Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
August 28, 2023
Unambiguous Exclusion Effective

Every Exclusion Must be Read as a Part of an Entire Policy
Barry Zalma
Aug 28, 2023

Read the full article at https://lnkd.in/gy2DBn-N and see the full video at https://lnkd.in/gSrcT3B2 and at https://lnkd.in/gfpgWqSU and at https://zalma.com/blog plus more than 4600 posts.

McCann Plumbing, Heating & Cooling, Inc.; Andrew R. McCann; and Wendy McCann, sued defendant, Pekin Insurance Company, for breach of an insurance contract and sought declaratory judgment because the demolition of an adjacent building damaged the McCann’s building.

In McCann Plumbing, Heating & Cooling, Inc., an Illinois Corporation; Andrew R. McCann; and Wendy McCann v. Pekin Insurance Company, an Illinois Corporation, 2023 IL App (3d) 190722, No. 3-19-0722, Court of Appeals of Illinois, Third District (August 23, 2023) the Court of Appeals broke ground with the first ruling on a governmental action exclusion.

BACKGROUND

Andrew R. McCann and Wendy McCann own a commercial building in Onarga, Illinois. They purchased the building in 2011 to use for McCann Plumbing, Heating &Cooling, Inc., their heating, ventilation, and air conditioning business. At the time of purchase, the building was surrounded by two uninhabited properties to its north and south.

Pekin Insurance Company (Pekin) is a licensed provider of personal and business insurance and provides insurance policies to the residents of Illinois. The McCanns and Pekin entered into a commercial lines insurance policy. The policy provided insurance coverage for “direct physical loss of or damage to” the covered property, which included the McCanns’ building and their business’s tangible property stored in the building.

The Village of Onarga declared that the building adjacent and to the south of the McCanns’ property was in an unsafe or unsanitary condition. The Village then ordered the building to be demolished.

On January 23, 2018, a contractor retained by the Village demolished the building. The parties stipulated that, in the course of the adjacent building’s destruction, the McCanns’ building was damaged, leaving a portion of their building open to the elements. The McCanns sought coverage from Pekin for damage incurred from the January 23, 2018, demolition.

In response to the McCanns’ claim, Pekin tendered a letter on March 21, 2018, denying coverage for damage resulting from the demolition based on several exclusionary provisions of their policy, including the governmental action exclusion. In granting Pekin’s motion for judgment on the pleadings, the circuit court found that “the government[al] act[ion] exclu[sion] applies” and dismissed the case.

ANALYSIS

Neither party disputes that the Village’s directive to demolish the adjacent property constitutes an “order of governmental authority.” The parties stipulated that on or about January 23, 2018, the adjacent building was demolished. Both parties also agree, at least to some extent, that the McCanns’ property incurred damage as a result of the adjacent building’s destruction.

The central issue is whether this damage was caused “directly or indirectly” from the destruction and whether that damage falls within the purview of the governmental action exclusion under the parties’ commercial lines insurance policy.

There is no binding authority in Illinois interpreting the applicability of the governmental action exclusion, and as consequence, there is no Illinois case law offering guidance on whether this exclusion may be broadly applied to exclude losses incurred ancillary to a governmental order. The commercial lines insurance policy before the Court of Appeals features the adverbial phrase “directly or indirectly” modifying the verb “caused” within the preamble sentence for the exclusions: “We will not pay for loss or damage caused directly or indirectly by any of the following…” including governmental action.

For the exclusion to apply, however, it is necessary that the destruction of property be carried out through an order of governmental authority. Considering the preamble sentence and the relevant exclusion together, the court found, at a minimum, that the McCanns’ property damage is a loss that grew out of and was therefore “caused *** indirectly” from the destruction of the adjacent property. Further the McCanns’ loss falls under the governmental action exclusion because the damage stems from the Village’s demolition order.

The McCanns assert that the Village’s demolition order only sanctioned damage to the adjacent building and not their own. Therefore, a narrow reading of the exclusion’s phrase “by order of governmental authority” does not include the McCanns’ property, as there was never an order of destruction against their property. However, reading the policy in its entirety, the exemption covers “loss or damage caused directly or indirectly” through the “destruction of property by order of governmental authority.” A plain reading of these clauses together does not imply a separate order is required for the exemption to attach.

