A California appellate court affirmed a ruling that a single, per occurrence limit applies under a commercial property policy issued to a cannabis business that was robbed. The case is Apex Solutions, Inc. v. Falls Lake Ins. Management Co., Inc., 2024 Cal. App. LEXIS 216 (Cal. Ct. App. 2024).
Apex owned and operated a cannabis manufacturing and distribution business. One of their facilities was robbed in summer 2020 during the nationwide protests against the murder of George Floyd. Apex submitted a police report the morning after the robbery, stating that security footage showed a group of burglars breaking into and robbing two vaults at the Apex facility. A few months later, Apex amended this report to include a claim that the robberies of the two vaults had each been carried out by separate groups of burglars one hour apart.
Apex timely filed a commercial property claim with its insurer, Falls Lake. Under a reservation of rights, Falls Lake claimed the robberies were actually a single occurrence and paid the $600,000 per occurrence policy limit. Apex asserted that the robberies had been made by two separate groups, so each robbery was a separate occurrence for which Apex was owed the policy limit. The dispute went unresolved, and Apex sued Falls Lake for breach of contract and implied covenant. The lower court ruled in favor of Falls Lake, and Apex appealed.
Unfortunately, the policy issued to Apex did not define an "occurrence." Apex argued the dictionary defined an "occurrence" as "something that happens[,] event [or] incident." However, the judges said defining an "occurrence" according to the dictionary was unnecessary because the insurance industry generally defined an "occurrence" as an accident. The judges also said the term "occurrence" had already been "judicially construed" under California law, and judicially construed terms should be given deference unless otherwise indicated by the parties.
The court pointed to two California cases relied on by Apex and Falls Lake–EOTT Energy Corp. v. Storebrand Int'l Ins. Co., 1996 Cal. LEXIS 4519 (Cal. 1996) and B.H.D., Inc. v. Nippon Ins. Co., 1996 Cal. App. LEXIS 622 (Cal. Ct. App. 1996)–that had focused on the nature of the injury, not injury itself, in determining the number of occurrences.
In EOTT, the court found that "multiple claims, all due to the same cause or a related cause, would be considered a single loss to which a single deductible would apply." In B.H.D., the judges affirmed a ruling that an insurer was not obligated to indemnify a jeweler for multiple thefts in a single three-month period because, despite the aggregated amount, no one theft had exceeded the policy deductible. The B.H.D. court said the difference between B.H.D. and EOTT was that the policy at issue in B.H.D. had specifically stated the deductible applied to each individual loss, not an aggregated loss. The EOTT policy had not made such a specification.
Like EOTT, the Apex policy had no precise language stating whether or how the policy limits applied to an occurrence. What the Apex policy did include was a chart of coverage limits for each covered cause of loss under the "Special Forms" part of the policy. The policy also specified that Falls Lake would cover the "direct physical loss of or damage to Covered Property … resulting from any Covered Cause of Loss." When combined, the list of limits and the accompanying language indicated that the property limit would be applied based on the specified cause of loss of an occurrence.
The judges next turned to the question of whether the separate robberies were so closely related that they could be considered a single event. They pointed out that the probability of two separate groups robbing the vaults within one hour of each other was not extremely high given the difficulty of breaching high-security vaults with high-grade steel walls and doors. The group that carried out the second robbery would have needed a plan and tools to get into the second vault. According to the court, "the suspects most likely to have that capability…would be people working in concert with the same group that had successfully breached the first vault less than an hour earlier."
An adjuster for Falls Lake testified that, based on his review of a surveillance video sent by Apex, the footage had showed "continuous activity in and at the Apex facility including near or at the Apex vaults" on the night of the robberies. Apex did not change its position that the robberies had been carried out by completely separate groups, but it offered only stills from the security footage, not the footage itself, for support. Based on this evidence, the court found Falls Lake had made a prima facie showing of a single occurrence, and Apex had neither refuted this evidence nor supported its own argument that the robberies were separate occurrences.
Editor's Note: What constitutes an occurrence is a regular question concerning insurance coverage. When two events occur close together in time, it often raises an issue as to whether the events should be considered one occurrence or two. In this situation, due to the specialized nature of the theft and the proximity of the timing, the court determined that the two thefts should be considered one occurrence. Other courts have found differently, depending on the case.
Read More: