Both of these opinions -- coincidentally published on the same day -- amply demonstrate why some people rationally elect not to purchase insurance coverage. Because what you may well think that you're buying doesn't actually protect you from the losses you fear.
The first opinion involves fire coverage for a home in Malibu. Ms. Hughes bought a homeowner's policy from Farmers. You'd think that'd cover you if your house burned down, right? Nope. Her house burned down, but there's an exclusion in the policy (that her broker allegedly absolutely didn't mention) that says that the policy doesn't cover fire if you could buy a state-sponsored FAIR policy. So lawsuit dismissed.
The second opinion involves a commercial general liability policy issued by Continental Casualty to a massage parlor owner. What's the absolute biggest risk you face when you own one of those businesses? Right. You're worried that you might get sued if you or one of your employees allegedly touches someone without their consent. Which, of course, happens here. At which point the insurer refuses to defend the lawsuit, relying on an exclusion in the policy, and a stipulated $6.8 million judgment results. The owner sues the insurance company for coverage. Lawsuit dismissed.
Both of these judgments get affirmed. Which is hardly surprising. The relevant exclusions do indeed negate coverage for the exact thing the owners probably bought the insurance for in the first place.
Which you'd think, at some point, would diminish the number of people willing to buy insurance.
Though that assumes you read the fine print of these massively long policies. Which few people do.
Which in turn is, of course, why those exclusions persist.
