Last month, I posted the description of a hypothetical incident involving a simple game of Pokémon Go – a game which turned into a catastrophic jumble of tangled interactions, torts, and general chaos. I asked what sense could be made of all this from a risk and insurance standpoint. If you’d like, go ahead and read (or re-read) the prior post before continuing. I’ll wait…
You back? Great! Let’s proceed.
This scenario – which could probably serve as a case study exam question in an insurance and risk management class, or even a law school torts class – is infested with specific issues involving risks and insurance policy forms. But there are also some larger and more general takeaways, as I’ll mention momentarily.
First, some brief and incomplete comments on the insurance specifics. I applaud the nice set of comments posted by Ms. Yardas (hi Theresa!), summarizing how various insurance policies might respond to each type of claim emerging from the scenario. Indeed, some of the key policies that might respond to this situation include, for example:
- Health or medical insurance. This is a “first-party” insurance coverage, in which the policyholder’s own insurer responds with coverage for injury to the insured, regardless of whether or not a “third party” is liable. In our Pokémon hypothetical, medical expenses associated with your broken ankle, the car driver’s broken wrist, and the pedestrian’s dog bite would likely each be covered by that person’s own medical insurance.
- Homeowners insurance. A homeowners (HO) insurance policy has two sections, a property section to protect against damage to the home structure, possessions, and land; and a liability section, to cover the homeowner’s legal liability stemming from certain types of risks. In our Pokémon hypothetical, the HO policy of the homeowner on whose property you trespassed would likely cover the damage you inflicted on the landscaping and the window, and might cover the homeowner’s liability for your injury from the loose cobblestone and the pedestrian’s dog bite. Also, if you have an HO policy, it might cover your liability associated with your trespass.
- Auto insurance. Damage to the passing car, as well as any liability ascribed to the driver and/or owner of the passing car, would potentially be covered by an auto insurance policy.
- Personal umbrella insurance. If purchased, this policy generally covers the liability of the policyholder in two ways: coverage above the policy limits associated with the policyholder’s HO and auto policies, and “drop-down” or “gap” coverage for other types of liability not covered by HO and auto policies.
Two points about the above discussion. First, note the use of words such as “might cover” or “likely to cover.” For any insurance policy, certain specific coverages are common, but may not be universal – they depend upon policy wording, and sometimes upon endorsements which may or may not have been purchased and added to a policy. Second, there are several elements of this injury scenario which could potentially be covered by two or more insurance policies. Sometimes a first-party coverage will respond initially, but then, after liability is determined, the liability insurance of the responsible party reimburses the first-party insurer. This process is called subrogation, and it is an important legal aspect of determining who ultimately is responsible for loss payments.
Finally, let me end with a few more general takeaways from a complicated risk and insurance scenario such as this:
- Even in a single incident, there can be many separate but interrelated injuries and damages, multiple responding insurance policies, and questions of ultimate liability for particular damages.
- It is far from easy to apply general legal principles to complicated situations. That’s one reason our legal and judicial systems are so large!
- A good actuary / risk manager can benefit from a good imagination. Things that have happened in the past are not a complete guide to what might happen in the future – one needs some imagination to envision what could happen, and then to evaluate whether you would be covered!