Understanding the Known-Loss Doctrine in Insurance Law
Definition & Meaning
The known-loss doctrine is a principle in insurance law that prevents individuals from obtaining insurance coverage for losses they are already aware of or that are highly likely to occur. Essentially, if a person knows about a loss or has a strong reason to believe it will happen, they cannot insure against that loss. This doctrine aims to ensure that insurance is used as a protective measure for unforeseen risks rather than as a financial safety net for known issues.
Legal Use & context
The known-loss doctrine is primarily used in civil law, particularly in insurance disputes. It is relevant in cases where an insured party seeks to claim coverage for a loss they were already aware of at the time of obtaining the insurance policy. Users can manage related forms and procedures through resources like US Legal Forms, which provide templates for insurance claims and disputes.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner discovers a significant leak in their roof but decides to purchase a homeowner's insurance policy to cover potential water damage. If they later file a claim for the water damage, the insurance company may deny the claim based on the known-loss doctrine.
Example 2: A business owner is aware that a major piece of equipment is failing and then tries to insure it. If the equipment breaks down, the claim may be denied due to the known-loss doctrine. (hypothetical example)