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IN INSURANCE, ONE WORD CAN MAKE ALL THE DIFFERENCE

Why review a policy?

A policy is a policy; they are all boiler plate, right?

Wrong!

There are many boilerplate and standardized policies issued, and knowledge of those forms helps us understand a baseline, but there are deviations, and these can be critical.

Consider the following:

Standard form:

CG 00 01 04 13 © Insurance Services Office, Inc., 2012
“This insurance does not apply to: Bodily injury or property damage expected or intended from the standpoint of the insured.”
Most readers would see no problem with this exclusion – if you intended to injure someone that’s not a logical subject for insurance. We would agree.

Now consider this one in a non-standard policy

“We will have no obligation to pay any sums under this Coverage Part, including any damages or claim expenses, for any claim for: bodily injury or property damage expected or intended from the standpoint of any insured.”

It’s a lot longer, which could be a clue that there is something amiss, but after you parse out the difference between the introductory clause which establishes that this is an exclusion, you likely conclude that they say the same thing:

— expected or intended from the standpoint of the insured.

— expected or intended from the standpoint of any insured.

It would be easy to miss the one- word difference – the standard version says “the” and the non-standard says “any” – it seems a minor difference, but consider the following case:

You run a restaurant, one of your waiters assaults a patron, hitting him over the head with a tray (guy was a bad tipper). The act is clearly intentional on the part of your waiter, but the patron will pursue a case against both you and the waiter.
Under the standard wording there is an intentional act by “an insured” (your employee), but not an intentional act by the restaurant owner. Coverage would apply for the benefit of “the insured” who did not intend the act. Thus, the owner, and the restaurant, would have defense, and the waiter would not.
Under the non-standard wording, the restaurant owner could lose defense, because the bodily injury was expected from the standpoint of “any insured.”

The principle in operation here is severability.  There are exclusions that may be valid for the guilty party, but should not be operable for the innocent parties including in most cases the company as well.

Tiny word differences matter – and you need a trained eye to find them.

Abby Krueger

Aug 26, 2018

Licata Risk Licata Risk & Insurance Advisors, Inc.
137 South Street, Second Floor
Boston, MA 02111-2848
617-451-2140     [email protected]
LicataRisk Advisors is an independent risk management and insurance consulting firm. We are not brokers and we do not sell insurance. We are not connected to any insurance company or product in any way and do not receive commissions. This is an important difference as you will have an expert on your side who is only committed to you.