The Manuscript Form

Your Instructor Barry Zalma

Barry Zalma, Inc.

4441 Sepulveda Boulevard
CULVER CITY CA 90230-4844
HTTP://members.aol.com/bzalma
Bzalma@aol.com
310-390-445

The DIC Policy

The Manuscript Form

! What Is a DIC Policy?

< A Contract That Covers Risks Not Normally
Covered by Standard Policies.
Often The DIC is Made Up from Standardized ISO
forms.
Many Times the DIC Wording Is a Pure Manuscript
Form.

All of the Words of the Policy Are Written Individually for a

Particular Risk.

The DIC Policy

What Is A Manuscript Form?

! A Policy Wording That Is Made

Unique to a Specific Risk.
< The DIC Policy is Created in Three Ways:
A Mix of Standard Forms and Standard
Endorsements.
A Mix of Stand Forms and Specially Written
Endorsements.
A Contract Wording Designed Exclusively for a
Specific Risk.

The DIC Policy

Who Writes the Manuscript Form?

!
!
!
!

The Insurers Underwriter.

The Insureds Risk Manager.
The Insureds Broker.
All of the Above Working
Together.

The DIC Policy

Rules of Contract Interpretation

! The Contra Preferendum Rule.

< If the terms of a promise are in any respect
ambiguous or uncertain, it must be interpreted
in the sense in which the promisor believed at
the time of making it, that the promisee
understood it. [California Civil Code 1649]

The DIC Policy

! If There Is an Ambiguity in the

Contract of Insurance It Must Be
Interpreted Against the Drafter.
< What is an Ambiguity?
< Rules of Contract Interpretation
Any ambiguity or uncertainty in an insurance policy
is to be resolved against the insurer and, if
semantically permissible, the contract will be given
such construction as will fairly achieve its object of
providing indemnity for the loss... [Continental Cas.
Co. V. Phoenix Construction Co. (1956) 46 Cal.2d
423.]

The DIC Policy

Rules of Contract Interpretation

! When the language of an

insurance contract is reasonably
susceptible to two constructions,
it should be construed in favor of
the Insured. [Hernandz v. First
Financial, (1900) 106 P.2d 1278,
106 Nev. 900]

The DIC Policy

Rules of Contract Interpretation

! The Rule Requiring Interpretation

Against the Drafter Goes in Both
Directions.
< If the Insured, or its agent, draws the
insurance contract the ambiguity should be
construed against the Insured!
The Rule Deals With Power the Contracting Party
with the Greatest Power has the Contract Interpreted
Against it.

The DIC Policy

How To Read The Contract

! To Understand the Interpretation

of Insurance Contracts We Must
First Understand What Insurance
Is All About.

The DIC Policy

How To Read The Contract

! To Understand the Interpretation

of Insurance Contracts We Must
First Understand What Insurance
Is All About.
< To Properly Interpret a DIC Policy We Must
First Understand What Insurance Is About.
Insurance is a contract whereby one undertakes to
indemnify another against loss, damage or liability
arising from a contingent or unknown event.
[California Insurance Code 22]

The DIC Policy

Important Terms

!
!
!
!

Is it an Open Policy?
Is it a Valued Policy?
Is it a First Party Policy?
Is it a Third Party Policy?

The DIC Policy

Our Discussion Will be Limited to First Party Property
Policies.

! An Insurance Policy Is a Contract

of Personal Indemnity
< Russell v. Williams (1962) 58 Cal.2d. 487, 24
Cal.Rptr. 859.

! The Person Seeking Indemnity

Must Have An Insurable Interest

The DIC Policy

How Do You Read A DIC Policy?

! Get A Complete Copy.

! Review the Declarations Page.
< It Identifies the Insured and the Insurer.
< It Tells the Location of the Property the Risk of
Loss of Which Is Insured.
< It Identifies the Limits of Liability and the
Deductibles

The DIC Policy

How Do You Read A DIC Policy?

! Read All The Words of the Policy!

< A Contract of Insurance Is Always Interpreted
as a Whole.
Parts of the Contract Will Not Be Interpreted Without
Consideration for the Remainder of the Contract.
One Part, as it Interacts with Other Parts, Will be
Used to Interpret the Entire Contract of Insurance.

The DIC Policy

How Do You Read A DIC Policy?

! The DIC Manuscript Policy Will

Often Have More Definitions
Than A Standard ISO Policy.
< A Definition In a Policy Gives a Common,
easily understood word, A Special Meaning.
That Which is Clear Using the Common Meaning of a
Term Will Have a Different Meaning When
Specifically Defined in the Policy.

The DIC Policy

How Do You Read A DIC Policy?

! Understand the Insuring

Agreement.
< Does It Insure Against
All Risks of Loss?
Direct Risks of Physical Loss?
Direct Risks of Accidental Physical Loss?
Specific Named Perils:

Fire, Lightning, Windstorm, Hail.

