Expected or intended

Number of occurrences

When injury "occurs"

Montrose decision

What Is an Occurrence? 

Although there is some difference in the phrasing of the insuring agreements in the previous general liability (CGL) coverage forms and the current policy, all forms provide coverage for acts or omissions caused by an occurrence. The 1973 policy's insuring agreement pledges to pay on behalf of the insured all sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage "caused by an occurrence." The current CGL form employs simplified language to promise: "We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage. . . . This insurance applies to bodily injury and property damage only if the bodily injury or property damage is caused by an occurrence. . . ." Note that even the claims-made policy requires that the bodily injury or property damage be caused by an occurrence.

"Occurrence" is defined in the 1973 liability policy and the current CGL forms in generally consistent terms. In the 1973 policy, an occurrence is "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." In the current CGL forms, the term is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The provision requiring damage to be neither expected nor intended is contained in exclusion 2(a): "This insurance does not apply to bodily injury or property damage expected or intended from the standpoint of the insured." Note this fact: the standpoint of the insured is the key. If an event happens that is accidental or not expected or intended by the insured, that is an occurrence; in other words, the existence of an occurrence hinges on how the insured, not the insurer or others, views things.

Although bodily injury and property damage usually results immediately upon contact with someone or something, the phrase "continuous or repeated exposure" eliminates the necessity of proving the exact moment at which damage is sustained. Injury and damage from gradual exposure is included in the definition. Thus, the definition of occurrence cannot be interpreted as limiting coverage to a single event.

For example, a single accident where a few drops of paint might splatter on an unintended object could result in barely perceptible damage, but repetition of the same accident on the same object could result in considerable damage over time. Another example is where an insured repeatedly—but unintentionally—strikes a neighbor's fence abutting the driveway with a lawn mower. Each time the fence is lightly hit, it weakens until finally it falls without an apparent single occurrence. Such damage is covered under liability policies due to the "continuous or repeated exposure" wording in the definition.

A case in which an insurer attempted to deny coverage for gradual exposure claiming there had been no occurrence in spite of a definition containing the phrase "including injurious exposure to conditions," is Boggs v. Aetna Casualty and Surety, 252 S.E.2d 565 (S.C. 1979). In this case, the South Carolina Supreme Court held that seepage of water over a period of time was a covered occurrence.

Litigation arose over construction of a home by an insured contractor. Prior to completion of the home, difficulty with drainage of the lot developed. The contractor agreed in writing to correct the problem, but was unable to do so. The owners filed suit for damages. The builder's insurer denied liability and refused to provide a defense in the action. The insured settled the lawsuit, and brought suit against the insurer for reimbursement of the settlement amount and other costs. The court stated the pivotal question was whether the seepage of water into the house, allegedly caused by the builder's negligent decision to place the home on that particular portion of the lot, was an occurrence within the meaning of the policy.

The insurer argued the word occurrence should be construed "as an accident referable to a sudden happening." The court decided in favor of the insured, holding the insurer's construction of the word "occurrence" to be erroneous. The court adopted an often stated concept that occurrence encompasses a broader range of incidents than does the term "accident." The phrase "injurious exposure to conditions" incorporated in the policy definition of occurrence "indicates an occurrence need not be sudden but may be produced over a period of time."

Another continuous exposure case is Air Products & Chemicals, Inc. v. Hartford Accident & Indemnity Company, 707 F. Supp. 762 (D.C. Pa. 1989). Here, the United States District Court in Pennsylvania dealt with liability claims arising out of the use of asbestos in the making of products by Air Products. The District Court sided with the insured in upholding the continuous nature interpretation of "occurrence." (Note that this case was vacated and remanded in part; but, this action was not based on the interpretation of "occurrence." This action came in Air Products and Chemicals, Inc. v. Hartford Accident and Indemnity Company, 25 F.3d 177 (3d Cir. 1994).

Note also that the term "occurrence" encompasses more than just an accident because accident is narrower in scope than occurrence. This can be seen in those cases decided before the occurrence wording was adopted. Accident, according to these cases, did not include coverage for damage occurring over time. For example, in A.D. Irwin Investments, Inc. v. Great American Insurance Company, 475 P.2d 633 (Colo. App. 1970), a Colorado appeals court decided in the insurer's favor when the insured became liable for damage to an apartment building resulting from the accumulation of condensation from an air conditioning system.

The court said, "We find it sufficient to state here that, in our opinion, damage which occurs and reoccurs over a continued period of time from gradual accumulation of condensate or from the functioning or removal of inadequately powered and improperly installed motors is not the result of an accident."

