INTENTIONAL

Intentional Acts – When Coverage May Be Excluded

In plain language: In insurance, "intentional" means that a person meant to do something on purpose, like causing an injury or damage. For example, if someone intentionally starts a fire in their own home, that's an intentional act.

Technical definition: In insurance, an "intentional" act is one in which the insured person intentionally causes harm or damage. This often manifests in policy exclusions, particularly in liability coverages, such as homeowner's or auto insurance. Thorough understanding prevents misrepresentations or misunderstandings when explaining coverages to clients and reduces the risk of Errors and Omissions (E&O).

Imagine explaining to your client, after their house burned down, that their homeowner's policy won't pay for the damages because they intentionally started the fire. Understanding the exclusions related to intentional acts can be critical to protecting your agency and clients from unexpected coverage gaps.

TL;DR

Intentional is about purposeful actions that cause damage or harm.

It is crucial for reducing E&O risks and effectively explaining coverage to clients.

The most common pitfall is failing to adequately explain intentional act exclusions.

Know the policy inclusions and exclusions and clearly communicate them to clients.

What Is Intentional in Insurance?

In the context of insurance, "intentional" relates to the intent behind an act that causes harm or damage. Policies often exclude coverage for damage resulting from intentional acts — a key aspect of risk management. Insurance is typically designed to cover accidents, not deliberate actions. If an insured is found to be intentional about causing damage, that would typically not be covered.

On the declarations page and often in exclusions as well, the term "intentional" is of paramount importance. Typically, intentional act exclusions are more prevalent in liability coverages, for example, in homeowner's and general liability policies. The distinction between an accidental and an intentional act can significantly impact the outcome of a claim, making it vital for agencies to emphasize this point when explaining coverages to clients.

Key Related Terms to Know

Negligence: the absence of reasonable care, resulting in damage or injury.

Exclusion: a provision in a policy that removes coverage for certain types of losses.

Liability: responsibility for actions that cause damage or injury.

Policy Limit: The maximum amount an insurer will pay for a covered loss.

Common Questions About Intentional

What does intentional mean in an insurance policy?

It refers to the purposeful actions causing damage or loss, with these acts often being excluded from insurance coverage. For instance, if a person intentionally burns down their own house, a typical homeowner's insurance policy would not cover the loss.

What's the difference between an intentional act and negligence?

While they can both cause harm or damage, an intentional act occurs when someone intentionally causes an outcome. Negligence involves a lack of caution or foresight that results in harm, often unintentionally.

Are there exceptions to intentional act exclusions?

There can be, it often varies by state and carrier; always check the specific policy form. Some states do allow for coverage in circumstances where the resulting damage was more severe than intended.

What's an example of an intentional act exclusion in a policy?

An example might be an exclusion in a homeowner's policy stating that any loss or damage caused by a homeowner's intentional act is not covered.

Intentional vs. Negligent Acts

Intentional acts refer to deliberate actions that cause damage, while negligent acts are unintended outcomes resulting from carelessness.

Comparison Area	Intentional	Negligent
Primary use case	To exclude coverage for losses caused by deliberate actions	To determine coverage for losses caused by carelessness
Coverage / concept type	Exclusion	Coverage determination
Typical exclusions	Safe from liability for intentional harm caused	Coverage may not apply if negligence leads to excessive harm
Who is most affected by errors	Policyholders that cause deliberate harm	Policyholders that cause harm through carelessness
Common mistakes	Assuming all damage is covered regardless of intent	Misunderstanding the concept of negligent harm

Real Claim Examples Involving Intentional

Scenario 1: A policyholder deliberately set fire to his warehouse to claim insurance money. The investigation found evidence of arson, so their property insurance policy denied the claim due to the intentional act of the policyholder.

Scenario 2: A policyholder, angry with a neighbor, intentionally damaged their neighbor's car. Their liability coverage did not cover the intentional damage, leaving the policyholder personally liable for the damages.

Scenario 3: A commercial client's employee got into a physical altercation with a customer and intentionally caused harm. The claim was not covered under the General Liability policy because the harm was deliberate, creating a financial burden for the business.

Limitations and Common Mistakes

Misunderstanding the concept of intentional and failing to explain to clients.

Not checking individual policy forms and assuming all policies treat intentional acts the same way.

Misinterpreting acts caused by mental illness as intentional.

Failing to highlight the importance of intentionality in liability policy exclusions, thus misleading policyholders.

How to Explain Intentional to Clients

Personal Lines client "Remember, your homeowner's policy is designed to protect you from accidents, not damage you cause on purpose. If you intentionally break your own window, your policy won't cover that."

Small Business owner "Your liability policy is designed to protect you from accidents or negligence, not deliberate harm. If one of your employees intentionally causes damage to a customer's property, your liability insurance likely won't cover that."

CFO or Risk Manager "While your corporate policies will cover many liabilities, acts that are deliberate or intentional may not be covered. It is important to manage risks appropriately and ensure corporate policies reflect such behaviour."