"absolute" exclusions

The effect of an absolute exclusion's language is to defeat coverage in situations where it could be reasonably expected that coverage would apply. For example, an absolute exclusion in a policy written to cover insurance agents' errors and omissions (E&O) exposures might read as follows: "This Policy does not apply to any 'Claim' against the 'Insured' ... based on or directly or indirectly arising out of or relating to any actual or alleged 'bodily injury.'" Assume, for example, that an insurance agent failed to secure bodily injury (BI) liability coverage for a client and the client is later held liable for BI. The client then sues the agent for failing to obtain an appropriate insurance policy. Given the wording of the "absolute" exclusion noted above, the agent's policy may not respond to the claim. This is because the client's allegation indirectly arose from and was "related to" BI. In recent years, these "absolute" exclusions have become more common, and insurers have, with increasing frequency, been using them to deny coverage of claims that would otherwise appear to be covered.