Business Property Policy Exclusions

When an insurance attorney gets a new client on an insurance related claim, one of the first things he wants, is a copy of the policy to read.  And when he reads the policy, he wants to know what the exclusions are that are in the policy.

The basic form and broad form business policy contains exclusions.  In fact, the many pages of an insurance policy are, when read, pages explaining what is excluded or limitations on what will be paid.  Sample exclusions on the broad form are:

  1.  Ordinance or law — When a building is not in compliance or conformity with local building codes or laws and must be rebuilt or replaced, local laws require that the new structure conform to current requirements.  Because ordinance or law exposures are not anticipated by basic premium rates, the cause of loss forms contain an ordinance or law exclusion, which excludes any part of a loss resulting from the enforcement of any ordinance or law regulating the construction or repair of property.  This is discussed in the 1962, Texas Supreme Court opinion styled, Employers Mutual Casualty Co. of Des Moines v. Nelson.
  2.  Earth Movement — For example, one Texas court has held compaction of soil due to drying, which caused settling of the insured’s building foundation which led to movement of several walls and the eventual collapse of the roof, was not “earth movement” within the meaning of the policy exclusion.  This was the 1986, Corpus Christi Court of Appeals opinion styled, Jones v. St. Paul Insurance Co.
  3.  Government action — In some instances, firefighters, police, or other government officials must take control of an insured’s property to protect others from anticipated harm.  The government’s confiscation of contaminated property or destruction of property to prevent the spread of a wild fire are examples of government action excluded under both the Basic Form and Broad Farm policy.
  4.  Water — This exclusion precludes coverage for flood type losses.  An insured desiring such coverage must separately purchase flood insurance.
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