Meaning of Occurrence Discussed by U.S. District Court in Missouri
This matter came before the United States District Court of the Eastern Division of Missouri on a motion for summary judgment. The litigation was the result of a state court judgment resolving a lawsuit, a judgment that the insurer, The Cincinnati Insurance Company, claimed it is not required to satisfy under the terms of an insurance policy it issued to Stolzer. This case is The Cincinnati Insurance Company v. Stolzer, 2010 WL 481298 (E.D.Mo.).
The underlying lawsuit arose out of an oral contract between Duffey and Stolzer, a general contractor doing business as P&G Construction. Stolzer agreed to design and construct a house for Duffey on a piece of property in Missouri. Duffey asked Stolzer to have the soil on the property tested, as she had had problems with a previous home caused by soil conditions. Stolzer responded that he was aware of her prior issue, but that he could address it through other means and testing would therefore not be necessary.
After construction was completed and Duffey had moved into her new home, it became apparent that a soil condition known as plastic soil—characterized by soil that expands and contracts—was causing structural damage to the residence. Duffey then sued Stolzer and a bench verdict was rendered in favor of Duffey in the amount of $423,399.85. Stolzer sought coverage under his CGL form with Cincinnati Insurance and the insurer filed a declaratory judgment action seeking a judgment that the CGL form did not obligate the insurer to satisfy the judgment.
The insured argued that the damage caused by the soil conditions is covered because it is an occurrence of property damage in that Stolzer would have protected against it had he foreseen the possibility of plastic soil damaging the house; however, since he did not order any soil testing, this showed that Stolzer did not foresee the possibility of plastic soil. The insurer countered that the damage was not an unexpected occurrence because Duffey specifically asked Stolzer to test the soil conditions and he declined to do so.
The U.S. District Court noted that Missouri courts have found that the ordinary meaning of “occurrence” is an accident, that is, an event that takes place without one's foresight or expectation, an undersigned, sudden, and unexpected event. The focus then, the court said, must be on the insured's foresight or expectation of the injury or damage. Thus, the fact that Stolzer may have been negligent in failing to order soil testing does not necessarily mean that the damage to Duffey's home was not an occurrence, but if he foresaw the possibility of plastic soil damage, then the incident would not be an occurrence.
Based on the facts of the incident, the court said that it was undisputed that Stolzer was on notice of the potential of soil-related problems. The facts demonstrated that Stolzer made a considered decision not to order soil testing and that he knew that certain soil conditions could result in damage to a home. Thus, when Duffey's home was ultimately damaged by expanding and contracting soil, it was not an event that took place without Stolzer's foresight or expectation. Stolzer's apparent belief that soil testing was unnecessary does not mean that any soil-related damage was unforeseeable; to the contrary, his awareness of Duffey's concern is precisely what makes the result foreseeable.
The court concluded that the insurer was entitled to summary judgment. The policy provided coverage for property damage caused by an occurrence, and the facts in this case demonstrated that the damage was not an unforeseen or unexpected event, but rather was a known risk.
Editor's Note: In discussing the meaning of “occurrence”, the U.S. District Court noted that where a person makes a conscious decision with respect to a known risk, he cannot later claim that it was unforeseeable that the risk would be realized. In this case, the damage to Duffey's home caused by plastic soil was not an accident; the insured (Stolzer) knew that soil conditions could cause such problems, but he was unwilling or unable to adequately protect against that risk. Thus, the CGL form, applying to occurrences, was not going to apply to this claim.