Burglary, Theft
Earthquake
Flood.

The DIC Policy

How Do You Read A DIC Policy?

! Remember, First Party Property

Insurance Does Not Insure
Property!
< It Insures People Against Certain Risks of
Loss to Specified Property.
< That is What Is Meant By A Contract of
Personal Indemnity.

The DIC Policy

How Do You Read A DIC Policy?

! Read The Exclusions.

< These Tell You What the Insurer Did not Wish
to Insure.
Sometimes, by Making Exceptions from the
Exclusion, they Provide Coverage.
Often Do Not Say What they Mean.

! Read the Conditions.

< These tell You What the Insured Must Do to
Obtain Indemnity.
Proof of loss, Examination Under Oath, One Year
Suit Limitation.

A Specific DIC Policy

Lloyds DIC Language

< The Perils Insured by this Policy shall be

understood to mean all risks of direct physical
loss or damage from any external cause
except that this Policy does not insure against
any loss or damage which is:
Directly or indirectly caused by or which is
contributed to by Fire, Lightning, Windstorm, Hail,
Explosion, Riot, Riot attending a Strike, Civil
Commotion, Aircraft, Vehicles, Smoke, Vandalism
and malicious Mischief or Sprinkler Leakage as
provided by the Standard Board Fire Insurance
Forms and the approved and standard
endorsements thereto in current use at the inception
of this policy...

A Specific DIC Policy

Lloyds DIC Language

! The Wording Should be Clear

That It is the Intent of the Policy to
ONLY Insure those Perils Not
Insured by a Standard ISO Policy.
< The Method Lloyds attempted is fraught with
ambiguity.
< It Would Have Been More Clear if a Named
Peril Policy.
< It Would Have Been More Clear if it Referred to
Specific ISO form Numbers.

A Specific DIC Policy

Lloyds DIC Language

! The Lloyds Form is a true

Difference In Conditions Form
< It Assumes that the Insured Has Basic
Insurance Available in the Normal Market.
It then fills SOME of the gaps not covered by the
standard form.
It attempts to exclude ALL of the Perils Insured by
the Standard Forms.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Loss caused by moths, vermin, termites or other
insects.
Loss caused by backing up of sewers or drains or
seepage below ground level.
Loss of use, delay or loss of markets.
Breakdown or derangement of machinery and/or
boilers.
Infidelity, or any dishonesty on the part of the
Assured.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Infidelity of employees of the insured or others to
whom the property may be intrusted, inventory
shortage or unexplained disappearance.
Loss or damage to electrical appliances caused by
artificially generated electrical current.
Loss or damage arising directly or indirectly from
nuclear reaction, nuclear radiation or radioactive
contamination.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Loss or damage to the property insured occasioned
directly or indirectly by war, invasion, hostilities,
acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power or martial
law or confiscation by order of any Government or
public authority.

A Specific DIC Policy

Lloyds DIC Language

< It Adds Exclusions Such as:

Loss or damage to personal property caused by
processing, renovating, repairing or faulty
workmanship thereon.
Loss or damage from shrinkage, evaporation, loss
of weight, leakage, breakage of glass, etc.
Loss or damage caused by:

Theft or
Exposure to weather conditions.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Loss or damage occurring while the building
insured or containing the property insured is to the
knowledge of the Assured vacant or unoccupied for
more than thirty consecutive days, or being a
manufacturing establishment ceases to be operated
and continues out of operation for more than thirty
consecutive days.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Aircraft, watercraft, vehicles designed for highway
use, jewellery, precious stones, furs or garments
trimmed with fur, standing timber, growing crops
and animals.
Accounts, bills, currency, notes, securities, deeds,
evidences of debt and valuable papers.
Data processing equipment and media.
Property in transit.

A Specific DIC Policy

Lloyds DIC Language

! The DIC Does Not Create A

Complete All Risk Policy
< It Adds Exclusions Such as:
Property sold by or under encumbrance to the
Assured after it leaves the custody of the Assured or
an employee of the assured.
Neon signs.
Buildings or structures in process of construction.
Power Transmission and feeder lines not on the
Assureds premises.

A Specific DIC Policy

Lloyds DIC Language

! Conditions Similar to Standard

Policies.
< Notification of Claims
< Proof of Loss
< Subrogation
< Cancellation
< Abandonment
< Assignment
< Debris Removal.

A Specific DIC Policy

Lloyds DIC Language

! Conditions Similar to Standard

Policies.
< Other Insurance
< Salvage
< False & Fraudulent Claims.

A Specific DIC Policy

Lloyds DIC Language

! What Things Does it Cover?

< Flood.
< Earthquake.
< Volcanic Eruption.
< Falling Spacecraft.

A Specific DIC Policy

How Do You Explain the DIC To a Lay Person?

! In Simple American!