Intentional and wilful act exclusion in liability policies

 

Liability insurance policies protects both individuals and companies against the possibility of being held legally liable or sued for carelessness, malpractice, or harm. These insurance policies shield the insured against financial penalties and settlements that the policyholder is held accountable for.

 

Intentional and wilful act exclusions in liability policies refer to provisions that exclude coverage for damages or injuries resulting from acts that the policyholder intentionally or willfully committed. These exclusions are commonly found in various types of liability insurance, such as general liability, professional liability and product liability etc. The rationale behind these exclusions is to prevent individuals from benefiting from insurance coverage for harmful acts they deliberately caused.

 

Let us look at the definition of intentional and wilful acts to understand this exclusion.

 

Intentional Act: An act done with the intent to cause harm or damage.

Wilful Act: An act done with a deliberate or reckless disregard for the safety or property of others.

 

Scope of Exclusion

 

The exclusion typically applies to acts that are deliberate and malicious, where the policyholder's intent is to cause harm or where they act with knowledge that harm is likely to result.

Acts that are merely negligent or accidental are generally not excluded, as these are the types of risks that liability insurance is designed to cover.

 General Liability Insurance: A business owner assaults a customer; damages resulting from this act are not covered.

·        Professional Liability Insurance: A doctor intentionally provides harmful treatment to a patient; resulting in injuries are not covered.

·        Directors & Officers Insurance: The management decides to acquire a target company at the price much higher than its intrinsic value only to divert funds of the Company.

·        Product Liability Insurance: Claim arising from consumption of expired / contaminated products of the Company which have been supplied by the Company knowing very well its expired / contaminated condition.   

Legal Considerations

 Courts may examine the intent behind the act to determine whether this exclusion applies. This can involve looking at the circumstances surrounding the act and the mindset of the policyholder at that point in time.

Some jurisdictions may have specific laws or interpretations that affect how these exclusions are applied.

 Practical Implications

Risk Management: Policyholders need to understand these exclusions to manage risks appropriately. 

Claims Handling: When a claim is made, insurers will investigate the nature of the act to determine if it falls under the exclusion. This can involve gathering evidence, witness statements, and expert opinions.

Legal Disputes: Disagreements over the application of intentional and wilful act exclusions can lead to legal disputes between the insurer and the insured. Courts will interpret the exclusion based on the prevalent common practices, policy language and the specific facts of the case.

Understanding intentional and wilful act exclusions is crucial for both insurers and policyholders. It helps clarify the limits of coverage and ensures that both parties understand the implications of the insurance.

It is best to approach an insurance broker to get a clear understanding of the intentional and wilful act exclusion in the liability policy you intend to buy and take the right decision.

 

We at Zen Insurance Brokers assist in choosing an insurance policy with clauses suited to your requirements. Choose your insurance policy wisely. Get in touch with us for any assistance.

 

Disclaimer:

Zen Insurance Brokers is an IRDAI registered broker which facilitates quick and adequate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.