Let’s just get this out into the open – INSURANCE IS CONFUSING.
There are forms. Many forms. Forms filled with fine print, limitations, and clauses you’ve never heard of before. Typically speaking, most consumers do not enjoy reading their insurance policy and reviewing all of the provisions of the coverage. Even if they did, the language would be too confusing. Further, since the policyholder rarely has a copy of the policy prior to purchasing the insurance, it is the broker’s job to explain and essentially summarize the key forms that are included.
Those provisions and clauses are important. A perfect example of this is a manifestation clause, which can leave you high and dry if it’s in your insurance policy.
A manifestation clause most often appears in the general liability insurance policy of construction companies, remodelers, builders and the like. To understand what a manifestation clause is, let me first explain what it isn’t. A general liability policy without a manifestation clause provides defense and indemnity for covered losses regardless of when the bodily injury or property damage first manifests. Thus, if the policy contains a manifestation clause, the insurance only applies when bodily injury and/or property damage first manifests during the policy period.
It is also important to point out that there is no standard wording for a manifestation clause, which makes figuring out if your policy has a manifestation clause even more confusing.
Here’s an example of a manifestation clause in action:
Let’s say you had a policy which contained a manifestation clause, and it expired 4/1/08. You then switched to a different carrier, and the new policy became effective on 4/1/08. In the meantime, a claim ‘occurred’ (unknown to you or anyone else) sometime during or after a job that was completed in February of 2008.
In June of 2008, the owner of the home where you recently completed the project notices a strange smell coming from a seldom used room of his house. When he enters the room, he notices stains on the ceiling and walls (drywall), damaged flooring and damaged furniture. Once investigated, it is discovered that a small hole in a pipe has been leaking for months.
Unfortunately, because the claim ‘manifested’ itself, or was first noticed in June of 2008, the policy which expired on 4/1/08 will not cover the damage, because it contained a ‘manifestation clause’. Thus, the owner of the construction company could be in big trouble, as he /she is facing a possible uncovered loss.
Not all is lost at this point. Reference back to my blog post on “prior works exclusions”. If the new policy does not contain a prior works exclusion, the loss may be covered under the new term, and the owner of the business could be saved.
However, it takes a commercial insurance broker with extensive knowledge of the coverage being offered to properly protect the consumer.
Many business owners, including construction company owners, don’t even know that their liability insurance policy carries a manifestation clause. Your company, the jobs of your employees and everything you’ve worked hard to achieve in your life could be at risk if you have a manifestation clause in your insurance policy.
At Fusco & Orsini Insurance Services, we almost always make sure the manifestation clause is taken out of the policies we offer our clients. The only exception is if a client cannot afford a manifestation-free policy (adding a manifestation clause to the policy lowers its price).
To find out if your current general liability insurance includes a manifestation clause, you can always call us at Fusco & Orsini. We’ll carefully review your policy for you and let you know exactly how protected your company is. If you have any additional questions about manifestation clauses, don’t hesitate to contact us.