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Sunday, March 16, 2014

Phone Insurance and Fine Print

An article in the LA Times explains how one customer's claim for insurance from AT&T Mobile Insurance resulted in nothing but headache and a lighter wallet.

A new iPhone 5s can cost a couple of hundred dollars so Marianna Yarovskaya thought it was a good idea to purchase phone insurance.  Yarovskaya purchased the insurance from AT&T Mobile Insurance for $6.99 a month so that if her phone was lost, stolen or damaged, she could get a replacement.  But she didn't read the very fine print - and even if she had, she probably wouldn't have understood what it meant.

While on an overseas trip, her iPhone was stolen and she submitted a claim to Asurion, AT&T's partner and insurance provider.  Asurion explained that because she enrolled on the trip while she was outside of  AT&T's network (she was in Indonesia) she wasn't covered under the plan. 

There are a few sneaky things about this provision and Asurion's use of it.  First, it seems that if you are going to exclude coverage for those outside a territory, that you should not permit them to sign up while they are outside that territory.  You might reasonably assume that if a company is allowing you to purchase insurance while you are out-of-network, that they will cover you as of that time.  Remember, we are talking about replacing a phone, not providing coverage.

The second sneaky thing is that the exclusion was emailed to her after she had signed up for coverage, aka a "rolling contract."  I'm not necessarily against emailed terms after a transaction - but the type of terms really matters.  If they addressed issues that the consumer should expect, then no problem.  For example, an acceptable exclusion for damage coverage might be intentional misuse.  But this exclusion undermines the very purpose of the insurance.

The third sneaky thing was that the exclusion was buried on page eight of the nine pages emailed to the consumer.  Not conspicuous at all.

Furthermore, David Lazarus points out that the exclusion was not contained in the section on "eligibility," which a consumer might read, but in the "definitions" section. 

Finally, even if she had read the terms all the way through to the page 8 definitions, it's doubtful that she would have understood the meaning of "covered property" as "actively registered on the service provider's network and for which airtime has been logged after enrollment," to mean that she had to use the phone on the carrier's network after coverage before that phone would be considered covered. 

Don't get me wrong - I think I understand the reason for the exclusion.  AT&T probably wants to guard against opportunistic consumers who might purchase the insurance after losing their phone.  But it seems there are much better and more consumer friendly ways to do this. In this case, they could have called her to verify the phone was still in her posssession (or asked her to call) before activating her insurance account and charging her.  It seems that the burden should be on the insurer to verify that the insured is eligible, not the other way around.  It also seems irksome to use a fine print provision that will always work against the consumer in this situation than instituting some corporate policy (like calling the consumer as part of initiating coverage) that would weed out opportunistic consumers from good faith ones that are seeking coverage.

My guess is that Yarovskaya is unlikely to sue over this contract becaues the dollar amount is too low to warrant legal fees.  Furthermore, there's probably a mandatory arbitration clause and a class action waiver that would create procedural hurdles.  Bottom line?  It will require more vigilance to understand AT&T Mobile's Insurance contract than it will be to just guard your phone more carefully when traveling.

 

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