Whether a claim involves an auto policy or a general liability policy, a question can arise about the number of occurrences. Depending on the facts and the policy language, the number of occurrences can have a significant effect on the insurer's exposure.

Most courts use a "cause" analysis in determining the number of occurrences. When a negligent act is committed and damage or injury results from one proximate cause and an uninterrupted chain of events, it's fairly simple to conclude that there was one occurrence. But the analysis becomes more difficult when, for example, a negligently caused condition results in damage or injury at different times or places.

Consider a situation in which 100 people were injured over the course of four years as a result of exposure to a defective product manufactured by the insured. Using a cause analysis, the focus would be on the single act of manufacturing the defective product so that there was only one occurrence.

A minority of courts use an "effect" analysis so that each injured party's separate exposure to a product or condition is considered a separate infliction of harm and, therefore, a separate occurrence under the policy. Since each of the 100 people was exposed to the product at different times and places, these courts would likely conclude that there were 100 separate occurrences.

Even courts that use the cause analysis tend to require some proximity in time and space in order to conclude that there was only one cause and one occurrence.

The Illinois Supreme Court addressed a negligent omission in Addison Ins. Co. v. Fay, et al., 905 NE2d 747 (Ill. 2009). Two teenage boys died as a result of a negligent condition being maintained on the property of Addison's insured, Parrish. There were no direct witnesses to either boy's death. The boys had left home together on April 30, 1997, presumably to go fishing, but did not return home that night. Their bodies were discovered several days later in a pit on the insured's property that was partially filled with water.

Investigators believed that the boys took a shortcut through the insured's property on their way home. From the positioning of the boys' bodies at the scene, it was determined that one of the boys had attempted to jump over water in a partially filled pit, but became entrapped in quicksand-like soil. The second boy, in an apparent attempt to assist his trapped friend, also got stuck in the soil. The cause of death for the first boy was determined to be drowning secondary to hypothermia. The second boy died from hypothermia. It was not possible to determine how much time had elapsed between the two boys becoming entrapped, how much time elapsed between their deaths, or whether they were even together when the first boy became entrapped.

The insurer accepted liability and offered to settle for policy limits, but the parties couldn't agree on whether the per-occurrence limit or the general-aggregate limit should apply. The insurer relied on an earlier Illinois Supreme Court case in which the court stated that "where each asserted loss is the result of a separate and intervening human act, whether negligent or intentional, or each act increased the insured's exposure to liability, Illinois law will deem each such loss to have arisen from a separate occurrence." The insurer argued that the death of each boy resulted from one occurrence, consisting of Parrish's "sole negligent act of failing to properly secure and control his property."

Digging Into the Details

While conceding that the insurer was correct that Parrish did not commit an intervening negligent act between the deaths of the two boys, the court found that focusing on the property owner's sole negligent omission would lead to an unreasonable interpretation of the policy.

The court, by way of example, asked what the outcome should be if, as a result of Parrish's failure to properly maintain his property, several people had been injured on his property days or even weeks apart. Applying the insurer's argument, the injuries would be considered attributable to one occurrence. The court said that "in accepting a per-occurrence limit, Parrish could not have intended to expose himself to greater liability by allowing multiple injuries, sustained over an open-ended time period, to be subject to a single, per-occurrence limit."

The court stated that there had to be some limiting principles applied to situations in which the damage or injury results from a continuous negligent omission. The court said that it was appropriate to use a time-and-space test to determine the number of occurrences. The court quoted Doria v. Ins. Co. of North America, 509 A2d 220 (N.J. App. 1986), in which a New Jersey appellate court said that according to this test, "if cause and result are simultaneous or so closely linked in time and space as to be considered by the average person as one event," then the injuries will be deemed the result of one occurrence. The Illinois Supreme Court chimed in, too:

"In the instant case, we think the appellate court properly adopted a 'time-and-space' test. The insured's negligence consisted of an omission, the failure to maintain the property. Where negligence is the result of an ongoing omission rather than separate affirmative acts, a time-and-space test effectively limits what would otherwise potentially be a limitless bundling of injuries into a single occurrence."

Applying a time-and-space analysis to the facts at hand, the Illinois Supreme Court pointed out that it could infer that the two boys did not become entrapped simultaneously, and that the second boy became entrapped after the first boy while trying to save him. Because of the "substantial uncertainty" regarding how closely in time the two boys became entrapped and died, the court concluded that the insurer had not met its burden of proof that these two events occurred simultaneously or so closely in time to be considered one event and, therefore, one occurrence. The court concluded that there were two occurrences and the claims were subject to the general aggregate limit.

Differences in Facts

Note that the Doria case involved a situation in which two boys were injured in an unused swimming pool that had become partly filled with stagnant rain water. In that case, there was proof that one boy was injured when he slipped into the pool and that the boy's friend was injured trying to help him. The timing of the two injuries was shown to be simultaneous and the injuries were found to be the result of one occurrence.

The difference in the two cases was proof. In Doria, the boys were able to testify about how and when the injuries occurred. In Addison, however, no witnesses could provide evidence of when the deaths occurred. Without proof of proximity of the two deaths, they could not be considered one occurrence. For another case that provides an excellent discussion of both the cause theory and the effect theory, see Basler Turbo Conversions, LLC v. HCC Ins. Co., 601 F. Supp. 2d 1082 (E.D. Wis. 2009).

Determining the number of occurrences will always depend on state law, specific policy language, and the facts of the particular claim.

The American Educational Institute provides claim law training courses to insurance professionals in legal principles; liability; property; workers' compensation; fraud investigation and defense; and automobiles. It also is a provider of self-study claim law courses that lead to professional designations, including the Senior Claim Law Associate (SCLA). More information is available at 800-631-8183, aei@aeiclaimslaw.com, www.aeiclaimslaw.com.

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