Difference in Conditions (DIC) Policies—Archived Article

October, 2003

A General Discussion

Summary: Difference in Conditions (DIC) policies most commonly are used to provide additional limits of coverage for certain property perils or to fill in coverage for perils that are excluded in standard property policies. They also may be used to supplement international policies that are written by admitted carriers in the applicable foreign countries. The DIC policy form excludes causes of loss that are better insured on other forms, such as standard property policies, boiler and machinery policies, or employee dishonesty bonds. Carriers who write DIC policies use their own proprietary coverage forms, so policy language should be reviewed carefully before a DIC policy is selected.

General Information

There is no standard DIC coverage form. Carriers who are willing to provide the coverage draft their own forms, and some underwriters even may use language that is manuscripted to fit a particular exposure situation. Therefore, policy wording should be carefully reviewed before it is put into place. This lack of an industry standard and various carriers' willingness to manuscript policy language can present both a blessing and a curse to those using DIC forms. The language can be artfully tailored to fit an individual exposure. However, when policy language is manuscripted, those reviewing the policy must be very careful not to overlook new coverage holes that may be created by the very language that was designed to more fully insure the exposure. The form used also must be carefully reviewed in connection with the standard policy forms it complements to be sure that they dovetail properly.

DIC policies usually provide catastrophic coverage for perils that present severe property exposures, such as flood and earthquake. DIC policies also can be used to supplement coverage in operations with unusual transit, burglary, and international exposures. The form is not meant to respond to frequency losses, so high deductibles usually are employed.

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