By: Josh Johanningmeier | IIAW General Counsel 

On May 21, 2020, in Emer’s Camper Corral v. Alderman, the Wisconsin Supreme Court issued a 6-1 majority opinion confirming a rigorous causation standard for negligent procurement E&O claims.  The Court ultimately found that, in order to prevail on a claim for negligent procurement of an insurance policy, an insured must show that the promised policy was commercially available to them.  While this decision is undoubtedly a win for agents, it is critical that you take care when communicating with clients. 

The Emer’s Camper Corral Case and Decision 

Since 2004, Rhonda Emer and her husband have sold new and used camper trailers under the trade name Camper Corral.  Not long after founding the business, the Emers began purchasing Camper Corral’s insurance through the defendant insurance agency.  Starting in 2007, General Casualty Company of Wisconsin insured Camper Corral.  However, before the commencement of the 2012-13 policy year, General Casualty sent Camper Corral a nonrenewal notice after two consecutive years with at least $100,000 in hail damage claims.  

Following the nonrenewal, the Emers worked with their agent to obtain insurance through Western Heritage Insurance Company.  The 2012-13 policy had a $5,000 deductible for hail damage per camper.  However, the agent told the Emers that, if they could go claim free for two years, he may be able to negotiate the hail damage deductible down to $1,000 per camper.  After two claim free years, the agent contacted the Emers with the news that he had obtained a policy from Western Heritage with a $1,000 deductible per camper for hail damage and a $5,000 aggregate deductible limit.  In reality, the Western Heritage policy the Emers ultimately purchased had a $5,000 deductible per camper for hail damage with no aggregate deductible limit.

In September of 2014, another hail storm swept over the Camper Corral lot.  This storm damaged 25 of the campers in the Emers’ inventory.  Because of the actual terms of the Western Heritage policy, the Emers’ deductible amounted to $125,000.  As a result, the Emers sued the agent for negligence, suggesting he had breached his duty to them by failing to adequately describe the terms of the Western Heritage policy.  For damages, the Emers asked for $120,000, i.e., the difference between their deductible and the $5,000 aggregate deductible they were promised.

The case ultimately went to trial.  However, before the jury could deliberate, the agent moved for a directed verdict, arguing the Emers had not satisfied their evidentiary burden.  The trial court agreed, ruling that, without evidence that the policy promised to the Emers was commercially available to them (and not just generally available in the marketplace), they could not prevail on their negligence claim.  The Wisconsin Court of Appeals affirmed the trial court, and the Emers appealed the case to the Wisconsin Supreme Court.

According to the State Supreme Court, to prevail on their negligence claim against the agent, the Emers needed to prove four well-settled elements: “(1) [the agent’s] duty of care to Camper Corral; (2) [the agent’s] breach of that duty; (3) injury caused by [the agent’s] breach; and (4) actual loss or damage resulting from the injury.”  However, the only issue left for the Supreme Court to decide was the third: causation.

The Wisconsin Supreme Court ultimately held that the Emers had not provided sufficient evidence to satisfy the causation standard.  In their arguments before the Wisconsin Supreme Court, the Emers suggested they only needed to prove that a policy like the one they were promised was commercially available.  The Supreme Court, though, found that was one step short.  Not only did the Emers have to prove that the relevant policy was available in the marketplace, but they also had to show that the policy was commercially available to their business.  Put differently, “[w]hether the unavailability is general, or instead particular to Camper Corral, the policy’s unavailability exists independently of any negligence on behalf of the broker.”  Thus, as the Emers did not show that the policy promised to them by the agent was commercially available to their business, the Supreme Court affirmed the trial court’s directed verdict in the agent’s favor.

Now What? 

This decision is a big win for both insurance agents and E&O carriers defending claims under Wisconsin law.  With the additional burden of having to prove specific availability in negligent procurement cases, agents will see fewer judgments against them and, as a result, fewer lawsuits brought in the first place.  Further, only one Justice dissented in the Camper Corral case.  Thus, even as the makeup of the Court shifts slightly over the next few months, this decision is likely to remain binding precedent well into the future.

With this in mind, you should still see this case as a cautionary tale.  Sure, the case ended with a positive result for both the defendant agent, the E&O carrier and insurance agencies around Wisconsin.  But, it took a full trial and appeals all the way to Wisconsin’s highest court to achieve that result.  It is essential that you take great care when marketing policies to your clients.  Doing so will likely save you the hassle of expensive litigation. 

