U.S. Court of Appeals defines "adumbrate"

My next several posts will discuss Essex Ins. Co. v. BloomSouth Flooring Corp., a decision just handed down by the United States Court of Appeals for the First Circuit.

The case addresses whether a liability insurance policy issued to a building contractor covers losses arising from an unpleasant odor emanating from a carpet the contractor installed. My next posts will deal with the substance of the decision.

For now, though, I want to applaud the Court of Appeals for providing a definition of "adumbrate." I have discussed how a court determines whether an insurer has a duty to defend("the eight corners test") here. The standard language is, "if the allegations of the complaint are 'reasonably susceptible' of an interpretation that they state or adumbrate a claim covered by the policy terms, the insurer has a duty to defend."

Although I have quoted that language numerous times in legal briefs, I have always skimmed over the word "adumbrate" without pausing to consider what exactly it means.

The Court of Appeals has now been kind enough to provide a definition in footnote 1 of the decision: "We have defined 'adumbrate' in the liability insurance context to mean 'to give a sketchy representation of; outline broadly, omitting details . . . or to suggest, indicate or disclose partially and with a purposeful avoidance of precision.'"

General Liability and Mental Anguish

General liability policies that protect most American businesses are designed to provide coverage for bodily injury and property damage to a customer or visitor.



Examples of bodily injury... A customer slips on your walkway. A product you sell causes a person to become ill. An employee causes a fire that burns down the hotel they are staying at. Faulty construction causes a collapse and ten people are killed.



The policy defines bodily injury as "bodily injury including death." Yes, bodily injury is really defined as bodily injury. In most states bodily injury does not include emotional distress or mental anguish. Some insurers have special endorsements to the policy that adds emotional distress and anguish. Some, not all. This could be a significant coverage hole in your insurance program. Talk with your insurance adviser.

Insurance Regulation

The following is a letter I wrote that has been published in the insurance publication, The Standard, May 1 edition. (Reprinted by permission.) This outlines my feelings on government regulation of all kinds - not just insurance.

To The Editor,

Your April 24th article on the UConn panel of regulators points to the fatal flaw of government regulation. Nowhere was there any mention made of the downside of regulation. The costs are high and many.

First, there is the cost to the taxpayers. Millions and millions of dollars are spent to staff and run the state departments of insurance. These are dollars that could be in taxpayer's pockets.

Next is the cost to industry. Again, huge. These are direct, in the fees charged, and indirect in the expenses of following the regulations while trying to stay in the good grace of the regulators. These costs increase the cost of insurance to the public.

There is also a cost to consumers in that regulation keeps new products and services from entering the marketplace quickly. Further, insurers cannot react promptly to changes in consumer demand for innovative extensions of current products. How much innovation have we seen lately in the most widely regulated insurance product - health insurance?

These costs are overshadowed by the cost of freedom. Capitalism and freedom are like pregnancy. You can not be a little pregnant, a little capitalistic, or a little free.

A free market allows willing buyers and willing sellers to deal together without interference - each to their own self interest. Getting and giving is based on the best value the parties can obtain. The rare dishonest or fraudulent transaction is well handled by a court system responding to facts and evidence.

The article states the arrogant regulatory premise that insurance consumers are too stupid to understand what they are buying. It follows that regulators see the industry as evil in that without regulation the Snidely Whiplashs of the insurance industry will cheat and dupe the public.

Those of us who have been in the industry for any time know the opposite is true. We are an honorable industry that serves the needs of the insurance buying public. Sure, we are out to make a profit. However, we know that profit only comes from providing value. If we don't provide value our clients will leave us in search of others who are eager to provide it.

We also know that our industry is not immune to bad apples. The initiation of force and fraud is always wrong. The courts should be used to take care of such acts. Poor performance in the marketplace is also punished by a bad reputation. In our society of freely available information and empowered consumers a stellar reputation is required for success. Those who perform well will be rewarded by the market. Bad actors will be punished.

Some will comment that the current economic maelstrom is caused by too little regulation. From what I see, regulation caused the current problems with its overly protective processes that lead to a whirlwind of unintended consequences, the cost of which are never born by or recognized by the regulators.

Our industry and our economy is not helped by regulation. Regulation is an unnecessary friction in commerce and a impingement of our freedoms.


Scott Simmonds, CPCU, ARM, CMC

Insurance Assurance℠

It's now official. Insurance Assurance℠ is in the process of being trademarked. The application is on its way to Washington.

Now, the correct spelling of the phrase is "Insurance Assurance℠."

Scott Simmonds, CPCU,ARM,CMC
"The Guy with the Big Insurance Brain"
Providing Insurance Assurance℠