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Civil Authority Insurance Coverage

It wasn’t that long ago when a distraught man called 911 and told the person who answered that he had a gun and was going to commit suicide.  “Come and get my body before my discovers it”, he begged.

The police quickly stormed his house with bull horns telling him to “Come out, come out!    We know you are in there!”

When he didn’t come out, the police fired tear gas into his mobile home.  Of course the tear gas canisters broke windows and damaged the home.  The police followed up with entrance tools and destroyed the door, the door casing, the storm door, swinging their ax inside the home searching for him, they caused more damage.  What a mess.

Inside his bedroom, they found his body on his bed.

His daughter turned in a claim to his insurance company and it was quickly denied.  She then contacted me.

This was the classic Civil Authority Insurance claim.  Civil Authority ruined the mobile home.  With the professional help of our office and me in particular, the insurer paid the POLICY LIMIT on this claim.

I thought of this when I read that Former New York superintendent of insurance Gregory V. Serio had called on insurers to greatly expand the civil authority coverage provided for in commercial insurance policies.  Superintendent Serio made his comments during a presentation on the topic of civil authority insurance coverages at the October 20-22, 2014 First Party Claims Conference held at the Crowne Plaza Hotel in Warwick, Rhode Island.  That is where Alice Young of Brown – O’Haver also gave a presentation on the complexities of Broad Form Insurance Policies.

In the suicide case, I was able to use the Civil Authority argument to resolve a homeowner’s claim.  Generally, however, civil authority insurance is that component of a commercial insurance policy, usually within business interruption coverage, that protects businesses that have been disrupted by an order or action of a governmental agency.

“Whereas civil authority was once a limited coverage pertinent in cases of individual losses, it has taken on a far greater import as emergency orders, wide scale evacuations, and more proactive and preventive emergency management have become the norm during times of disasters,” Serio said.  “The coverages are sorely lagging behind the changing times, and their impacts upon the nation’s businesses, especially small businesses which can least afford or manage disruptions lasting more than a couple of days,” Mr. Serio argued.

“If the industry is unwilling to take on this obligation to policyholders and insurance consumers, then I would expect insurance regulators and state legislators would take up the mantle.”

Serio, a partner in the New York City-based consulting firm Park Strategies, LLC,  also advocated to the audience of insurance professionals (including public insurance adjusters, lawyers, accountants and engineers) that they become more proactively engaged with governmental agencies, including emergency managers, to make certain that government orders issued before, during or after disasters like hurricanes, earthquakes and tornadoes, or terrorist events, reflect the terms and provisions of civil authority insurance contracts to assure that businesses will be covered for losses incurred as a result of those orders.  “Oftentimes,” Serio said, “the orders are missing critical pieces of information that render civil authority policies useless.”

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