The company for which I work writes a Difference in Conditions (DIC) policy for earthquake and flood. I first encountered DIC policies while working hurricanes Dennis and Katrina. I had been an adjuster 15 years before seeing my first DIC policy. I find that, over and over again, when I assign a claim I first have to explain to the adjuster what a DIC policy is and how to read it for coverage. This applies even with adjusters who have 20+ years of experience. I think we may be seeing more and more of these policies, expecially with regard to Commercial Windstorm coverage. So, I'm wondering how many CADO-ites have worked with these policies and what your experience has been.
For those who have never seen a DIC policy, suffice it to say that this is a different animal. It is technically an All Risk Inland Marine policy designed to cover a single peril (or sometimes two perils as in my company's policies) which is excluded under commercial property policies. So, for instance, if the policy is designed to cover windstorm it will start by stating that it covers all perils not excluded. Then it goes on to attempt to exclude anything else that might possibly happen except the peril it is trying to cover. It is not unusual to have 30 or more excluded causes of loss on a DIC policy. And some of the exclusions may seem highly unlikely. A DIC policy often excludes asteroid strikes, geomagnetic storms, railroad collision, and other unlikely scenarios. Sometimes they even seem to exclude the peril they are insuring against. For instance, a DIC earthquake policy will likely exclude earth movement, but then state that it does not exclude earth movement caused by an earthquake.
The first time I encountered one of these policies I wasted a lot of time analyzing all the property exclusions (there were twenty some kinds of property excluded), then moving on to the excluded causes of loss (more than 25 excluded) and pretty much drove myself nuts trying to make sure the loss was not excluded only to arrive at the end of the policy where windstorm was defined and figured out that, even though an exclusion might apply, that there was coverage after all because it fit the definition of windstorm. Now I begin by telling the adjusters I hire to look at the dec page and see what the policy covers. Then skip over the rest of the policy and determine whether the cause of loss fits the definition of that peril. If it does, then the excluded causes of loss are probably moot. If it does not fit the definition of the covered peril, then look to the exclusions and see if this loss is excluded. It is, after all, an "all-risks not excluded" policy, so the loss might have slipped between the cracks of the exclusions. For instance, I haven't seen one yet that excludes Zombie Apocalypse. I pointed this out to our assistant vice president of DIC Underwriting last week and she told me (tongue in cheek, of course) that she would have to look into fixing that oversight.