Occurrence--Part #1

When you think of this word and insurance you probably think of GL. It actually is used with Crime Coverage also and Commercial Property. In fact, this word lead to lots of litigation after 9/11. Was the attack on 9/11/01, one occurrence or two? Why the confusion? While GL and Crime define the word “occurrence” a standard property does not. It uses it but it does not define it. We will hold that discussion for another day. This blog will go over the word with GL. The next blog will go over how this word is being used a great deal to deny coverage everywhere right now.

As you may remember from last time we mentioned that a GL policy is a “snap/crackle/pop” form; coverage triggers when something physical happens. This is one of the basic difference between a GL policy and an E&O policy. However, when you look at the definition on a GL policy it does not mention “physical” at all. Here it is—

Definition 13.

"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. 

(History Sidebar—The original CGL used the word “accident”. The word was changed to “occurrence” in 1966 to make it broader than accident although you will notice the word accident is included in the definition).

The definition of the word occurrence is VERY broad and does not include any mention of a physical happening. It just has to be accidental. Why does everyone than harp about the need for “physical” to be an occurrence? The reason is that the Insuring Agreement does not say that it covers “occurrences”; it says that it covers “bodily injury” and “property damage”. To have a “bi” or “pd” something physical needs to happen. As you continue to read the GL Insuring Agreement you find that that bi or pd must be caused by an “occurrence” (b-1). One can debate many things (especially the second part of “property damage” which does not mention physical injury) but the intent of a GL policy is a physical policy; a snap/crackle/pop policy.

You have always heard that a GL policy does not cover faulty workmanship. Show me where it is excluded?  It is not. There is no classic faulty workmanship exclusion in GL. There are “pd to the work/product” exclusions as well, of course, as c,c,c; but there is not a classic faulty workmanship exclusion. However, classic faulty workmanship will not produce a “physical bi/pd”.  If you put in the wrong wiring which has to be torn out and replaced there has been no physical injury; no “property damage” as defined. Most people will say that there has been no occurrence but really there has been-----as long as it is accidental. But, there is still no coverage, as you must have an occurrence and bi or pd. If the faulty wiring started a fire we would have a new situation. But---you have an occurrence as long as it is an accident.

Here is the definition of “accident” right from the Dictionary—

accident |ˈaksidənt|----noun

1 --an unfortunate incident that happens unexpectedly and    unintentionally, typically resulting in damage or  

2 --an event that happens by chance or that is without apparent or deliberate cause

What is the key here??  It must be unintentional. As long as you did not plan it you have an accident.  Simple enough—what is the problem? Carriers are using (A LOT) this word to deny practically all property damage under a GL policy for contractors. They are basically saying that any loss caused by “faulty workmanship” is, by definition, not an accident. You knew, or you SHOULD have known, that when you or your subcontractors did the work it was not perfect!  Hence, the loss was not accidental. With that kind of logic a GL policy is paying practically nothing. Remember, it is a legal liability policy to begin with --- if you did not do something wrong you probably would never have a loss and if you did you probably would never be liable. 

This has gotten out of hand. Carriers (lead by MAJOR carriers) are using this all over the place and, here is the scary part, they are going to court and winning! With our next BLOG we will review a couple major cases/decisions and continue to talk about this problem. You need to be ready for this and be ready to fight it. It is an accident UNLESS it is deliberate. Just because you do something wrong does not mean you did it intentionally. If we all did everything perfectly why would we need insurance???