CRIMINAL ACTS CAUSE LOSS OF INSURANCE COVERAGE

Most of my asset protection planning clients are not criminals…but some are. They have been convicted of health care fraud, tax evasion, Builder’s Trust Fund Act violations, insurance fraud and so forth…and, interestingly, we can usually help these people. But what is the impact when someone pleads guilty to a criminal act in order to achieve a quick and acceptable settlement but the act was actually an accident and unintentional. According to Jason Byrne in his article in the December 2007 Michigan Bar Journal, “How a Criminal Plea Can Result in the Loss of Insurance Coverage” be very careful or you can lose your insurance coverage. Jason points out how in several cases where the defendant claimed the act was an accident the prosecutor claimed it was intentional and to settle the case the defendant pled to a minor crime avoiding incarceration. However, when the victim later sues civilly to recover damages and the “criminal” looks to his insurance carrier for defense and coverage, the insurer denies coverage on the basis that it will not pay for any loss “arising out of a criminal act or omission.” There are different types of exclusions that insurers use, as pointed out in the article, but one thing is clear, the criminal lawyer looking for a “best deal” may be far better off having the client enter a plea of nolo contendere rather than an affirmative plea of guilty.