The question of the month deals with theft claims based on the shortage of an insured's physical property as determined by an inventory computation. The main problem here is establishing the cause of the shortage without depending solely on the use of inventory computations because the commercial crime policy excludes coverage for a loss that can be shown only by such computations.

The inventory shortages exclusion came into use in the 1950s and was designed to protect the insurer from claims based on mistakes or falsified computations in claims involving employee fidelity policies. Today, there are many differing interpretations of the inventory shortage exclusion, with some courts strictly applying the exclusion and others being more liberal in their interpretation. For more knowledge of the inventory shortages exclusion and a review of the differing judicial interpretations of the exclusion, see the designated article in the Bulletins.

One of the issues reported in the court cases this month deals with the timing of property damage. An appeals court in Washington had to decide when property damage occurred in order to rule whether or not the insurance policy in question was in force; the loss occurred over a period of ten years. A circuit court in Texas was faced with the question of whether carbon monoxide constitutes a pollutant and if so, did it discharge, disperse, release, or seep into a residence. The alleged dispersal of carbon monoxide into an apartment led to a claim of health difficulties for a newborn baby. Another case dealt with workers compensation and the costs of

OSHA-required prophylactic testing. A healthcare employee was splattered in the face and eyes with blood in the course of employment and the Kentucky Supreme Court had to decide if this was a compensable injury, that is, whether the employee was entitled to reasonable and necessary medical treatment that included future health tests. And, the final court case presents a ruling from a court of appeals in Ohio on the Telephone Consumer Protection Act (TCPA). The court there has added its voice to the continuing coverage disputes about whether the CGL form applies to claims based on alleged violations of the TCPA.

Questions and Answers

Is an attached trailer always covered under a business auto policy regardless of its size and ownership as long as it is being pulled by a covered auto? See BAP Coverage for Attached Trailer. The insured accidentally damages a door to a garage that he rents. Does the BAP exclude coverage for the property damage claim because of the care, custody, or control exclusion? See Care, Custody or Control Exclusion and BAP Coverage. 

The insured is a snowplow contractor. He has a general liability policy and an auto policy. If he causes property damage with his snow plow, would he have coverage for the claim under the BAP or the CGL form? See Snow Plowing, Completed Operations, and Auto Coverage. Under the CGL med pay coverage, is there a contractual obligation between the insurer and the claimant to pay out the med pay limit? See Med Pay Coverage Obligation to Claimant. 

Regulation of Rating Laws

Each state regulates insurers' rates in different ways. A state-by-state summary of insurance rating laws with statutory citations is provided in FC&S this month. See Regulation of Rating Laws.

Uninsured Motorists Requirements

Just as the various states have different requirements for automobile liability coverage, they also have different requirements concerning uninsured motorists (UM) coverage. This month's FC&S issue provides an examination of each state's UM laws. See Uninsured Motorists Requirements.

Capitalization Requirements

Before an insurer enters a state as an admitted company, capitalization requirements must be met. This month's FC&S issue provides an update of each state's capitalization and additional surplus requirements. See Capitalization Requirements.