To bolster the point that policy language matters, in the case of Honeycomb Systems, Inc. v. Admiral Insurance Company, 567 F. Supp. 1400 (1983), the court here referenced the A.D. Irwin case and said that case "appears to consider pre-1966 CGL policies that did not contain the phrase 'including continuous or repeated exposure to conditions' as part of the definition of accident". After the "occurrence" wording was made a part of the liability policy, courts had no trouble going beyond the limits of "accident" when deciding coverage questions. Yakima Cement Products Company v. Great American Insurance Company, 590 P.2d 371 (Wash. App. Ct. 1979) is an illustration of this process.

A manufacturer of concrete products entered into an agreement to produce and deliver eighty-one panels to a construction site. After installation of the concrete panels, it was discovered that thirty-eight were seriously defective. The defects were caused by negligent manufacture. Corrections delayed construction, which resulted in a substantial increase in costs to the project; in addition, the Washington appeals court found that the roof was damaged by weather exposure.

The contractor refused to pay the concrete manufacturer, claiming the damages it suffered exceeded the agreed price of the products. The manufacturer sued to recover on the contract and the builder counter sued for the damage to the roof and costs involved in the delayed construction. The manufacturer turned to its liability insurer to defend the action, but the insurer denied coverage on the ground that the suit alleged a breach of contract and insurance coverage was available only for damage caused by an occurrence.

The Washington court of appeals held an occurrence to be broader in meaning than an accident. The court ruled an occurrence required three elements: (1) an accident; (2) resulting damage; (3) neither expected nor intended by the insured. "Here, the misfabrication . . . was the result of negligence on the part of [the insured] . . . [The insured] was unaware of the defects . . . at the time of delivery. The subsequent rejection . . . and resulting property damage to the roof . . . was unintended and unforeseen. Thus . . . there was an occurrence within the terms of the policy."

Note that the Supreme Court of Washington, in Yakima Cement Products Company v. Great American Insurance Company, 608 P.2d 254 (Wash. 1980), did reverse the appeals court decision. However, the reversal was based on the question of whether property damage existed; the court did agree that the negligent manufacture of the panels was an occurrence. Indeed, the Washington Supreme Court gave an extensive discussion of why it found that an occurrence within the meaning of the policy had taken place. The court rejected the insurer's contention that there could be no accident when the misfabrication of the concrete panels was the direct result of the manufacturer's volitional and intentional acts. The court asserted that, "In the area of products liability, if insurance coverage does not extend to the deliberate manufacture of a product which inadvertently is mismanufactured, and thereafter results in property damage, the coverage would be rendered virtually meaningless."

Occurrence, the court said, was broader in scope than accident, and "As these words are generally understood, accident means something that must have come about or happened in a certain way, while occurrence means something that happened or came about in any way. Thus, accident is a special type of occurrence, but occurrence goes beyond such special confines…It would, therefore, seem that from the usual and ordinary meaning of the words used, the word "occurrence" extends to events included within the term "accident", and also to such conditions, not caused by accident, which may produce an injury not purposely or deliberately."

Also, though primarily concerned with the meaning of property damage, the United States seventh circuit court of appeals addressed what constitutes an occurrence—and what does not—in Hamilton Die Cast v. U.S. Fidelity & Guaranty, 508 F.2d 417 (7th Cir. 1975).

The case dealt with the manufacture of defective tennis racket frames, sold to the manufacturer of tennis rackets. The rackets were found to be defective after they had been completely assembled, causing their withdrawal from the market. The racket manufacturer sued the frame maker to recover the resulting loss.

The frame maker's insurer denied coverage and refused to defend the action, stating there had been no occurrence under the terms of the form. The maker sued the insurer in an attempt to find coverage, contending there had been property damage to the finished product, the tennis racket, by reason of the incorporation of the defective part.

The court found for the insurer, basically because it ruled there had been no property damage as defined in the form, but also because there had been no occurrence. However, the court noted there could have been an occurrence for liability purposes "if one of the completed rackets had broken during normal use due to the defective frames and a person or an item of property had been harmed…Such a situation would clearly be an accident…The policy does not cover an occurrence of alleged negligent manufacture; it covers negligent manufacture that results in an occurrence."

Another area where the question of what an occurrence is can be found in construction liability disputes. For example, if the insured did faulty work or left a work site in an unfinished condition, is that an occurrence? After all, the insured did his work, or left his work, on purpose and not by accident.

