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Illegal acts or criminal acts exclusion in insurance policies

Insurance coverage is one of the necessities of modern life. Most people drive motor vehicles and can at anytime be involved in a serious collision or crash with another vehicle. Such crashes can cause catastrophic injuries or death. The cost of medical care and the potential lifetime of lost earnings would instantly bankrupt the vast majority of driver's on Louisiana's roads.

And this is why insurance coverage is mandatory for anyone operating a vehicle in the state. Insurance coverage insures that those injured are able to obtain the resources they need to recover from their injuries and to compensate families for their losses.

But there is a countervailing element of insurance law. Many insurance policies contain exclusions for behavior that is illegal, criminal or constitutes a bad-act. This is typically because we do not want to insulate those illegal or criminal actions from financial responsibility.

One would not want to allow a mob boss to insure himself from the costs of defending cases where he has ordered a "hit" on the member of another criminal organization.

This exclusion, depending on how it is defined, however can have problematic effects.

In the cases involving clergy abuse within the Archdiocese of St. Paul and Minneapolis, insurance coverage that will be necessary to pay victims of abuse claims could be jeopardized by criminal charges filed against the Archdiocese.

The cost of these abuse claims in the U.S. have been estimated at more than $2.7 billion, and the claims against the Archdiocese of St. Paul and Minneapolis are presumed to exceed its $27 million in assets. The Archdiocese is currently involved in a coverage dispute with its insurers over coverage for the clergy abuse cases.

This is one of those issues where either outcome seems less than optimal.

Source: insurancejournal.com, "Charges Put Minnesota Archdiocese Insurance Claims at Risk," June 26, 2015

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