ZALMA OPINION

The greatest error made by people interpreting an insurance policy is to take a part of a policy without reading it in context with the entire policy. The Court of Appeals read the entire policy and disabused the plaintiffs of their claims trying to take a small part of a policy to change its meaning. The attempt failed because the full policy made it clear that the Plaintiffs property was damaged by the order of the governmental authority to demolish the adjacent property resulting directly in the damage of the plaintiffs property.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: http://www.linkedin.com/comm/mynetwork/discovery-see-all...

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Go to substack at https://lnkd.in/gcZKhG6g & the Insurance Claims Library – https://lnkd.in/gWVSBde, & Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH.

00:08:58
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
September 05, 2025
Interpleader Helps Everyone Potential Claimant to Insurance Proceeds

Interpleader Protects All Claimants Against Life Policy and the Insurer

Who’s on First to Get Life Insurance Proceeds

Post 5184

See the full video at https://lnkd.in/gyxQfnUz and at https://lnkd.in/gAd3wqWP, and at https://zalma.com/blog plus more than 5150 posts.

Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gRthzSnT; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; Go to the Insurance Claims Library – https://lnkd.in/gwEYk.
Interpleader Protects All Claimants Against Life Policy and the Insurer

In Metropolitan Life Insurance Company v. Selena Sanchez, et al, No. 2:24-cv-03278-TLN-CSK, United States District Court, E.D. California (September 3, 2025) the USDC applied interpleader law.
Case Overview

This case involves an interpleader action brought by the Metropolitan Life Insurance Company (Plaintiff-in-Interpleader) against Selena Sanchez and other defendants (Defendants-in-Interpleader).

Key Points

Plaintiff-in-Interpleader’s Application:

The Plaintiff-in-Interpleader...

00:06:34
September 05, 2025
Demands for Reasons for Termination not a “Claim”

A Claim by Any Other Name is not a Claim
Post 5182

It is Imperative that Insured Report Potential Claim to Insurers

Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.

In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.

Case Background:

This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...

00:08:22
September 04, 2025
Demands for Reasons for Termination not a “Claim”

A Claim by Any Other Name is not a Claim
Post 5182

It is Imperative that Insured Report Potential Claim to Insurers

Read the full article at https://lnkd.in/gfbwAsxw, See the full video at https://lnkd.in/gea_hgB3 and at https://lnkd.in/ghZ7gjxy, and at https://zalma.com/blog plus more than 5150 posts.

In Jeffrey B. Scott v. Certain Underwriters At Lloyd’s, London, Subscribing To Policy No. B0901li1837279, RLI Insurance Company, Certain Underwriters At Lloyds, London And The Insurance Company, Subscribing To Policy No. B0180fn2102430, No. 24-12441, United States Court of Appeals, Eleventh Circuit (August 25, 2025) the court explained the need for a claim to obtain coverage.

Case Background:

This appeal arises from a coverage dispute under a Directors & Officers (D&O) insurance policy. Jeffrey B. Scott, the plaintiff-appellant, was terminated from his role as CEO, President, and Secretary of Gemini Financial Holdings, LLC in October 2019. Following his termination, Scott threatened legal action against Gemini, and ...

00:08:22
September 03, 2025

Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit

© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...

post photo preview
September 03, 2025
Barry Zalma, Esq., CFE Insurance Claims Expert Witness

The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit
© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive and became a consultant and expert witness for lawyers representing insurers and lawyers ...

post photo preview
September 03, 2025
Evidence Required to Prove Breach of Contract

APPRAISAL AWARD SETS AMOUNT OF DAMAGES RECOVERED FROM INSURER

Post 5180

See the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.

It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence

Evidence Required to Prove Breach of Contract

Read the full article at https://www.linkedin.com/pulse/evidence-required-prove-breach-contract-barry-zalma-esq-cfe-rfelc, see the full video at https://rumble.com/v6yd2z0-evidence-required-to-prove-breach-of-contract.html and at https://youtu.be/2ywEjs3hZsw, and at https://zalma.com/blog plus more than 5150 posts.

It’s a Waste of Time to Sue Your Insurer if You Don’t Have Evidence

In Debbie Beaty and Jonathan Hayes v. Homeowners Of America Insurance Company, No. 01-23-00844-CV, Court of Appeals of Texas, First District (August 26, 2025) Debbie Beaty and Jonathan Hayes filed a claim under their homeowner’s insurance policy with Homeowners of ...

See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals