Dec Page

The question of the month deals with subrogation. Subrogation is a means by which the insurer steps into the shoes of the insured by collecting from an entity that is responsible for a loss, the money the insurer has paid to an insured. This process can be open to many questions and interpretations. For answers to these questions and for more information on the subrogation process, along with court rulings on the matter, link onto the designated article in the FC&S Bulletins.

The Dec Page also presents court cases on various subjects. A U.S. District Court in Illinois takes on the issue of whether an insured's making a mistake and demolishing the wrong building is an accident that would be covered by a general liability policy. An appeals court in Washington decides whether the exclusive remedy of workers compensation applies after an employee is injured in a mixed-use parking area while on his way to work. The meaning of the use of an auto is the subject of a case from Indiana : is a passenger using a vehicle when the vehicle is involved in an at-fault accident? And finally, an exclusion pertaining to uninsured motorists coverage is stacked up against public policy that strongly supports the purchase of uninsured motorists insurance. A Federal Court of

Appeals in Pennsylvania decides whether the UM exclusion is voided by the public policy of the state.

Finally, a report on the use of the Internet to buy insurance is noted. Is the Internet being used to actually purchase insurance or is it merely a place to research price? Are insurers and insureds eagerly accepting the Internet as a transaction conduit? The noted report is informative.

Questions and Answers

The standard homeowners forms exclude coverage for “bodily injury to an insured.” Does the exclusion apply, though, when a third party attempts to seek contribution because of bodily injury to an insured? See Bodily Injury to an Insured. A homeowner's sewer line leaks, causing sidewalk and roadway damage. Is there coverage? See Water Leakage Causes Covered Damage?.

An absent homeowner returns home to discover his pipes have frozen and burst, and there is both water and mold damage. See Mold and Frozen Pipes.

The ISO builders risk form states that coverage will end ninety days after construction is complete. See Builders Risk Coverage and the Meaning of “Completion” for a discussion of this condition. A worker is injured when returning to his place of origin after dropping off cargo. Is there coverage? See Workers Compensation and the “Going and Coming” Rule. 

An insured replaces his destroyed building with a more costly one. See Replacement Cost Coverage and Insurer's Rights.

AAIS Computer Coverage

The American Association of Insurance Services (AAIS) has developed a form (IM 72 03 10 04) that can be used to insure a business's computer hardware, including mainframe, personal computers, laptops, and hand-held devices, as well as its software—both pre-packaged and developed in-house. The coverage form includes coverage for extra expense. Coverage extensions include coverage for: debris removal; electrical and power supply disturbance; and emergency removal. Supplemental coverages include coverage for: new hardware and acquired locations; pollutant clean-up and removal; and property in transit and off-site.

Endorsements can be attached to broaden the coverage, among them business income, earthquake, flood, and backup of sewer and drain, and Web site server, including Web site server interruption. See AAIS Business Computer Coverage for a discussion of this form and endorsements.

Manifest Intent

Many crime coverage forms and fidelity bonds cover theft of property because of an employee's dishonest act. The forms often state that the act must be carried out with the employee's “manifest intent” to cause the insured to suffer a direct financial loss, and with the employee obtaining financial gain. Three elements, therefore, must be present to establish a claim.

As seemingly clear as these elements are, they have resulted in confusion. What happens if an employee acts dishonestly with the hope his or her employer will benefit? Is “direct loss” the same as “proximate loss”? And, most problematic, what is the meaning of “manifest intent”?

For a discussion, including legal thinking on these terms, see Employee Dishonesty: Direct Loss, Financial Gain, and Manifest Intent.