In Oak Crest Construction Company v. Austin Mutual Insurance Company, 998 P.2d 1254 (Or. 2000), the Supreme Court of Oregon handled a case where one of the issues was whether costs incurred by a general contractor during construction of custom homes for repairing faulty painting work of a subcontractor arose from an occurrence. Occurrence was defined in the policy as an accident, including repeated exposure to similar conditions. The court acknowledged that, in some circumstances, property damage that results from the negligent performance of a contract can qualify as being caused by an accident; but, the court went on, an accident has a tortious connotation and exists only when damage results from a tort. In other words, although negligent performance of a contract might cause damage by accident, there is no tort and no accident (hence, no occurrence) when the damage results solely from the complete failure of performance of a contract.

In another case from Missouri, an appeals court held that a breach of implied warranties in connection with a construction job cannot fall within the term "accident". Here, a claim arose against the insured over alleged failure to build a house in a workmanlike manner and in accordance with a contract. The insured sought coverage under his CGL form but coverage was denied, with one issue being that there was no occurrence. After examining the facts of the case, the court said that this was a breach of contractual obligations, and that the insured's failure to perform cannot be characterized as an undesigned or unexpected event. There was no occurrence here and without an occurrence as defined on the policy, the insured was not covered for the claim. The case is Hawkeye Insurance Company v. John Davis dba Davis Construction, 6 S.W.3d 419 (Mo. App. 1999).     

Expected or Intended?

Intent is part of the definition of occurrence in the 1973 liability policy, but intent is not specifically mentioned in the definition of occurrence in the current CGL forms. Regardless of which version is in use though, some courts look to see if that state of mind is prevalent when deciding if an occurrence has taken place. This type of judicial review often comes up in cases based on wrongful termination. For example, in Hartford Fire Insurance Company v. Karavan Enterprises, Inc., 659 F. Supp. 1075 (D.C. CA 1986), the United States District Court in California ruled that wrongful termination of an employee is not an occurrence under a general liability policy; the termination was intentional and so, it was an act that could not be included within the meaning of occurrence. Also, in Dyer v. Northbrook Property and Casualty Insurance Company, 210 Cal. App.3d 1540 (CA App. Ct. 1989), a California court of appeals decided that the general liability insurance did not cover a claim based on an employee's termination since that termination was not an occurrence; the termination of the employee was intentional and not an accident.

As previously noted, contained in the 1973 liability policy's definition of occurrence is the requirement that damage or injury be "neither expected nor intended from the standpoint of the insured." Also as noted previously, this same purpose is carried out by a specific exclusion in the current CGL coverage form. Insureds, insurers, and the courts have disagreed on the application of this particular language.

Courts of various jurisdictions follow one of three basic approaches in determining whether the act was expected or intended. The majority of courts find that if the insured acts with the specific intent to cause some kind of injury or damage, the exclusion applies. Other courts hold that the exclusion applies if the act itself is intentional, resulting in injury or damage that is a natural or probable consequence of the act, whether or not some harm was intended. A small minority of courts determine that the exclusion is inapplicable if the insured acts with intent, but does not intend to cause the specific damage that results.

 For a more thorough discussion of the expected or intended exclusion, see Expected or Intended. FC&S holds the position that if the insured does not expect or intend the wrong result, the act is an occurrence. For example, if the insured is hired to cut down a stand of trees on a certain property, but mistakenly cuts down trees on the wrong property, this is an occurrence. The act of the insured was certainly intended, but the result was not; a mistake was made by the insured, the insured did not intend the property damage that occurred, and so, the general liability policy should respond to the damage that the insured mistakenly made.

Number of Occurrences

The drafters of the liability policy apparently intended to limit liability for continuous or repeated exposure to the same general conditions to a single occurrence, rather than having each result or claim from the same incident counted as a different occurrence. In other words, the cause of the alleged damages should be looked at as to whether one occurrence or several occurrences took place. This cause theory holds that the number of occurrences for purposes of applying coverage limitations must be determined by referring to the cause of the damage, and not to the number of injuries or claims that may arise out of the incident. In the 1973 policy, this theory was represented by a clause under the limits of liability section stating, "For the purpose of determining the limit of the company's liability, all bodily injury and property damage arising out of continuous or repeated exposure to substantially the same general conditions shall be considered as arising out of one occurrence." Today, although the language of the current CGL form is structured differently, the intent is the same. The limiting language is contained in the definition of occurrence. An occurrence is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

The cause theory is, of course, subject to different judicial interpretations in its application to liability claims. The following cases represent some varying discussions on the issue.

