Meaning of Occurrence in a General Liability Policy

Man slipping on wet floor

Many lawsuits filed against businesses are based on allegations of bodily injury or property damage. To protect themselves against such suits, businesses purchase commercial general liability insurance. A commercial liability policy covers damages an insured business is legally obligated to pay for bodily injury or property damage caused by an occurrence. The word occurrence has a specific meaning that is explained in the policy Definitions.

What Does Occurrence Mean?

Most general liability policies contain the same definition of occurrence found in the standard ISO liability policy. The term means:

An accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Note that the definition consists of two parts. First, an occurrence means an accident. Secondly, an occurrence includes continuous or repeated exposure to the same general harmful conditions.

What's An Accident?

While accident isn't defined in the policy, this word generally means a fortuitous event. An accident is a circumstance that happens unexpectedly or by chance. Many events are clearly accidental. Here are some examples:

  • A branch breaks off a tree on your property and falls onto a customer's head.
  • An apple falls off a display at your grocery store and rolls onto the floor. A customer slips and falls on it, sustaining a broken ankle.
  • A plumber installs a pipe in a motel but fails to weld the pipe properly. The pipe bursts the following day, causing serious water damage to a motel room.

Intentional Injuries Aren't Accidents

Because it is designed to cover accidental events, a general liability policy excludes bodily injury or property damage that is expected or intended from the standpoint of the insured. That is, it excludes injury or damage that the insured inflicts on someone intentionally. "The insured" means the insured party that is the subject of a claim or suit. If that person committed an act by which he or she intended to cause injury or damage, any claim or suit that results may be excluded.

For example, Bill is an employee of Earth Movers, an excavation contractor. Joe is employed by a plumbing contractor. One day, two men are at a construction site when Joe makes a rude comment. Bill becomes angry and throws a pickax at Joe with the intent of hurting him. Joe is injured and sues Bill for bodily injury. Earth Movers' liability policy won't cover the suit because Bill caused the injury intentionally.

Intentional Acts May Result In Accidental Injuries

In the previous example, Bill committed an intentional act and caused an intentional injury. In some cases, a person may commit an intentional act that he or she does not intend to cause bodily injury or property damage. In other words, an act may be intentional but the injury or damage that results may unintended. If the person that committed the act did not intend to cause harm, the injury or damage may be considered accidental.

For example, suppose that Bill doesn't throw the pickax at Joe. Instead, he waves it in Joe's direction. Unbeknownst to Bill, the ax head is loose and it flies off the handle. The ax head strikes Joe in the head, causing an injury. While the act (waving the pickax) that led to the injury was intentional, the injury itself was accidental. If Joe sues Bill for the injury, Earth Mover's liability policy may cover the suit.

Continuous Injury

As noted above, an occurrence includes continuous or repeated exposure to substantially the same general harmful conditions. This means that multiple events may constitute a single occurrence if they result from the same harmful circumstances. 

For example, suppose a property owner hires a contractor to install a window in an office building. The contractor completes the work but fails to properly fasten the flashing to the window sill. Over the following two months, four separate rainstorms occur. The window leaks during each storm, causing water damage to the building. The building owner sues the contractor for property damage.

The water damage arose out of repeated exposure to the same harmful conditions (water leakage due to faulty flashing). Thus, the contractor's liability insurer treats the four events as a single occurrence. It will pay the sum of all damages that result from the four events if that amount does not exceed the Each Occurrence limit in the policy.

Umbrella Policies

Commercial umbrellas may define occurrence more broadly than the standard liability policy. Some expand the definition outlined above to include offenses arising out of your business that result in personal or advertising injury. When the definition is expanded, the Each Occurrence limit in the policy will apply to personal and advertising injury claims and claims arising out of bodily injury or property damage.

When shopping for an umbrella, ask whether the Each Occurrence limit applies in the same manner as in your primary liability policy. In most liability policies (and many umbrellas), the Each Occurrence limit applies only to bodily injury and property damage. A separate limit is provided for personal and advertising injury claims.