Wear and Tear Exclusion: Definition, Implications, and Examples

In the realm of insurance, wear and tear exclusions play a significant role in defining the scope of coverage provided by policies. This article delves into the concept of wear and tear exclusions, exploring what they entail, how they function, and their implications for policyholders and insurers alike.

A wear and tear exclusion is a standard provision found in insurance contracts. It stipulates that losses stemming from the expected degradation of insured property over time are not covered by the policy. Unlike sudden and accidental damages, which are the core focus of insurance protection, wear and tear represent predictable and ongoing deterioration inherent to the natural aging process of assets.

Insurance policies typically contain a comprehensive list of exclusions and limitations, which serve as the criteria for determining coverage eligibility. Wear and tear exclusions are part of this list, clearly delineating the types of damages that fall outside the purview of insurance compensation. Examples of other common exclusions include poor maintenance, prior damage, manufacturing defects, or faulty installation.

Disputes often arise between insurers and policyholders regarding the interpretation of wear and tear exclusions, particularly in cases involving older properties or assets. Insurance companies may attempt to invoke wear and tear to deny claims, asserting that the damage resulted from preexisting conditions rather than covered perils. Such disagreements can escalate into insurance bad faith lawsuits, especially when substantial losses are at stake.

Unlike provisions with “anti-concurrent cause” lead-in language, wear and tear exclusions do not address concurrent causes of loss. In the absence of such language, courts may rule in favor of coverage if a loss arises from a combination of covered and uncovered perils. This distinction underscores the importance of precise policy language in defining coverage parameters and mitigating disputes.

Wear and tear exclusions usually encompass damages resulting from the normal aging process of insured items, such as gradual deterioration, rust, corrosion, or mechanical breakdowns due to regular use.

Policyholders can proactively mitigate the effects of wear and tear exclusions by adhering to regular maintenance schedules, promptly addressing minor repairs, and setting aside funds in an emergency reserve to cover expected losses.