In Maurice Pincoffs Company v. St. Paul Fire & Marine Insurance Company, 315 F. Supp. 964 (D.C. Tex. 1970), the insured imported bird seed that was sold to eight feed and grain dealers. The seed was apparently contaminated with a chemical insecticide, prior to receipt by the insured, and caused the death of many birds. The insured had two liability policies, a general liability policy with $50,000 per occurrence and $100,000 aggregate limits and an umbrella policy issued by another insurer. The primary insurer took the position that the contamination of birdseed was the single occurrence. It paid the $50,000 per occurrence limit and declared its obligation fulfilled. There were still a number of outstanding claims.

The umbrella insurer argued however, that there were multiple occurrences and it was not obligated to respond until the primary insurer had paid claims amounting to the aggregate limit. It was left to the court to decide if the incident involved one, or multiple, occurrences.

The primary insurer contended that the prevailing view must be to look to the cause of the occurrence rather than the effect. Therefore, there was but one cause—the contaminated seed—and while there were many claimants, there was only one accident or occurrence. The trial court agreed.

However, in Maurice Pincoffs Company v. St. Paul Fire & Marine Insurance Company, 447 F.2d 204 (5th Cir. 1971), the lower court's decision was appealed and overruled. The appeals court held that while damage to the birds was caused by contamination, the insured's liability resulted from the sale of seed. The court reasoned that if the insured had destroyed the seed instead of selling it, no loss would have occurred. Since it was the sale that created the exposure to conditions that resulted in property damage, each of the eight sales to the grain dealers was considered a new exposure and a separate occurrence. The primary insurer, therefore, was required to pay an additional $50,000, or an aggregate of $100,000, before the excess insurer was obliged to begin responding.

Along the same lines, American Indemnity Company v. McQuaig, 435 So. 2d 414 (Fla. App. 1983), held that the injuring of two deputies with three shotgun blasts by the insured constituted three separate occurrences for purposes of the insured's homeowners liability coverage.

The police officers were attempting to convince the insured to surrender when he began shooting at them. The first officer was hit, a minute later another blast injured both officers, and a third, forty-five seconds later, injured the second officer again. The insured's liability policy provided $100,000 coverage, per occurrence. A claim was filed by one of the officers, and he was paid $100,000 by the insurer, who then denied any further liability. The second injured officer asked the court for a determination of whether this payment exhausted the insurer's obligation.

The Florida court of appeals ruled that the question involved was whether "there was but one proximate, uninterrupted, and continuous cause which resulted in all of the injuries and damages." The insurer contended there was one occurrence, because the injuries were caused by one instrument of danger, the shotgun, and occurred in one very specific location in one brief time period of less than two minutes. Further, the insured's insanity was the single proximate cause of injury.

The court ruled against the insurer. "While it is true that but for his insanity, [the insured's] act would have been intentional and therefore excluded . . . it does not follow that his insanity was the proximate cause of . . . injuries. It is clear that the proximate cause of [the first officer's] injuries was the shotgun blasts which struck him and the proximate cause of [the second officer's] injuries was the blasts that struck him. Under the cause theory, there was not one proximate, uninterrupted and continuous cause which resulted in the injuries and damages but rather three separate causes." The court held there were three occurrences, and therefore, three $100,000 per occurrence limits.

Applying Wisconsin law in the case of American Motorists Insurance Company v. Trane, 544 F. Supp. 669 (D.C. Wis. 1982), a federal court, applying the cause theory, found that an on-going cause of harm constitutes one occurrence when there is just one proximate, uninterrupted, and continuing cause for all damage.

In this case, the question concerning the number of occurrences arose when the production of liquified natural gas at a new plant was less than expected. It took three years to determine that the shortfall was due to a Trane company heat exchanger used in the process of reducing natural gas to a liquid form. Once the problem was pinpointed, the Trane heat exchanger was replaced by one from another company, with good results. It was uncertain which policy applied since the malfunction of the heat exchanger was of an on-going nature. The court found that the damages constituted "one occurrence stemming from a single injury: the operation of the defective Trane heat exchanger." The policy in effect when the damage first became apparent to the insured, in this case shortly after the plant began operations, was the one that applied.

In another case, the insurer in Owens-Illinois v. Aetna Casualty and Surety, 597 F. Supp. 1515 (D.C. D.C. 1984), attempted to convince the court that there had been multiple occurrences rather than a single occurrence where hundreds of claims were brought against the insured for exposure to asbestos due to a product manufactured by the insured. In this case, each occurrence was subject to a deductible, and no single claim against the insured (who was self-insured to high limits) exceeded the deductible.

