Q
Our insured runs a travel agency. He booked two separate trips, back-to-back, for a client. The insured included travel insurance on the first trip, but neglected to add it to the second trip. The client became ill and incurred unexpected living and medical expenses. When the client wanted our insured to pay for these expenses, the insured submitted the claim to the professional liability insurer.
The adjuster denied the claim based on exclusion Q which reads as follows: this policy does not apply to any liability arising out of or contributed to by the co-mingling of money or the inability or failure to pay or collect any money for any reason, including insolvency, receivership, bankruptcy, liquidation, or unauthorized or illegal credit card transactions. The adjuster said that there was a failure to pay by the insured and so, the exclusion applies. We say that the insured did not fail to pay money, but that he failed to book the correct coverage.
What is your opinion?
Florida Subscriber
A
The adjuster is misreading the exclusion. The insured negligently failed to order travel insurance; he did not fail to pay money. It is not as if the insured booked the coverage and then failed to pay for it. He did not ask for the coverage, no charge was made, and there is no failure to pay. Liability insurance coverage is based on the insured being liable for causing some injury to another party. The reason the insured is held liable is that he proximately caused the injury. Proximate cause is that which in a natural and continuous sequence unbroken by any intervening cause produces injury and without which the result would not have occurred. In this case, the proximate cause of the injury was not ordering travel insurance; it was not a failure to pay for the travel insurance.
Also, the items listed in the exclusion seem to be intentional acts or acts forced on an insured by outside forces. Negligently forgetting to order travel insurance does not seem to us to belong in the same category as the reasons listed in the exclusion. Exclusions are meant to be read narrowly, and should not be expanded beyond their reasonable range.
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