Voluntary Payment by Insured Leads to Denial of Coverage

We insure a company under a standard Businessowners Liability policy. Our insured was hired to do a kitchen renovation and, in the process, stained a custom-made carpet with a soiled tarp that had been laid in preparation for painting. The insured paid to have the carpet cleaned twice, but the stain was still visible so he agreed to replace the claimant's rug. There is an exclusion under “Duties in the Event of Occurrence, Offense, Claim or Suit” indicating that if an insured voluntarily makes payment for damages without an insurance company's consent, the claim can be denied. As this is a claim we normally would have honored, we wanted to clarify the intent of this exclusion and if it would apply to this particular claim.

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