Friday, July 5, 2013


Insurance won’t pay

The local news is reporting that illegal fireworks caused a fire that damaged more than a million dollars worth of boats.

Given the location, that probably is a conservative estimate; “several” millions might be more accurate.

It’s almost assured that the owner of the illegal fireworks will be identified.

Likewise, it almost is assured that the folks whose boats when up in flames will want to be compensated. If not the owners, than the owner’s insurance companies that paid on the boat owners’ claims.

The person who had the U>illegal fireworks is on the hook for the damages.

That person’s insurance won’t pay if – as most policies do – it included a statement that the insurance company is NOT liable for illegal actions.

The ERM-BC-COOP connection: If something goes awry and if there is anything that can be construed as “illegal,” and if the policy has the standard “if it’s illegal” opt out statement, the insurer may refuse to pay the claim.

The first type insurance that comes to mind if Board & Officer (B&O) coverage.

If the Board or Officers do something illegal and are taken to court, the insurer may refuse to pay to defend the people accused of the illegal activity. Alternatively, it might pay legal fees, but if the charged are found guilty, the insurer will sue to recover its money.

Reading, and publicizing an insurance policy’s “small print” might go a long way to reducing the temptation to so something that might be considered illegal. Having a policy in place that tells all personnel – from the board room to the mail room – that if any illegal action occurs, the perpetrators will have to pay any legal fees and penalties out of their own pockets might help prevent transgressions before they occur.

Illegal actions are just one of the reasons an insurer will refuse to pay.

If, for example, chemicals – even simple cleaning products – are improperly stored and this can be determined to have led to a mishap, the insurance company may balk at covering any damages.

Insurance companies should be considered as an ERM resource; their expertise based on experience is a valuable asset then ferreting out potential threats to “business as usual.”

Insurance adjusters also are an ERM resource; being independent, they can help translate insurance terminology and finely examine policy limitations.

If I wrote it, you may quote it.

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