Conclusion

Ultimately, the Wisconsin Supreme Court’s decision in Emer’s Camper Corral v. Alderman is a huge win for insurance agents and E&O carriers around the state.  This will undoubtedly result in fewer negligent procurement cases brought against agents and stronger defenses in some of the cases and claims that are brought by disappointed insureds.  We will keep an eye on the application of this stringent causation standard—it may well cross Wisconsin’s borders into other states.

By: Roger Sitkins | Chief Executive Officer, Sitkins Group, Inc.

One of the best questions I ever heard came from Andy Stanley, the founder and pastor of North Point Ministries in Atlanta: “What will your story be when it’s time for your story to be told?”

Whenever I’ve asked this question at our senior leadership programs or producer programs, it tends to spur considerable thought. I can see that people are asking themselves, “When the time comes, what is my story going to be?” I think this question applies to you regardless of your role in the agency, whether you’re a leader, a producer, or any other team member.

Although we may not be aware of it, we all are creating stories that someday will be told. Perhaps a better word is “legacy.” What legacy are you going to leave? As I’ve said before, eventually everybody leaves their business.

Granted, most of my readers will be in this business for another 10, 15, or 20 years, if not longer. Why? Because it’s a great business that’s creating opportunities and freedoms that most can only dream of. To seize these opportunities and freedoms, however, you must act! As I’m sure you’ve heard me say in the past, “If you’re going to put the time in anyway, you might as well be great at it.”

So here’s another question: If your agency could talk, what would it say? What would it say today, and what would you like it to say five years from now?

Before you answer that, let me share with you the story of a Best Version Possible (BVP) Agency as it unfolds in my perfect world. It starts with asking “What’s it all about in your agency today?”

The 3 Cs

This is how the BVP Agency responds:

Here at the BVP Agency, we embrace several key themes, the first of which is The 3 Cs:Clarity, Consistency, and Commitment.

Clarity means having a clear view of our vision. It’s what we want and why we want it, based on our understanding of the vision’s purpose and value. In terms of Key Performance Indicators, our agency and all of our team know exactly where we are today, where we want to go over the next three years, and exactly how we are going to get there.

We know the resources and tools we need. We know the personal development plans for each team member. And we know our agreed-upon behaviors and strategies.

We’re all on the same page concerning our business plan. In case you’re wondering how it’s possible for everyone to be on the same page, it’s because our business plan is on one page. Unlike most agencies, we have a single-page summary of our Strategic Business Plan that everyone can rally around.

Further, we believe that direction and destination must match up. Because we have absolute clarity on our desired destination, we have to keep checking to make sure our current direction matches that desired destination. Just like an airplane or a ship at sea, if we get off track just a little bit and “stay the course” without recalibrating, we’ll miss our target by a lot.

Consistency is all about our team members never deviating from our “agency’s way of doing business,” which is quite specific. We have
documented processes and procedures that explain with absolute clarity (there’s that word again!) how things are done in our agency. We know our new business processes in all departments. We know our continuation processes in all departments. (As you know, we don’t renew accounts, we continue relationships.) We know how claims will be handled. We know how all day-to-day transactions will be handled. We know how our technology and automation systems apply to our jobs and how to maximize them.

In all areas, we have identified best practices, which are mutually agreed upon and followed. There is absolute buy-in from all team members. We
accomplish this by asking team members for their input before making any improvements (which is an ongoing process). We know that if they’re
part of the design, they’ll buy in more quickly and enthusiastically.

Commitment holds it all together and starts at the top with our leaders, who are committed to our plans. They’re also committed to continual and never-ending improvement because in our agency, good is never good enough. Our leaders are committed to “over-communication,” which, by the way, can never happen. Most agencies under-communicate, but have you ever seen an agency that communicates too much? (You haven’t, because it doesn’t exist!) Our leaders and our team are committed to our Clients, Colleagues, Carriers, and Communities.

The 4 Cs

We want our Clients to have the absolute best experience that creates raving fans who buy all of their insurance and risk management needs
from our agency. These clients would never think of leaving us, and they love sending us referrals and introductions.

Next, our leaders are committed to all of our Colleagues, our team members. They want to attract and retain the very best. They provide
personal development opportunities for everyone. They truly do provide a “Best Places to Work” atmosphere. It feels like family, because it is!

Further, we’re committed to seeking out the best assortment of Carriers to represent. We want deep partnerships, which is why we don’t represent every carrier out there. We know the 80/20 Rule applies to our carriers, and we believe that less is more. We also are committed to crevice marketing, so we represent carriers that let us specialize, thereby
enabling us to go “narrow and deep” in our marketing.

