Erik S. Knutsen

Abstract

Insurance is based on the notion that only uncertain, or fortuitous, losses are insurable. There are systemic problems, however, with the consistency in which fortuity clauses are applied in the liability insurance context. Differing interpretive approaches and litigation distortions include the use of at least three interpretive perspectives and two substantive requirements to interpret the intentional act fortuity clause, and four interpretive perspectives to interpret the criminal act fortuity clause. These problems stem from the tension between the two purposes of liability insurance (wealth protection and victim compensation) coupled with a move from explanatory rhetoric about fortuity to explanatory rhetoric about morality. This Article outlines the importance of balancing that tension and examines the problematic effects of these two ubiquitous fortuity clauses that remove coverage for policyholders and simultaneously deny access to compensatory funds for injured victims. The Article argues that intentional and criminal act fortuity clauses need to be more consistently interpreted to avoid a host of inefficient distortion effects that result from the introduction of moral concerns, and it concludes by offering possible solutions for redress for those accident victims who would still be left—though more predictably—in the liability insurance compensation gap.

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