The Neglect Exclusion Does Not Apply to Pre-Loss Neglect

Originally published by Edward Eshoo.

Homeowner and commercial property insurance policies typically exclude loss or damage caused by or resulting from neglect.1 Under the ISO Homeowners 3-Special Form,2 neglect means “neglect of an ‘insured’ to use all reasonable means to save and preserve property at and after the time of a loss.” Under the ISO Commercial Property Causes of Loss-Special Form,3 neglect means “neglect of an insured to use all reasonable means to save and preserve property from further damage at and after the time of loss.” As both forms clearly and unambiguously state, the exclusion does not apply to pre-loss neglect. Rather, it applies only to neglect of an insured at and after the time of loss.4
But, what if the purported neglect occurred after an incident which also resulted in a loss? That was the issue raised in Chicago Import, Inc. v. American States Insurance Company. There, a sprinkler at the insured’s warehouse sprayed water, damaging inventory. The…

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