Insurance policies that provide broad coverage across multiple items or locations can be a policyholder’s best friend. A recent federal court decision in Louisiana 1 highlights the complexities in determining whether a policy provides blanket or scheduled coverage – a distinction that can significantly impact claim payments.
The Louisiana case involved a hydrocarbon production facility damaged by Hurricane Ida. The company claimed $4.4 million in damages but received only about $392,000 from its insurers. At the heart of the dispute was whether the marine cargo and equipment policy provided blanket coverage up to policy limits or was restricted to scheduled items.
Why Blanket Coverage Matters
Blanket policies or blanket coverage offer several key advantages for policyholders. A blanket property insurance policy covers different types of property at one or more locations and does not specify the valuation of the items protected under the blanket. Instead, it allocates an overall limit to the policy upon which premiums are based. Blanket policies provide protection that extends across multiple items up to the total policy limit. It is an insurance coverage that attaches to and covers property to its full amount value subject to a policy limit without individual item value restrictions. From a policyholder perspective, there is no need to worry about individual scheduled item limits because those items are covered on a “blanket basis” rather than a per-item limit. This often simplifies the claims process without proving exact values for each item and making them subject to a scheduled limit. A blanket policy helps protect against underinsurance on individual items.
The Court’s Analysis
The Louisiana federal court’s examination of the policy language reveals how complex these determinations can be. The policy contained elements suggesting both blanket and scheduled coverage.
These were the noted arguments supporting a claim for blanket coverage:
- Broad language describing covered property.
- No explicit statement that it was a “scheduled policy.”
- Equipment list values could be interpreted as just required for premium calculation.
These were the noted arguments supporting scheduled coverage:
- The word “schedule” appeared 12 times.
- The total insured value matched the sum of individually listed items. (Chip’s Note—This is often the case with a blanket policy, so I am not certain this supported a scheduled argument.)
- The policy specified “agreed value” as the basis of valuation. (Chip’s Note—The “agreed value” is often to prevent any question of co-insurance or underinsurance and has nothing to do if it is blanket.)
The Court’s Decision
Finding the policy language ambiguous, the court determined that material issues of fact existed regarding the parties’ intent. The court noted that adopting either interpretation would require ignoring certain policy provisions, but it was not ripe for summary judgment.
This highlights a crucial lesson that does not often arise: When policy language is unclear, courts may look to industry customs and external evidence to determine the parties’ intent and the coverage provided.
Practical Takeaways
For policyholders and their advocates, this case offers important lessons. First, review policy language carefully for clear statements about the coverage type. Second, look at the underwriting and materials from the agent about discussions of coverage expectations during policy placement because they often indicate if the policy was intended to be on a blanket basis. Third, blanket coverage often exists despite the policy having a schedule because the schedule is needed to identify what is covered and is often needed to determine the deductible. Many wrongly assume that a blanket policy that refers to schedules is no longer a blanket policy.
The distinction between blanket and scheduled coverage can mean millions of dollars in claim payments. While blanket policies typically cost a little more, they often provide superior protection and flexibility for businesses with multiple properties or frequently moving equipment.
For those negotiating insurance coverage, being clear about expectations and getting written confirmation of blanket coverage can help avoid costly disputes later. Remember, the goal is to have certainty about coverage before a loss occurs, not to litigate it afterward.
This case reminds us that even seemingly straightforward policy interpretations can become complex legal battles. As always, careful attention to policy language and documentation of coverage intentions during placement is your best protection against future coverage disputes.
For those interested in this topic, I wrote Blanket or Specific Coverage: Which One Do You Have? We also analyzed deductibles under blanket policies in How Many Deductibles? Proper Application Of Deductible Under A Blanket Policy On Commercial Properties.
Thought For The Day
“Adding CO2 to the air is like throwing another blanket on the bed.”
—James Hansen
1 Expert Oil & Gas v. HDI Global Specialty SE, No. 22-3121, 2024 WL 4512354 (E.D. La. Oct. 17, 2024).