Our final commitment is to our Communities. They are critically important to us! We live here and work here. We realize how blessed we are, and we want to give back. Although we don’t assist/contribute to 100% of the projects out there, we have a Community Service Committee that helps us identify and select opportunities to support and the ways that we can give back. We’re proud to say that more than 75% of our team members have contributed, whether through time or money, to the community projects we’ve chosen.

Our agency’s overall theme is truly to be our Best Version Possible. It’s a constant work in progress. We’ve simply never allowed “good” to be good enough. And while we’re respectful of our competitors, we believe we’ve become the “category of one” in our marketplace, emerging as the agency that has transcended commoditization and that defies comparison.

We simply don’t want commodity-based clients. If price is the only reason someone comes to us, it will also be the reason they leave us. We’ve raised the bar on everything we do. We’re risk advisors who provide solutions well beyond the simple placement and purchase of insurance products.

We are the feared competition, the point of comparison against which all other agencies are measured.

If your agency could talk, how would it compare to the BVP agency described above, and how do you want it to compare five years from now?

Your BVP is out there waiting for you to arrive. Are you ready for the journey?

The author

Roger Sitkins, chief executive officer of Sitkins Group, Inc., is the nation’s number-one “Agency Results Coach.” He established The Sitkins Network™, a territory-exclusive network of high-performing agencies, and The Better Way Agency, a web-based training program that shows agency owners ways to make significant improvements in all areas of the agency. To learn more, please visit www.sitkins.com.

By: Josh Johanningmeier | IIAW General Counsel

Not since the Thrilla in Manila has a third bout been as eagerly anticipated as the upcoming United States Supreme Court hearing of the latest challenge to Obamacare. Well, perhaps comparing the case to the 1975 finale of the Ali - Frazier rivalry is unfair (to Ali and Frazier), but the case does merit attention. Earlier this month, the Supreme Court agreed to again hear a case concerning the validity of the Affordable Care Act (“ACA”), President Obama’s signature healthcare legislation. If the Court takes this opportunity to overturn the law, the provision of health insurance in this country could fundamentally change. This change would be especially impactful for your business clients. 

Case Background

In 2017, congressional Republicans began their efforts to repeal and replace the ACA. When those efforts failed, Republicans changed tactics and instead, chipped away at one of the act’s most well-known, and unpopular, provisions: the individual mandate. To be clear, Congress did not eliminate the individual mandate itself, but, rather, eliminated the tax penalty for failing to acquire health insurance. President Trump quickly signed this change into law. 

Seeing an opportunity, a group of 20 states brought suit in the United States District Court for the Northern District of Texas, arguing that the entire ACA is invalid because of the changes to the law. In a previous challenge, the Supreme Court upheld the individual mandate as an exercise of Congress’ taxing power. The states challenging the ACA asserted that, with no tax penalty for violations, the individual mandate can no longer fall under Congress’ taxation powers and must be considered unconstitutional as a violation of individual liberty. Going further, the states argued that the individual mandate is a fundamental component of the ACA, and, as a result, the entire law must be overturned. In a December 2018 decision, District Judge Reed O’Connor agreed and ruled the ACA unconstitutional. 

Shortly thereafter, several groups, including Democratic state attorneys general and the House of Representatives, under Democratic control at that point, appealed the decision to the Fifth Circuit Court of Appeals. Given a choice between finding the individual mandate constitutional and overturning the entire law, the Fifth Circuit chose a middle way. The court agreed with Judge O’Connor that the individual mandate is unconstitutional, but sent the case back to the lower court to reconsider if such a holding renders the entire act invalid. The House and the states led by Democratic attorneys general appealed that the decision to the United States Supreme Court, which agreed to hear the case. Based on standard timeframes, the Court will likely issue a decision in spring or summer of 2021. 

Now What? 

Importantly, it is not clear how the Supreme Court will rule on this case. The ACA has come before the Court on two previous occasions, and it has upheld the law both times. While the makeup of the Court has changed significantly in recent years, all five Justices making up the majority in both decisions remain on the Court. However, the law has now changed, and in ways relevant to the Court’s previous opinions. The takeaway: while it is entirely possible the law will be upheld, you and your agencies should be prepared for it to be overturned. 

