A recent decision confirms that failure to read the fine print is not a valid defense. The Mississippi Supreme Court recently ruled that the owner of two nursing homes was required to pay a $1.25 million deductible despite claiming it was unaware of the high deductible. The insurance policy issued by Lloyd’s of London contained a $250,000 per-claim deductible. Since the nursing homes were named in five separate professional liability suits, and each of which was considered a separate “claim,” the policyholder was forced to pay a $1.25 million deductible.
The owner of the nursing homes, Southern Healthcare Services, Inc., sued Lloyd’s claiming it breached the insurance contract by requiring it to pay the high deductible. Southern Healthcare argued that it was excused from paying the deductible because it was unaware that the policy’s deductible was $250,000 per-claim. Moreover, Southern Healthcare attempted to steer blame to its insurance agent for failing to explain the per-claim requirement. The Mississippi Supreme Court rejected Southern Healthcare’s arguments and found it was obligated to pay in full. According to the Court, “the failure to read the policy is not a valid reason for not knowing its contents.”
Granted, the application of these principles may differ from state-to-state depending on the particular insurance and consumer laws. Nonetheless, the decision serves as an important reminder to all: read your insurance policy! A party is expected to have read and to understand the terms and conditions included in an applicable insurance policy. Ignorance of the terms contained in a policy is not a valid excuse. Along these lines, insurance agents and brokers should familiarize themselves with the applicable language and take steps to confirm that the purchaser of the policy understands the key terms and conditions. It is likely that Southern Healthcare will consider a malpractice claim against its insurance professional in light of the $1.25 million payout to Lloyd’s.