| When reviewing policies,
clients often express surprise that a particular activity
or item is excluded from coverage. “But that happens
all the time in my business! How could that not be
covered?” Contrary to popular opinion, exclusions aren't
created just to avoid paying claims. In fact, of the
three major purposes for exclusions, only one refers
to “uninsurable” situations. The other two might better
be seen as attempts to provide coverages in the most
efficient and economical manner. The three purposes
are “covered elsewhere; coverable only by extra cost
or modification; or uninsurable.”
- “Covered elsewhere” focuses primarily on efficiency.
These exclusions are added to policies when another
policy is intended to cover the specific item or
activity. For example, automobiles are excluded under
general liability forms because the liability for
operating autos is properly addressed by automobile
policies. The efficiency arises from minimizing duplication
of coverages — just get it right in the proper policy
and there's no need for other policies to step in.
- A key goal of “covered only by extra cost or modification” exclusions
is keeping coverage economical. Items and activities
eliminated by this group of exclusions are those
not typically associated with most insureds. Why
charge everyone to include coverage pertinent to
only a few? If you need the coverage, you can add
the endorsement and pay the extra premium, while
allowing others to forgo the added expense.
- “Uninsurable” actually represents the smallest
number of exclusions. These are items and operations
(such as intentional damage, warfare, or nuclear
activities) that are either considered so dangerous
as to be insurable only through special programs
(nuclear) or governmental authorities (warfare),
or so clearly not intended to be covered by insurance
(intentional damage) that who could argue?
Next time you find an exclusion in your coverage that
you're not sure you want to live with, don't automatically
assume that it falls into the third category. Give
us a call. In most cases, we'll be happy to point out
where it's already covered or what would be involved
in adding it to your policy. If there's no way to provide
the coverage, we'll tell you that, too. When it comes
to us, good advice to our clients is never excluded. |