If the entire law is invalidated, a key impact will be the elimination of the “employer mandate.” As you are likely aware, currently, employers with 50 or more full-time employees, or full-time equivalents, must provide health insurance to 95% of those 

full-time employees and their children that is both affordable and ensures minimum value. Coverage is considered “affordable” if employee contributions do not exceed a specified percentage of that employee’s household income (9.78% in 2020). A plan provides “minimum value” if it pays for at least 60% of covered services (including deductibles, copays and coinsurance). If employers violate their mandate, they face a monetary penalty. 

If the ACA is overturned, however, there will be of course no employer mandate. This will likely result in many of your business clients evaluating changes to their employee health plans. It is critical that you and your agencies work with legal counsel so that you can make informed decisions when it comes time to design plans responsive to your clients’ needs. 

Conclusion

While it is unclear if the Supreme Court will take this opportunity to overturn the ACA, it is crucial to be prepared in the event that it does. Keep an eye on this column and other IIAW publications for developments on this case, and make sure to work with legal counsel to ensure that you and your agencies are able to successfully navigate what could be a complex path forward. 

States have gone to war against some municipalities over COVID-19. Executive orders currently in place in many states still bar certain businesses considered “non-essential” from opening; but some municipalities have told their respective governors they are opening the community regardless.

Governors finding themselves in these situations have undertaken various tactics to prevent these municipalities from carrying through with their reopening plans. North Carolina’s governor told a county that all state funding would be cut if they opened, the county capitulated. Other governors, seemingly out of options, have undertaken a unique and indirect tactic – misrepresenting insurance coverage.

Although this sounds like an odd tactic, the goal is to scare the business owners into remaining closed. If the governors can successfully dissuade the business owners, it doesn’t matter what the city or county does, businesses won’t open solely out of fear.

Governors and their representatives are publicly stating that if a business opens in violation of the executive order, doing so places its insurance coverage in jeopardy because of the “illegal,” “criminal” and/or “dishonest” acts exclusions. The problem is, there is enough untruth in these statements to make them lies.

Let’s review the truth or half-truths of these claims on a coverage-by-coverage basis. Note, the following analysis  is of unendorsed policy language, endorsements can alter application of this policy language analysis.

Commercial General Liability (ISO’s CG 00 01 04 13) 

Coverage A – Bodily Injury and Property Damage Liability. 

Simply, there is NO illegal or criminal acts exclusion applicable to Coverage Part A. One state knowingly took indecent liberties with the “Expected or Intended Injury” exclusion in its attempt to assert that coverage would be denied.

The expected or intended injury exclusion does not act to deny claims resulting from opening against a governor’s orders. This exclusion applies to the actions of an insured that one would EXPECT or INTEND to cause injury such as punching someone in the nose or setting a trap. A reasonable person intends and would expect that someone would be injured by such acts.

There does not appear to be an applicable exclusion in Coverage Part A. So, a slip-and-fall incident is covered, a products liability claim is covered, basically anything covered under Coverage A in “normal” times is covered if/when the business opens – even against a governor’s orders.

Coverage B – Personal and Advertising Injury Liability. 

There is a “Criminal Acts” exclusion appliable to personal and advertising injury coverage. Within Coverage B the specific exclusion reads:

2. Exclusions: 

This insurance does not apply to: 

d. Criminal Acts

“Personal and advertising injury” arising out of a criminal act committed by or at the direction of the insured.

“Personal and advertising injury” is a defined term. Basically, this exclusion applies to activities and actions such as libel, slander, defamation of character, violating a right of privacy, wrongful eviction, false arrest and other such actions. If any of the acts listed in the definition is done in violation of a law, there is no coverage.

If the store owner calls the governor a nasty name, that would be excluded; but only if doing so is considered a criminal act. Thus, this exclusion is a non-issue.

Coverage C - Medical Payments. 

In short, there are no exclusions for “illegal,” “criminal” or “dishonest” acts in Coverage C. Where the insured had coverage before the orders, they still have coverage.

Commercial Property

Within ISO’s CP 00 10 10 12 - Building & Personal Property Coverage Form there is one reference to “illegal.” The policy excludes coverage for “contraband, or property in the course of illegal transportation or trade.” Although this is intended to exclude coverage for products that are illegal to import, export or sell, the wording may present problems if the insured opens against government orders.

Two key questions arise:

• Is operating in defiance of an executive order a criminal act (making it illegal); and

• If it is a criminal act, does ignoring an executive order mean the operation is “in the course of” illegal…trade?

Illegal or Criminal Act

An illegal act is one that is forbidden by law. In the absence of this pandemic, the reasonable assumption is that the insured is a legal operation and was operating legally. Whether an executive order disallowing the operation of a business is given the effect of or is equivalent to a law is a question for the courts.