The United States District Court was asked to decide whether the insured's liability arose from a single occurrence—that being the manufacture and sale of the product containing asbestos, or multiple occurrences, being each individual claimant's exposure to the asbestos. The court noted that regarding the manufacture and sale of the product as a single occurrence would require the insured to absorb a single deductible from the total policy aggregate, leaving the insurer to satisfy the excess liability. On the other hand, if each claim were to be considered a separate occurrence, the insured would have to absorb the deductible on each claim. The court noted that following this logic, the interpretation "would effectively deny coverage because the deductibles are larger than any claim successfully brought against" the insured.

Thus, the court determined that the manufacture and sale of the insulation was a single occurrence. Reading the policy's definition of occurrence in conjunction with the wording contained in the limits of liability provision pertaining to repeated or continuous exposure being considered one occurrence, the court ruled in the insured's favor. "Given the . . . definition of occurrence and the . . . unifying provisions, the calculation of the number of occurrences focuses on the underlying circumstances which resulted in the personal injury and claims for damage rather than each individual claimant's injury. . . . The provisions make it clear that the number of injuries or claims . . . are irrelevant when determining the number of occurrences."

In Appalachian Insurance Company v. Liberty Mutual Insurance Company, 676 F.2d 56 (C.A. Pa. 1982), the federal appeals court noted that the majority of jurisdictions employ a cause test that asks if "there was but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage." If the answer to the question is that the injuries did indeed stem from one proximate cause, there is a single occurrence. Quoting from the Appalachian case, another federal appeals court, in Michigan Chemical Corporation v. American Home Assurance Company, 728 F.2d 374 (1984), noted that the vast majority of courts concluded that "the number of occurrences is determined by the cause of the damage and not by the number of injuries or claims."

In summary, if the facts of the individual case show that there was one proximate and continuous cause for the injuries, these cases say that most courts will find that one occurrence happened. Therefore, the cause theory or test should be considered a valid (and the most broadly accepted) concept in determining the number of occurrences. However, it should be noted that these two cases have been sharply critiqued by several courts around the country over the years. Neither of the cases has been overruled, but some courts have declined to follow the rulings.

When Injury Occurs

Determining the date of occurrence—when an injury can be said to have occurred—has become a heated area of litigation in recent years, primarily concerning workers" exposure to such things as asbestos and other harmful disease-causing substances. Over the years, there has been little conflict when it comes to determining when property damage occurs. This is because the prevailing rule is that property damage occurs at the time the damage is discovered or when it has manifested itself. For an example of this ruling, see Wrecking Corporation of America, Virginia, Inc. v. Insurance Company of North America, 574 A.2d 1348 (D.C. D.C. 1990). However, as noted, the timing of bodily injury is not so clear-cut.

At issue in the bodily injury type of case is a determination of when the injury occurred, considering that there may be as many as twenty-five years or even more between exposure to the substance and manifestation of illness and a number of different insurers' policies covering the time period in question. At the base of the problem is assessing which policy covers the insured's liability: the policy in effect at the time of exposure; the policy covering the operation when the disease is diagnosed; or any policy in-between these times.

Such difficulties can arise out of the 1973 policy's definition of bodily injury. The term is defined as injury, sickness, or disease that occurs during the policy period. It is the meaning of occurs that spurs disputes: does such an injury occur at the time a person is exposed to the harmful substance, or does the injury occur when the disease reaches the diagnosable stage? As for the current CGL forms, the occurrence requirement (and any subsequent difficulty) is in the insuring agreements. The occurrence version of the CGL form declares that the insurance applies only if the bodily injury or property damage occurs during the policy period; the claims-made version of the CGL form deals with bodily injury or property damage occurring between the retroactive date and the end of the policy period.

Several approaches have been developed by insurers, insureds, and their legal representatives as to when bodily injury can be said to have occurred. Four theories that have found acceptance by various courts are: the exposure theory; the manifestation theory; the injurious process theory (also called the triple-trigger or multiple trigger theory); and the injury-in-fact theory. There is a good discussion of the theories, and multiple cases on the theories are listed, in Armstrong World Industries, Inc. v. Aetna Casualty & Surety Company, 26 Cal. Rptr.2d 35 (Cal. App. 1993); this case may not be cited as precedent (under California law), but the discussion of the theories and the cases listed are still worth reading. Also, as implied, the advocacy of these four theories show that there is no iron-clad rule followed by every single court in the land.

