What is an Occurrence?

••• Image courtesy of [Scott MacBride] / Getty Images. Image courtesy of [Scott MacBride] / Getty Images

One of the primary coverages provided by a general liability policy is Bodily Injury and Property Damage Liability. The latter is often designated Coverage A. It protects your firm against claims for bodily injury or property damage caused by an occurrence. What is an occurrence? This article will explain the meaning of the term.

Most liability policies define occurrence in the same manner as the standard ISO liability policy. In the ISO policy occurrence means an accident, including continuous or repeated exposure the substantially the same general harmful conditions. Note that this definition consists of two parts. First, an occurrence means an accident. Secondly, an occurrence includes continuous or repeated exposure the same general harmful conditions.

Meaning of Accident

The word accident generally means a fortuitous event. It is something that occurs unexpectedly or by chance. Many events are clearly accidental. Here are some examples:

  • A branch breaks off a tree on your property and clunks a customer in the head.
  • Apples are displayed in a pile at a grocery store. One rolls onto the floor, causing a customer to trip and fall. The customer sustains 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.

Expected or Intended Injury

While some events are obviously accidental, others can be difficult to categorize. An example is an intentional act that results in bodily injury or property damage. The 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, then the injury or damage may be considered accidental.

In most liability policies, Coverage A does not exclude intentional acts. (Some types of intentional acts are specifically covered under Personal and Advertising Injury Coverage, but they don't qualify as occurrences.) However, Coverage A does exclude bodily injury or property damage that is expected or intended from the standpoint of the insured. "The insured" typically means the insured 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.

Here is an example.

Bill and Joe are working at a construction site. Bill is an employee of Earth Movers, an excavation contractor. Joe is employed by a plumbing contractor. Bill has discovered that Joe is having an affair with Bill's wife. Bill is angry and wants to hurt Joe. When Joe asks Bill to pass him a hammer Bill throws one at Joe's head, causing severe injuries. Bill threw the hammer with the intent of injuring Joe. If Joe sues Bill for bodily injury, Earth Mover's liability policy is unlikely to cover the claim.

Now suppose that Bill admits that his actions (throwing the hammer) were intentional. However, he claims that the resulting injury was accidental. Bill says he never intended to harm Joe. Rather, he was simply tossing the hammer to Joe in response to Joe's request. In this case, Bill's intentional act may have resulted in an unintentional injury. Thus, Bill may be covered for the claim under Earth Mover's liability insurance.

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 that a contractor installs a window in a commercial building. During the installation process, the contractor negligently fails to properly fasten the flashing to the window sill. The work is completed. 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 four events will be considered one occurrence under the contractor's liability policy. All damages awarded to the property owner in the suit will be subject to one Each Occurrence limit in the contractor's liability policy, not four separate limits.