If operating in defiance of an executive order is forbidden by law (making it a criminal act), will the “law” be upheld in court? Reports are that at least one state court has determined that stay-at-home orders are not legal. Whether other courts will follow this lead is unknown.

For sake of this analysis, let’s make the worst-case assumption that operating in defiance of an executive order is considered a criminal or illegal act. If operating against a lock down order is a criminal act, this is strike one towards the lack of property coverage.

However, given the anecdotal evidence, these orders do not appear to hold status as a law. Governors can make emergency declarations that can be enforced to a certain degree; but if they were, in fact, laws and the actions were illegal, the governors would not need to use scare tactics and/or threats such as the revocation of the business’ operating license, they would simply have the owner arrested.

Additionally, laws cannot generally be created by edict. A law (statute) generally requires approval of both houses. Yes, as stated, an executive does have broad powers during a declared emergency, but that does not include the ability to create a law or statute.  

Lastly, in general the US is designed as a “bottom-up” regulatory model. The only reason the NC county succumbed to the governor’s orders was because the state threatened to take away state funds. Evidently, opening is not illegal, it’s just against the governor’s wishes contained in the emergency declaration. (It’s unlikely that any level of government would want the executive to have the ability to create law by edict.)

If the actions are NOT criminal, coverage for the property is NOT excluded.

Is Operating in Defiance of the Order “In the Course of” Illegal Trade

“In the course of” can be defined to mean “during a specified period.” Other definitions include “in the process of,” and “during.”

Black’s Law redirects the definition of “course of trade” to “trade usage.” “Trade usage” redirects to “usage.” Under “usage” is found the meaning of “trade usage.” A long way around to the information needed.

Trade or trade usage in Blacks Law essentially means the common methods of operation. Other sources define trade to mean a business or occupation entered into for profit.

Given the above, it appears any business operating is “in the course of trade.” If operating in defiance of a governor’s order is illegal (a criminal act), the business is “in the course of illegal trade.” Operating in the course of illegal trade negates property coverage during the time of illegal operations.

The commercial property form does not limit the application of this wording to real or personal property – the wording applies to all property.

Unfortunately, there is not a “fix” for this possible exclusion of coverage. The lynchpin or key factor to whether the property is covered or excluded from coverage is whether the operation is illegal. If opening is not illegal, there is coverage; if opening is a crime, there is no property coverage.

ISO’s CP 10 30 09 17 - Causes of Loss - Special Form contains an exclusion for dishonest or criminal acts; however, the wording applies to actions undertaken by the insured to damage or destroy covered property. This exclusionary wording does not apply to the operation of the business within or outside the allowances of an executive order.

Is coverage excluded for property losses when the business is operating in defiance of an executive order? This may ultimately be a question for the courts; but it appears:

If a governor’s decree does NOT carry the weight of a law, it’s unlikely this wording would apply – meaning there would be coverage regardless the governor’s wishes;

If a governor’s decree IS given the weight of a law, making the act of opening illegal, the insured may lose property coverage; or

If a governor’s declaration is granted the weight of a law, but such decree is struck down by the courts, coverage may be reinstated.  

From a property coverage perspective, the question of coverage is murky. Carriers may or may not attempt to spit hairs to deny or provide coverage.

Workers’ Compensation and Employers’ Liability

Does NCCI’s workers’ compensation policy respond to cover an injury to an employee arising out of and in the course and scope of employment if the business is operating against that orders of the state? Workers’ compensation is a unique coverage, the policy responds in accordance to the guidelines of the state’s workers’ compensation statutes. To answer the question, the statute must be reviewed. If statute does not exclude protection to employees working in violation of the law, the work comp policy responds and pays for injury – regardless of the executive order.

Because workers’ compensation is for the benefit of the injured worker, it is unlikely any state law would disallow coverage for any work-related injury, even if the business is operating against an executive order. This violates the spirit and intent of the coverage. In fact, some work comp statutes specify that it applies to workers whether lawfully or unlawfully employed.  

The respective state law must be reviewed, but such limitation or exclusion is unlikely to be found. Furthermore, there is no wording in the policy itself that would allow the insurance carrier to seek repayment from the insured. Thus, opening in defiance of an executive order does not appear to jeopardize workers’ compensation coverage.

Part Two – Employers’ Liability does contain exclusionary wording regarding employment in violation of the law. The policy reads:

C. Exclusions

This insurance does not cover:

3. bodily injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers.

