When is coverage triggered? There's no clear answer

Determining the date of an occurrence, that is when an injury can be said to have occurred, can cause a dispute over which insurance policy applies to a claim or lawsuit.

There is a general rule that applies for determining when an occurrence happens, as stated by the United States Court of Appeals, Third Circuit, in Appalachian Insurance Co. v. Liberty Mutual Insurance Co., 676 F.2d 56 (1982): “There can be no question but that the aspect of the occurrence that must take place within the policy period is the result, that is, the time when the accident or injurious exposure produces the personal injury.” However, when is the actual time when the accident produces the injury and thus, the insurance coverage?

There is a more comprehensive discussion of the theories and multiple cases pertaining to the theories, in Armstrong World Industries v. Aetna Casualty & Surety Co., 26 Cal. Rptr.2d 35 (1993). Although the opinion in this case was superseded by the California Supreme Court in In re Asbestos Insurance Coverage Cases, 866 P.2d 1311 (1994), the discussion of the theories and the cases listed are still worth reading.

When did the injury occur?

When it comes to the timing of bodily injury and property damage, the following information is generally true. Courts have accepted four major theories as to when bodily injury can be said to have occurred: the exposure theory; the manifestation theory; the triple-trigger theory; and the injury-in-fact theory. As for property damage, the prevailing rule is that property damage occurs at the time the damage is discovered or when it has manifested itself, although some courts today are applying a different way of thinking.

Advocates of the exposure theory hold that liability coverage for bodily injury is triggered, and therefore covered by the policy in effect at the time, by the victim's exposure to the harm-causing agent. For example, when a person injured by a pollutant first comes into contact with (or is first exposed to) the harming agent, the liability coverage is triggered by that first exposure. This is not to imply that the only liability coverage lies with the insurer covering the period of first exposure because the claimant may be exposed to the pollutant over a considerable number of years, and each of the insurers providing liability coverage during those years of exposure can be subject to the exposure trigger.

The manifestation theory states that it is the date of actual diagnosis of the bodily injury, or with respect to those cases in which no diagnosis was made prior to death, the date of death that determines the trigger of coverage. Under this theory, only the insurer that covers the risk at the time the injury manifests itself is held responsible for the liability coverage.

The triple-trigger theory (or the injurious process theory) is the theory that may prove to be the most costly to insurers. As stated in Owens-Illinois v. Aetna Casualty & Surety, 597 F. Supp. 1515 (1984), under this trigger of coverage, the “occurrence is a continuing process beginning with the inhalation of fibers, proceeding through the damage caused by fibers in residence in the lungs, and ending with the manifestation of the disease.” Accordingly, any policy in effect during any point in this process is applicable to the insured's liability. This theory can be seen as combining the exposure and manifestation trigger theories.

The final theory, the injury-in-fact theory, appears to be gaining some acceptance from courts.

This theory differs from the other theories in that the central issue for determination is when the bodily injury actually occurred so that coverage is provided if injury actually is suffered during the policy period. As articulated by the U.S. Second Circuit Court of Appeals in American Home Products Corp. v. Liberty Mutual Insurance Co., 748 F.2d 760 (1984), “the provision that the policies give coverage for occurrences that cause injury, read with the provision that the policies apply only to personal injury, sickness or disease that occurs during the policy period, clearly supports the court's conclusion that coverage is triggered by injury in fact.” And in Strauss v. Chubb Indemnity Insurance Co., 771 F.3d 1026 (2015), the U.S. Court of Appeals, Seventh Circuit, said that “the injury-in-fact theory allows the finder of fact to place the injury at any point in time that the effects of exposure resulted in actual and compensable injury.” In other words, the trigger of coverage is that point in time when actual bodily injury occurs.

Property damage triggers

When it comes to property damage, as noted previously, the prevailing rule has been that property damage occurs at the time the damage is discovered or manifests itself; however, some court decisions have scrambled this rule.

For example, in Strauss v. Chubb Indemnity Insurance Co., 771 F.3d 1026 (2015), the U.S. Seventh Circuit Court of Appeals applied the triple-trigger theory, relying mainly on the policy language in which the definition of an occurrence includes the phrase “continuous or repeated exposure to substantially the same general conditions.” In this case, water infiltrated and damaged a home through a defect present since the completion of the home's construction. The water damage continued until it was discovered after the insurance policy was no longer in effect. The court ruled that the coverage under the policy was triggered when an occurrence took place (that is, damage first occurred) during the policy's term and the loss was ongoing and continuous up until the damage manifested itself years later.

As another example, in YWCA v. Allstate Insurance Co. of Canada, 275 F.3d 1145 (2002), the U.S. Court of Appeals, District of Columbia, recognized an exception to the general rule as to when property damage occurs, applying the continuous trigger theory. The court said that damage to precast concrete panels due to improper acid etching process occurred within the meaning of the policy language continuously from the date the panels were first exposed to excessive chloride ions until the date of infiltration of ions into the concrete and resulting corrosion was discovered.

The Supreme Court of Texas offers a very good discussion of the trigger of coverage for property damage in Don's Building Supply v. OneBeacon Insurance Co., 267 S.W.3d 20 (2008). That court noted that under Texas law, the key date is when injury happens, not when someone happens upon it. The court stated that “property damage under the CGL policy occurred when actual physical damage to the property occurred, not when the damage was or could have been discovered.”

Consider also, Harford County v. Harford Mutual Insurance Co., 610 A.2d 286 (1992), wherein the Court of Appeals of Maryland held that coverage under the policies could be triggered during the policy period at a time earlier than discovery or manifestation of the damage.

So, the bottom line in a discussion of the triggers of coverage is that no bright line rule imposing any particular trigger of coverage exists, that is, there is no iron-clad theory that every court follows. Insureds and insurers need to be aware of the theory favored by the particular jurisdiction in which a lawsuit or claim is brought.

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