December 2010 Dec Page

Question of the Month

Property coverage forms commonly contain exclusions for loss caused by governmental destruction, confiscation, or seizure of property. However, a denial of coverage based on these exclusions is not automatic. For example, some property forms, such as the commercial property forms and the ISO homeowners policy, mitigate the effects of the exclusions by stating that actions taken by the government to stop the spread of fire fall outside the scope of the exclusions. Moreover, the exclusions, as is usual, are subject to judicial interpretation.

Since the governmental action exclusion is not ironclad, how can the insured know when a loss due to governmental authority is covered by his property policy? The best way is through an examination of the case law on the subject. The Governmental Action article discusses the application of the exclusion as found in various court cases. For the most part, courts have upheld the exclusion, but the courts also rein in an overly-broad reading of the exclusion to make its application more reasonable. This article examines the exclusion and its interpretation in different jurisdictions based on the language in both commercial and personal lines policies.

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