If you’re an insurance coverage nerd like me, then you likely have a love-hate relationship with following form policies. They can make a policy straightforward—or unwieldy.
First—for our readers who don’t geek out over reading insurance policies—here’s a quick primer:
A following form policy is a policy that piggybacks off other insurance policies in a coverage program by adopting some of their terms, provisions, and/or definitions.
On one hand, who would complain about having fewer pages to read, clauses to analyze, and definitions to decipher? On the other, these policies are short because they are adopting the terms of (“following form to”) other policies. A following form policy can only be fully understood in the context of all the language it picks up from the other policy.
The challenge is when a policy follows form to several different policies that may, in turn, follow form to still others. You may need to check three or more policies to understand a single defined term. When you multiply that out over many years in a large corporate insurance program, you have an unwieldy problem.
KCIC often partners with coverage counsel in their efforts to sort through such policies. We’ve found that most attorneys opt to focus on as few policy terms as possible for the sake of efficiency. Over the years, we’ve devised several ways to use technology to allow for a broader view of the policies and terms.
For example, one solution we’ve implemented is to store these follows form connections between policies as data points in our policy database. We have been turning policy language into data points for years and thought: Why not do the same with follows form connections?
When we review a coverage program and are coding specific language and provisions, we code which policies have follow form language and which policies are being followed. This is an important first step in any follows form analysis so that questions can be answered. For example: What policies might I need to examine for new exclusions that will impact a policy I am focused on? Storing policies that will need to be reviewed for follows form purposes creates a link in the database between the language and provisions of all the relevant policies.
One of the advantages of using databases for our policy data is that, if rules are clearly defined, they can be modeled programmatically. Having linked our policies together, we can now program rules to fill out the follows form analysis. For example, we could undertake a conservative analysis to update the provision coding to assume that if a policy is following form of any policies that have a key exclusion, then the following form policy also adopts that exclusion. For ease of understanding and explanation, we can then show that change using a key and colors on a coverage chart. The impact of that exclusion can then be modeled through allocations. As an alternative, we could examine the impact of assuming that the policy does not pick up the exclusion unless all its follows form policies have it, again showing the results on a coverage chart. Viewing these charts side by side can be very informative.
Experienced coverage attorneys on both sides of the aisle have been analyzing insurance policies for decades, but the tools available to do so today are much more advanced and will continue to evolve.
As someone who knows how time intensive it is to really figure out the follows form puzzle, I certainly enjoy using technology to work through these complications in a more streamlined manner.
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Nick Sochurek has extensive experience in leading complex insurance policy reviews and analysis for a variety of corporate policyholders using relational database technology.Learn More About Nicholas