Lawyers Professional Liability Coverage

water damage after a disgruntled tenant moved out. It appeared that the tenant had taken a sledgehammer to the radiators. Is the water damage covered under the Vandalism and Malicious Mischief coverage?

A. Yes. It should be covered. For Vandalism and Malicious Mischief to apply, the damage must result from a willful and malicious act. The only exclusion is for such acts when committed by the insured.

—Dan Corbin, CPCU, CIC, LUTC

No guaranty fund for RRGs

Q. The risk retention group that our insured participates in for liability coverage has been downgraded by AM Best Co. Will the guaranty fund back the policies issued by the risk retention group if it becomes insolvent?

A. Risk retention groups are not covered by insolvency guaranty funds based on the following: “A risk retention group is exempt from any state law, rule, regulation or order.” The code (U.S. Code Title 15, Section 3902) requires a notice be given to policyholders advising the state insurance insolvency guaranty funds are not available for risk retention groups and are not permitted to participate in any insurance insolvency guaranty association to which an insurer licensed in the state is required to belong.

You should proceed with caution when your client asks about participating in a risk retention group. Not only are they not covered by an insolvency guaranty association, they are exempt from the state insurance laws.— Helen K. Horn, CIC, CPIA, CISR

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