Is the employment in violation of the law or is the operation in violation of the law? The apparent intent is to exclude employers’ liability protection for those employed in violation of federal guidelines regarding status as a legal worker in the US. Given the intent, this exclusion does not appear to apply. But remember, this is regarding the employers’ liability protection only, this wording does NOT apply to workers’ compensation.

Business Auto (CA 00 01 10 13-Business Auto Coverage Form)

There is no illegal, criminal or dishonest act exclusion in Section II – Covered Autos Liability Coverage of the business auto policy (BAP). 

Like the CGL, there is the Expected or Intended Injury exclusion; but, as in the CGL review, this is irrelevant in regard to this conversation.

Operating in disregard to the executive order does not appear to negatively affect the liability coverage provided by the business auto policy. If the BAP did exclude illegal acts, there would be no coverage for injury caused when speeding, when making an illegal turn or many other actions that are illegal.

Neither is there an applicable exclusion under the physical damage coverage. No specific exclusionary wording appears to affect uninsured/underinsured motorist coverage either.

Apparently, the business auto policy responds regardless of any orders in place.

Professional Liability and Errors & Omissions Policies

There is no “standard” professional liability or errors and omissions (E&O) contract, thus each will require separate review. However, most of these forms do contain exclusions related to criminal conduct. But does such wording exclude coverage simply because the business is open regardless of the governor’s declarations?

Given the intent of coverage, professional liability and E&O policies cover the professional activities of the insured and the harm caused by the improper practice of those activities. Opening against the wishes of the governor doesn’t seem to entail the professional activities, it is a business decision.

For example, assume insurance agencies were not considered essential businesses and were forced to close. If an agency owner decided to reopen in spite of the order, any act or failure to act for or on behalf of a client may result in an E&O suit. 

IF opening is a criminal act (it’s not clear if such act is criminal), does that activate the criminal acts exclusion?

Opening in defiance of any order has no correlation to the erroneous act of the agent. They are separate and distinct incidents. One has no relationship to the other.

This same logic appears to apply to all other activities covered by either a professional liability or an E&O policy. Opening against the wishes of the governor does not appear to affect coverage.

However, some governors have threatened to revoke and some already have revoked certain professional licenses. If holding a professional license is a condition of the professional liability or E&O coverage, then these coverages appear to be in jeopardy.

Most occupations that require professional liability or E&O coverage also require a license to provide the service (not the same as a business license). 

If the government, through its police powers, revokes a professional license, the coverage may cease to exist for any future events. Revoking a professional license is not the same as revoking a business license. For agents, this is revoking the agent’s P&C license, not the agency’s license to exist. Whether such revocation is allowed by law is not a topic for discussion in this article.

Executive or Management Liability

Directors and Officers (D&O), Employment Practices Liability (EPL) and Fiduciary Liability are the three most commonly discussed executive or management liability coverages. Like professional liability and E&O, there are no “standard” forms. Likewise, these forms generally do contain exclusions related to illegal, criminal, and/or dishonest acts.

Following are examples from two separate management liability forms:

Exclusions:

The Insurer shall not be liable to make any payment for Loss in connection with 

any Claim made against any Insured:

A. alleging, arising out of, based upon or attributable to:

                             (2) the deliberately fraudulent or criminal acts of an Insured; provided, however, this exclusion shall only apply when it is finally adjudicated that such conduct occurred;

Exclusions:

We will not pay for any “loss” resulting from any “claim”:

A. Based upon, attributable to, or arising 

     in fact out of any dishonest, 

     malicious, fraudulent or deliberately 

     criminal act or any willful violation of 

     any statute or regulation;

Notice the key words common to both exclusionary examples, “based upon,” “attributable to” and “arising out of.” Neither exclusion applies to any management liability suit unrelated to opening against the will of the governor. The only suits that might be excluded are management liability suits directly related to the violation of the decree; otherwise, the policy is unaffected.

Findings

Overall, opening in defiance of a governor’s decree appears to have little effect on insurance coverage. Questions arise in two policy types:

Commercial property; and Professional liability / E&O policies.

If, and this seems to be a big “if,” the act of opening is a criminal act, the insured’s commercial property coverage may be compromised. And if the state revokes the business owner’s professional license (not business license), the professional liability or E&O policy may exclude coverage.

The fear tactics being used by some states surrounding insurance coverage are largely unsupported. Not being lawyers, no agent should advise on what constitutes a criminal act, but agents can and are within their licensure to explain insurance language.