We have spoken about “contract certainty” before. In the rush to have contract certainty, auditors and regulators have insisted that insurers and reinsurers have documents that contain more language than the “slips” or what might be considered shorthand contracts. While as an attorney, I applaud the intent of contract certainty. Contract certainty requires more than just more words. A poorly drafted contract will not meet the aims of contract certainty.

In a recent case In Re Acceptance Ins. Co. Inc. that was reported in Reinsurance Focus, www.reinsurancefocus.com/, the parties had contracts. While there were a number of issues under consideration by the courts, due to the failure to define all the relevant terms a significant amount of time and money was spent arguing before the courts. Even terms that many in the industry would consider to be almost boilerplate need to be defined. Let us face it, when things are going well, no one will need to look at the thirty or more pages of a reinsurance contract. All the important parts can be written on the “back of a napkin.” It is when a claim is a little outside the norm or a company has run into some financial difficulty that all the pages are looked at with great scrutiny. We should work to ensure that all pages get that scrutiny and are understood by all.