured for 2 times his annual earnings under the life insurance section of his employer’s benefits plan. The employer only reported the base sallary to the insurance company. The employee died unexpectedly and the insurance company paid out twice the base salary to the widow. She sued the employer claiming that she was entitled to 2 times the overtime earnings also. She won the case and the employer had to write a cheque to pay for the mistake.

A Stunning Claim Of Over $1.5 Million

A wholesale company that services many hundreds of business customers from a large inventory of products had been in business for over 10 years without any claims. The owners had set themselves up in a fine new building (in a quiet small town) and installed all the safeguards that were thought to be important, such as sprinklers, alarms, and security locks. The nature of the business was not evident from the signage either. Naturally, the owners had developed the attitude that insurance, while necessary to comply with their lenders’ requirements, was really something that they would never use. Cost became the main negotiating issue at every renewal. One evening, 2 innocent looking individuals knocked on the front door, seemingly looking for directions. An employee, who was just closing up, opened the door….he was tied up and in no time at all, the intruders had filled a predetermined shopping list resulting in a stunning claim of over $1,500,000 to the company’s insurers. It turns out that a competitor in another town had had the same experience on an earlier date.

No Satisfactory Documentation

A well known Canadian football team went to its high profile insurance broker and requested a very special insurance policy in the amount of $1,000,000. They planned to randomly select one person out of the spectator stands and give that person an opportunity to kick the ball through the goal posts. If that person succeeded, he/she would collect the prize money. As this type of insurance coverage is not generally available from standard insurance companies, the broker went into the “wholesale” market and found an intermediary who arranged the coverage. A significant premium was paid to the intermediary for that special insurance. No satisfactory documentation was ever produced and the question of whether or not coverage was ever properly placed remains an open question. Fortunately, the ball never made it through the uprights.

Numerous Locations Uninsured

siberiaA large, publicly traded, multinational, with sales of over $200 million has arranged a centralized insurance program for its various holdings. No tracking procedure, of any kind, is in place and 9 months into the program it is discovered that numerous locations are uninsured. One of these locations has had an uninsured loss and head office management is unable to demonstrate whether the property at the location is owned by the company, or by its customer, as the supply contract is ambiguous.

Insurance Has Been Restricted To Exclude Coverage

An exporter is enjoying increased business activity into the new state of Russia. She has arranged for marine insurance to cover all goods in transit because the terms of sale are F.O.B. Further probing yields the fact that the insurance has been restricted to exclude coverage from the time that the goods are unloaded at the first Russian port of entry. To make matters worse, the freight forwarder is a small company that issues its own through bill of lading and has arranged the insurance without making any arrangements to insure the inland Russia part of the voyage. The freight forwarder, like any small service company, has few assets and no professional liability insurance whatsoever.

A Record Of Stealing

A building owner, who managed his own properties, impaired his otherwise excellent loss record by suffering a major loss to rental funds, when 2 of his employees made off with significant amounts of rent money. It was discovered that the on site building manager was heavily “involved” in a known affair with an accounts clerk in the office and he had coerced her into helping him. It was further discovered that he had a record of stealing from a prior employer.

Unable To Cover The Loss

A warehousing and trucking operator decided to take a good look at his exposures, after a trailer filled with customer goods had been stolen from his yard. Not only was his insurance placed by an inexperienced broker (there was no coverage) but he had no written agreements in place of any kind in respect of his storage and transportation activities for his customers. He was unable to cover the loss and lost a large client to his competition.

Insufficient Coverage

fulton28An apartment building owner insisted that the insurance broker of his choice be allowed to arrange the insurance on his building. Subsequent to a major loss, it was discovered that a policy extension was woefully insufficient to cover a large part of the loss. This policy extension could have been increased, at the time of policy issuance, at no cost whatsoever, thus saving the owner well over $100,000 in uninsured losses.

Don’t Make Assumptions

The manufacturer of an environmentally sensitive product purchased liability insurance from a broker, assuming that the insurance included product liability coverage. All sales were being made to a U.S. customer and the product was one which required skilled operators. It was discovered that the insurance did not provide any product liability insurance whatsoever and there was nothing in the agreement with the customer that required the customer to provide the coverage. Legal action against the manufacturer would be facilitated by the fact that the 2 jurisdictions have reciprocal agreements that make suing easier.

Property Management Firm Gets Caught

A property management firm, active in the management of revenue producing properties, executed repair and service contracts on behalf of its building owner clients in such a way as to allow its own name to appear on the documentation. The property manager was jointly sued every time a building (or its owner) was unable to pay its supplier(s) and eventually had to close its doors due, in part, to the fact that its name on these transactions resulted in excessive legal activity.

Car Dealers Out To Dry

An international auto manufacturer spent over 6 months assembling an extended warranty program for its dealers to sell. It relied on the services of a respected law firm and a large international insurance brokerage. Just prior to unveiling this very exciting initiative, it was discovered that the insurance company was insolvent and had set the program up so as to enable it to be shut down at any time, leaving the dealers fully responsible for covering the future costs that a customer might face. (It was estimated that the insurer could have collected $7,000,000 in premiums before having to face its first loss…..not a bad little windfall to leave town with!)

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