Insurance Endorsements and Exclusions

by Nicholas Walsh, PA

Every year you get a copy of every insurance policy you pay for: home, auto, boat. Most people, I suspect, don’t read these policies. I strongly suggest you read, maybe not the whole policy, but at a minimum the declarations page, the exclusions, and the endorsements.

The declarations page, or dec page, states the most important aspects of the policy: Who the insured is, any additional insureds (such as lenders), the limits of liability for the policy, and the effective period of the policy. Read the dec page and if anything doesn’t make sense, or if the liability limits seem high or low, call your agent. For example, it is common to find a paid-up lender still listed as an additional insured.

Exclusions exclude coverage under certain conditions. For example, every liability policy excludes coverage for an act intended by the insured. That means if you slug someone, break his jaw and get sued, your insurer will almost certainly decline to pay the claim. Another exclusion seen in auto policies is for commercial use. If you are using your car to carry other persons for pay, your plain vanilla auto policy won’t protect you. The same exclusion could apply if you are using your truck to haul for pay: read your exclusions, and if you have any questions ask your agent.

A common pitfall is for someone to assume that their regular consumer policy (auto, home or otherwise) will protect them for a business loss. Not long ago a contractor client’s van burned up, along with all his carpentry tools. (For some reason he sent me an iPhone video of the event, towering flames and all.) All he had was a regular auto policy, and his carrier declined to cover him for the loss of tools. The same result would occur if, say, you had a shop in your basement and manufactured items for sale. If a fire occurred in the shop, your homeowner’s policy would probably decline to pay the claim.

The solution is Commercial General Liability (CGL) insurance, which generally protects business owners against claims of liability for bodily injury and property damage occurring in your business. If you are in business, you need a CGL policy.

Marine policies have exclusions, too – read them. For example, your policy probably covers your boat only for certain geographic areas, say from Eastport to the Cape Cod Canal and up to 100 miles offshore, or whatever. Unless you have a special endorsement, your lobster boat policy may exclude coverage for racing. Sailing yacht policies often have a racing exclusion. Most yacht policies, and some commercial hull policies, have layup exclusions – my sloop, for instance, must be hauled by November 1 and can’t be launched until April 1.

Stray outside an exclusion and your coverage is voided. It doesn’t matter if it was an honest mistake, or if you just didn’t read the policy. This is especially true of marine policies, where the liberal rules of construction generally applied to shoreside policies have no application.

While I’m on the subject of marine policies, remember your obligation to fully disclose. A ship owner applying for insurance has the absolute obligation to disclose material facts to the insurer. By “material facts” I mean facts that could reasonably affect an insurer’s decision whether to issue the policy for the quoted premium. So if, for example, you shift over from dragging to scallop dredging, don’t tell your underwriter (or the agent), and lose the ship, chances are good your insurer won’t cover the loss. My advice is that any time your boat will undertake different operations or a different fishery, you email your agent, provide the details, and close with “Make sure I’m covered.”

Many marine policies include a master’s endorsement, stating who the master will be. Even if the loss is one no captain could have averted, coverage doesn’t exist if the boat is skippered by a person not named in the endorsement. If your boat will make a trip with a new captain, email your agent!

There are many other endorsements which may appear in your policies, and you must read and understand them. An email to your agent can get you an extended endorsement, should you need to amend an endorsement to keep coverage. I emphasize emails over phone calls because if there is a lapse in coverage that would not have occurred had the agent acted on your information, the paper trail emails provide may prove invaluable. And agents themselves carry “errors and omissions” coverage for just this type of claim.

Nicholas Walsh is an admiralty attorney with an office in Portland, Maine. He may be reached at 207-772-2191, or nwalsh@gwi.net.