Exclusions

Bad Exclusions, Trial Lawyers, and Big I Advocacy

Sometimes we come across policy exclusions that shouldn’t be there but, due to human error, they’re there. If such inappropriate exclusions are used to deny a claim, what should be done? One view is to sue, sue, sue those greedy insurance companies. Another view is resolve the problem without litigation and work to change the contract language. The following is a recent real-life example of how this works.

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Commercial Property Coverage for Public Water Main Breaks

In July 2015, on the campus of UCLA, a 30-inch water main had some sort of catastrophic failure, causing a massive geyser of water, estimated to be around 30-feet high, to erupt from under the road. Over 20,000,000 gallons of water gushed into campus buildings and lower levels of parking decks, stranding over 1,000 cars. The newly renovated Pauley Pavilion suffered significant damage, where over an inch of water covered the famous basketball court. So, is there any commercial property coverage or is this excluded as “surface water”?

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Coverage for Property Damage Caused by Toilet Overflow

A toilet overflows in a 4-story frame condo building and causes damage to structural components on all floors. Does the ISO CP 10 30 Special Causes of Loss cover this? What about their BOP policy? Would an ISO HO-3 cover a similar loss in a home?

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CP Coverage for Docks

A dock is damaged by a covered peril but the carrier denies the claim, citing the “piers, wharves, docks” exclusion. You argue that his language applies to permanent docks, not portable docks like the one damaged. Who’s right and, if the insurer is correct, is there a solution for this coverage gap?

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Squirrely Building Damage Claim

A squirrel entered a community center building that had just undergone a $2 million renovation. It either gnawed some wiring or otherwise came in contact with the electrical system, causing a major power surge. Three newly installed HVAC systems were severely damaged, along with parts of the boiler system. Estimated damage was $300,000. Is this covered by the ISO CP 10 30 Special Causes of Loss form? What about ISO’s HO-3 policy?

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Insurance and Meth Labs

One of the worst scourges of the drug scene involves methamphetamines. Because the drugs are so inexpensive, increasing numbers of teens and others are becoming addicted. Because the drugs are so easy to make from over-the-counter pharmacy products, meth labs are springing up all over the country, from urban to rural areas. The labs can also be dangerous to operate. If property is damaged, is there insurance coverage?

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Roof Hail Damage and Defective Materials

A 10-year-old condo association building suffered hail damage during a storm. The adjuster claims that there is minimal damage from the hail and that most of the damage is due to 'defective shingles.' According to the shingle manufacturer, it is possible that the shingles are from a 'bad' batch. The adjuster is citing the CP 10 30 exclusion that says, 'We will not pay for...faulty, inadequate, or defective...workmanship, construction, materials, etc.' Do you agree?

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The "Wear & Tear" Exclusion

If the volume of 'Ask an Expert' questions we get is any indication, the 'wear and tear' exclusion in auto and property policies–both personal and commercial lines–is one of the most misunderstood in insurance. Unlike the mechanical breakdown exclusion which can be subject to varying interpretations, this one is pretty clear. So, why is it so often misinterpreted?

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Weather and Off-Premises Power Failure

A 17-store chain of restaurants were shut down recently by Hurricane Charley. Direct property damage was actually minor at all locations; however, an area-wide power outage resulted in several of them being closed for business for 5-7 days. The agent thinks they should have coverage for the loss of refrigerated property and the loss of income because the outage was caused by windstorm, a covered peril. When will they ever learn?

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