FRACTURING AND BUNDLING RISKS: THE COVERAGE EXPECTATIONS OF THE “REAL” REASONABLE POLICYHOLDER
Author: James Davey
The market for residential property insurance is well established within most Western States, and beyond. Within the United Kingdom (“UK”), it is the second largest personal line, behind motor insurance. The two dominant products are buildings insurance and contents insurance, although other forms are now appearing, such as ‘Home Emergency’ cover. In the UK, a majority of adults hold both, with a slightly greater proportion buying contents cover than buildings cover. Although at first sight these might appear as property insurances covering real property (buildings) and personal property (contents), in reality they are an amalgam of real and personal property and liability insurances. There is no neat divide between land and chattels, as might be attempted in an undergraduate law class. Moreover, there is often no neat geographical divide between ‘home’ and elsewhere. Insurance cover often extends to personal property used beyond the home. Instead, these contracts have evolved over time to meet the disparate needs of home owners, landlords, property financiers and tenants. The process by which the risks have been assimilated into the form of “contents” and “buildings” insurance is in itself worthy of attention. However, even starker are the legal consequences of subdividing these risks into the two distinct contracts. We now face not only the inevitable difficulty of rationalizing the internal conflicts between positive statements of cover and exclusion clauses within a single legal document, but also the possible interactions between two contracts which in practice will be need to be read together. Moreover, the products are normally available separately. This raises the distinct possibility that an insured will have contents cover from one provider and buildings cover with another. This provides genuine difficulties for lawyers and regulators: how to ensure the required synergy across two separate markets.