Absolute Exclusion – What It Means
Absolute exclusions are 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.
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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, the inclusion of an absolute exclusion in policies has become more common, and insurers have, with increasing frequency, been using them to deny coverage of claims that would otherwise appear to be covered.
To learn more about how an absolute exclusion can impact your organization’s insurance coverage connect with an ALIGNED Advocate. We can provide expert guidance about insurance and risk management best practices for your organization.
ALIGNED specializes in delivering insurance and risk management solutions exclusively to Canadian businesses. Through our 18 points of differentiation and expertise, we deliver unmatched value to our growing portfolio of clients from all industries that range from small to large organizations. We offer all of the following management liability products:
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