Absolute Exclusion: ALIGNED’s Term of the Day
One word can have many different meanings. That’s why ALIGNED is committed to helping demystify the often complex terms commonly found in business insurance policies. By helping to bring clarity to insurance terms, we’re working to align our understanding of risks, coverages and policies with the needs of Canadian businesses.
Absolute exclusion is today’s term of the day.
The International Risk Management Institute (IRMI) defines “absolute” exclusions as, “exclusions found within certain insurance policy forms, precluding coverage for claims that are remotely—but not directly—related to the actual nature of the exclusion. The effect of such language is to defeat coverage in situations where it could be reasonably expected that coverage would apply.
For example, an absolute exclusion in a policy written to cover insurance agents’ errors and omissions (E&O) exposures might read as follows: “This policy does not apply to any ‘claim’ against the ‘insured’ … based on or directly or indirectly arising out of or relating to any actual or alleged ‘bodily injury.'”
Assume, for example, that an insurance agent failed to secure bodily injury (BI) liability coverage for a client and the client is later held liable for BI. The client then sues the agent for failing to obtain an appropriate insurance policy. Given the wording of the “absolute” exclusion noted above, the agent’s policy may not respond to the claim. This is because the client’s allegation indirectly arose from and was “related to” BI.
In recent years, these “absolute” exclusions have become more common, and insurers have, with increasing frequency, been using them to deny coverage of claims that would otherwise appear to be covered.”1
Absolute Exclusion And Environmental Claims?
According to an article recently published by Claims Canada, a potentially precedent-setting 2014 British Columbia Supreme Court decision may “have an impact on any fire loss claim involving environmental damage.”2 A detailed assessment of the situation and what it might mean for commercial general liability policies that contain an absolute pollution exclusion can be read here.
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An ALIGNED advocate can provide expert advice about absolute exclusions. Talk to one of our advocates today about how we can help you secure the best products, services and insurance solutions for your business.
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