What do the Columbine Murders, OJ Simpson, and President Clinton all have in common?

23 Aug

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Odd question–but, an eye opener in terms of the Homeowners Policy and a Personal Umbrella Policy (PUP).

Yes, all three of these cases were covered in one fashion or another on either the Homeowners Policies under the Liability section or PUP. Homeowners Policies offer some of the broadest coverages available on both the Property and Liability Sections of the policy. The Personal Umbrella provides additional limits AND additional coverages subject to a minimum retention. Even with all the limitations, exclusions, definitions and modifications from one form series to the next, the coverage under both policies is still very comprehensive. It often times comes as a complete surprise to policy holders that their insurance policies would pay for defense or judgments for civil lawsuits. That clearly was the case with the Clintons.

Clinton and his wife were probably like typical American homeowners. Even though they are both lawyers, neither had any idea of the hidden bonus in their policies, Bennett said. It was he, Bennett told reporters, who made the discovery. “The president and the First Lady were totally unaware that they had these policies,” Bennett said. “I think it came as quite a surprise to them.” (ProQuest Information and Learning Company)

Let’s begin with the basics. The liability section of the Homeowners Policy is titled Personal Liability. The coverage is far broader than just a “premises” liability policy. The policy responds to claims that are made or suits that are filed against an “insured” as defined in the policy for damages due to “bodily injury” or “property damage” caused by an “occurrence” to which coverage applies. There are two distinct parts to the coverage: damages for which the insured is held legally liable and a defense for such claims that is outside of the limit of liability provided on the policy. It is the defense part of the policy that often provides coverage that is most unexpected. The ISO Homeowners Policy defines the defense coverage as:

“We will…Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when our limit of liability for the “occurrence” has been exhausted by payment of a judgment or settlement.”

Now the question is how this applies to Columbine, OJ Simpson and President Clinton.

Columbine Highschool Murders: Columbine Victims Get $2.65 Million Settlement (Reuters)

The Columbine High School shooting occurred April 20, 1999 in Littleton Colorado. Two teenagers that were students at the high school killed thirteen people and wounded twenty others and then shot themselves to death. One of the shooters was 17 years old and the second shooter was 18. Their death removed them from potential criminal and civil action and left the parents as the primary remedy. The parents of the dead and injured students sued the parents and the lawyers claimed the parents were negligent in their supervision of their children AND the gun supplier was negligent for selling them the weapons used in the shooting. In an out of court settlement, the student’s parent’s insurance policy paid a reported $1.6 million settlement to the victims that were covered on their Homeowners policy. Insurance company payments on behalf of the people who supplied the guns used in the killings bring the total of the settlement to about $2.5 million. ( April 24, 2001). The settlement for this case is for damages and there is no mention of what the costs were to defend the suit and what amount was paid for under the Homeowners Policy for the defense.

Now you are no doubt thinking that “murder” is an intentional act and that intentional acts are excluded on the Homeowners Policy. And clearly that has always been the intent of the policy. Remember that this loss occurred in 1999 so we need to go back in history, for a moment and re-visit the Homeowners Edition date that was in effect at that time. That would take us back to the 1991 form using ISO as a reference which was used by most states until the revision that took place in 2000. In the 1991 form the “intentional act” exclusion was very short and stated.

1. Coverage E—Personal Liability and Coverage F—Medical Payments to Others do not apply to “bodily injury” or “property damage”:

a. Which is expected or intended by the “insured”;

“In this policy, “you” and “your” refer to the “named insured” shown in the Declarations and the spouse if a resident of the same household.”

The definition goes on define “insured” to include relatives in the household. There are those reading this that might doubt this interpretation but remember the claim was paid under the policy. To add weight to this argument, the new definition of intentional act is much broader in scope—specifically because it was too vague in the prior editions. The language from the 2000 edition date of the Homeowners Form reads.

Coverage E and F do not apply to the following:
1. Expected Or Intended Injury

“Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”:

a. Is of a different kind, quality or degree than initially expected or intended; or
b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.

However, this Exclusion E.1. does not apply to “bodily injury” resulting from the use of reasonable force by an “insured” to protect persons or property;

Notice the change from “the” insured to “an” insured and how broad-based this exclusion is. So in the case of Columbine it was a combination of alleged negligence of the parents and the ambiguity of the intentional acts exclusion that allowed for the $1,600,000 settlement.

The OJ Simpson trial and Former President Clinton both involved payment of defense costs for their respective trials.


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