| 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 |