Advocates of the exposure theory hold that when the disease manifests itself has nothing to do with when the bodily injury took place. Liability coverage is triggered (and therefore covered by the policy in effect at the time) by the victim's exposure to the harm-causing agent, whether or not the disease manifests itself during the policy period. This is not to imply that the only liability coverage lies with the insurer covering the period of first exposure, because an employee may have been exposed to asbestos over a considerable number of years. The United States sixth circuit court of appeals adopted the exposure theory in INA v. Forty-Eight Insulations, Inc., 633 F.2d 1212 (6th Cir. 1980).

The leading case in which the manifestation theory was adopted is Eagle-Picher Industries v. Liberty Mutual Insurance Company, 682 F.2d 12 (1st Cir. 1982). Simply put, the manifestation theory states that it is the date of actual diagnosis of the disease, or with respect to those cases in which no diagnosis was made prior to death, the date of death that determines the date of occurrence.

The United States first circuit court of appeals in Eagle-Picher based its decision on the construction of the insurance policy. "Both bodily injury and occurrence are defined in the policy. Each term . . . is linked by the use of causal connectors such as by reason of, because of, and caused by or arising out of. Liability is caused by injury, and injury in turn is caused by an occurrence. This construction implies that liability, injury, and occurrence, while necessarily connected, are nevertheless distinguishable. It further means that each element is expected to occur separately in time."

The court further stated that an occurrence must contain two elements, neither one alone sufficient to trigger liability coverage: initial exposure or accident and resulting injury. "There can be no question but that the aspect of the occurrence which must take place within the policy period, however, is the result, that is, the time when the accident or injurious exposure produces personal injury . . . the definition language explicitly focuses on the result rather than the cause as the component to which coverage is linked."

The injurious process theory (or triple trigger), adopted by the United States District Court, in Owens-Illinois v. Aetna Casualty & Surety, 597 F. Supp. 1515 (D.C. D.C. 1984), is the theory most costly to liability insurers. Relying on an earlier decision, Keene Corp. v. INA, 667 F.2d 1034 (D.C. D.C. 1981), the court held that the occurrence was 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 covered the insured's liability. Another example of a case that applied the Keene court's multiple trigger theory is Eli Lilly and Company v. Home Insurance Company, 482 N.E.2d 467 (Ind. 1985), a case dealing with DES injuries and decided by the Indiana Supreme Court. Although Lilly's policies were manuscript policies, the provisions were identical to the comprehensive general liability policy in all material respects. The court held that Lilly was to be indemnified by each insurer on the risk between the ingestion of DES and the manifestation of a DES-related illness.

Finally, a theory that has gained some acceptance is the injury-in-fact rule. It differs from the other theories in that the central issue for determination is when the injury actually occurred, so that coverage is provided if injury actually is suffered during the policy term. This approach was first described in the case of American Home Products Corporation v. Liberty Mutual Insurance Company, 748 F.2d 760 (2nd Cir. 1984), in which the Second Circuit federal court of appeals rejected both the position of the insured (a pharmaceutical company) and the insurer in arriving at its determination of when coverage was triggered.

The court, in rejecting the insurer's position, said, "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…which occurs during the policy period, clearly supports the court's conclusion that coverage is triggered by injury in fact. [The insurer's] construction of injury as manifestation of injury is inconsistent with this language. Some types of injury to the body occur prior to the appearance of any symptoms; thus, the manifestation of the injury may well occur after the injury itself. There is no language in the policies that purports to limit coverage only to injuries that become apparent during the policy period, regardless of when the injury actually occurred." It was further clarified that the court found no requirement that the injury be diagnosable during the policy period, since the injury may have occurred but not been apparent until after the policy period. The court also rejected the insurer's view that it should not be liable for any injuries that occurred during the policy period if the exposure that caused the injury during the policy period continued after the policy period, reasoning that an injury occurring during the policy period could not have been caused by the subsequent exposure.

The court also discounted the insured's position, stating, "[The insured's] contentions that exposure alone is sufficient to trigger coverage are likewise contrary to the plain language of the policies. Injury cannot be read as the equivalent of exposure, because the policy contemplates injury caused by exposure; since a cause normally precedes its effect, it is plain that an injury could occur during the policy period, although the exposure that caused it preceded that period."

Montrose Decision

There may be some speculation as to how the Montrose decision might affect the trigger of coverage in CGL forms. For a discussion of this, see Montrose Endorsement.

Original article published August 17, 2011