New Rating and Policy Bureau Breaks Ground With Injudicious Exclusion
Insurance regulators across the country are bracing for the introduction of new commercial property policy language promised this fall by the newly-formed property insurance rating and policy form bureau, the National Organization of Property Exchanges (NOPE).
NOPE was formed to promulgate rates and forms on behalf of many of the newly founded property insurance exchanges and existing captive insurers, and promises to bring new life to a rather boring and staid insurance industry.
NOPE’s strict focus on property insurance has allowed it to analyze property losses “from every angle,” according to NOPE CEO Kermit DePhrog. DePhrog says that NOPE’s primary goal in developing new commercial property policy language, “unlike any that has ever been used,” is to assure that members of exchanges and captives get the most for their premium dollar.
A review of the new policy language promulgated by NOPE shows that many of the traditional property coverages offered in other rating organization forms, such as those from Insurance Services Office (ISO) and the American Association of Insurance Services (AAIS), are found in NOPE’s property form. However, there is one new and potentially game-changing exclusion found in NOPE’s property form not found in any other previously promulgated form; this new exclusion is known as the “Injudicious Acts Exclusion.”
“Our long research of and into commercial property claims proved what has long been expected within the insurance industry, namely that most commercial property losses are due to, well, human error,” said Waldorf N. Statler, NOPE’s chief coverage officer. NOPE’s goal, according to Statler, is to remove coverage for such causes.
An example of a loss covered under old terminology but excluded under NOPE’s “Injudicious Acts Exclusion” is damage caused by fire resulting from an employee’s poor judgment or lack of experience. Essentially, this exclusion is designed to remove coverage for any action of any insured that fails to meet standards of reasonable care.
“Basically we want to exclude loss caused by stupidity,” said Statler.
ISO and AAIS are both interested in this new exclusionary wording, according to representatives from both rating organizations. “We want to see how the ‘Injudicious Acts Exclusion’ holds up in court before we begin the long process of filing the form changes for our member carriers,” said one ISO executive under condition of anonymity. “Courts may consider property policies with such provisions illusory.”
ISO and AAIS both state that this so-called “stupidity exclusion” will result in much lower property rates. In fact, AAIS calculates that property rates would likely be cut by more than half if injudicious acts could be excluded.