Insurance Law Lesson 47: Identifying Carve Outs

The prior lesson introduced the concept of carve outs – exclusions that are not based on the risk being uninsurable (either by way of public policy or by way of economic concerns), but because such risks are covered by other policies.

To think of an example of a carve-out, you can walk backwards from different types of insurance policies. This will make sense in a minute…

If you own a car, you should have an auto-policy. That is not a general risk. It is a defined, specific risk. The auto policy does not cover claims that do not involve a vehicle of some sort. Now, look at your homeowners policy. The first exclusion in Section II (the liability section) of the standard HO3 homeowner’s policy form is “motor vehicle liability.”

If you own a boat, you should have boat policy. Check out HO3’s exclusion B. “Watercraft Liability.” Same for an airplane – HO3 exclusion C.

If you have a business, you should have coverage specific to that business. Check out homeowners exclusion E. 2.

Now look through your exclusions – in whatever policy you have. Are you at risk for that type of claim? If so, and if the exclusion is a carve out, you might want to consider adding some additional coverage to fill the gap.

Leave a Reply