The Possibility of Creation by Insureds for Already Existing Contracts

Michael Sean Quinn*

It is sometimes said that new components of an already existing insurance policy–a contract of insurance–cannot be “created.”  It is worth thinking about this pithy but obscure proposition.  It is also worth dividing the discussion between insureds and carriers.  This one will be about insureds, and the next one on this topic will concern carriers.

The word “creation” has more than one meaning:

  • No one thinks that insureds cannot be involved in creating new contracts or alternations in existing contracts, when it has the consent of the insurer.
  • This obvious truth pertains to modifying creations, as well. 
  • A more interesting issue involves whether an insured can create new coverage if the insurer does not oppose it, after it has already been tried.  This blog will focus on more interesting problems.

Here they begin:

  • One can create new works of art, new architectural designs, ideas, words, and so forth.  The point about contracts is that a party cannot create anything new.  Everything that exists, is already there. So the idea might go. 
  • There is a problem with that argument. There is such a thing as a triptych.  The original artist  may have finished only two parts, so a third artist–or maybe more–does the remaining part(s). The last creation may improve the whole.rror may improve the whole creation.
  • The same idea can be applied to art forgeries, though this idea is less attractive.  
  • Of course, the anti-creation “rule”, if it is one, does not mean that a party to a contract cannot realize and discover new dimensions to an already existing contract.  This is obviously true with respect to individually created, thoroughly negotiated, nonstandard contracts, or at least with respect to their nonstandard portions, if any.
  • In a way, a new meaning is created and exported into the already existing contract, and a new whole is created.  Everyone may be happy about this. In the alternative, only the creator is happy, but the other party may admit a helpful contribution with that the creator. . . . 

  • Maybe the creation of a new life is a bit like this. 
  • Usually insurance contracts are not of this sort; usually they are at east “95% standard.”  Nevertheless,  insureds discover–often by considering the meanings of various different words and phrases–unintended and unexpected meanings.  With regard to this matter, there is a sense in which the “inventive” insured, or the insured oriented to “innovation,” may be said to have created a new component in a contract of insurance.  Arguments against such conclusions invariably proceed on the basis of the no-creation principle.
  • This type of creation can happen are a result of focusing on ambiguities, vagueness, inconsistencies, or propositions that are very difficult to understand.  Ignorance or ill-informativeness–on the part of adjusters–may help with this.  So may the poor education of adjusters as to the contents of a policy.
  • There is a difference between actual creation, and an alleged creator winning a so-called “Argument Regarding Creation.” 
  • The most likely analogy if God in Genesis.  He is said to have created the heavens and the earth, etc.  At least the first two of these involve creating something out of nothing.  Of course, this analogy, while neat looking, won’t work. God was dealing with nothing–nothing at all. This fact–to the extent that it is a fact–is that which makes what happens truly miraculous, and breathtakingly so.  The anti-creation “axiom,” as I heard it in a deposition last week, is not anywhere in the same catagory as God’s accomplishment. 
  • That fact is obvious enough.  Nonetheless, one of the rhetorical undertones of the “You cannot create arguments” is that you are not God.”  Or, “Who do you think you are?”  It’s as though you think you can create new beings and fit them into the already created.”  “You are an arrogant SoS.”
  • Another version of the anti-creation “axiom” is like some of the others, but it also stands for the proposition that the meanings of existing terms cannot be changed.  This view is simply the idea that no new meanings can be inserted into–or on to–the words in a contract.  This is really an idea of “original fixedness.”  Some contract wording has lasted over 100 years.  Maybe there should be some changes every 50 years.

The actual idea seems to go something like this.  An insured cannot create a new idea and then place it into an existing contract, where the creation is actually inconsistent with the real fundamentals of the existing contract.  Inconsistency may come from out-and-out explicit contradictions, and, it  may include contract silences.  Of course, creation regards expansions of the insurance contract.  It does not involve contractions, as an empirical matter, though such a thing is theoretically possible. 

One of the things wrong with this “Anti-Creation Proposition,” is that it  has been recognized that some conditions, for example, can be changed by courts in significant ways.  After all, some already have.  The stringent requirement of timely notice has been pushed aside for almost all insurance policies is an example.

It is significant to the “axiom” “Insureds cannot create new coverages in aready existing contracts to which they are parties”–and this is a better formulation than others–is virtually always challeged to this of which I have heard are formulated, argued for, and “pushed,” by insurers that are parties to the contract at issue.  The challenges always, so far as I know, increase the insurer’s liabiality.

It must be admitted that others can raise “You cannot create new coverage” arguments.  The only ones I can think of now are reinsurers, excess insurers up the stack, and regulators of various sorts.  This context is not a direct application of the principle. It is a complaint to and then about the insurer having failed to apply the “Anti-Creation Rulee” with sufficiently good arguments or with enough vigor.  There will be a cause of action here–maybe for tegligence  and/or maybe for breach of contract.

Michael Sean Quinn, Ph.D., J.D., C.P.C.U. . . .
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