8.5.1 Occurrence

• Jurisdiction: Arizona

The first major issue to be resolved in any environmental coverage question is whether there has been an occurrence. There has been a significant amount of litigation regarding the definition of "occurrence" within the environmental context. Generally speaking, the definition of occurrence focuses on the loss, not the act that precipitates coverage.

An "occurrence" is an event the results of which are both unexpected and unintended.^[245] The definition focuses on whether the loss, rather than the act, is unexpected and unintentional. Intentional acts resulting in unexpected losses have been held to qualify as occurrences.^[246] For example, in Waste Management v. Peerless Insurance Co.,^[247] the insurer argued that the polluter's routine business conduct of intentionally dumping waste materials at a landfill was not an occurrence because the conduct was expected and intentional. However, the court found that the dumping of waste materials was an occurrence because the loss was neither expected nor intended.^[248]

Generally speaking, the courts in other jurisdictions have held that an insured's intentional act of polluting will not, in and of itself, take the event outside the definition of "occurrence." This determination will depend upon whether the insured intended or expected the alleged damage to occur as a consequence of its acts. A good example of this analysis is found in City of Carter Lake v. Aetna Casualty & Surety,^[249] where the court observed:

For the purposes of an exclusionary clause in an insurance policy, the word "expected" denotes that the actor knew or should have known that there was a substantial probability that certain consequences would result from his actions. If the insured knew or should have known that there was a substantial probability that certain results would follow his acts or omissions, then there has not been an occurrence or accident as defined in this type of policy when such results actually come to pass.

The court in City of Carter Lake explained that "substantial probability" was more than "reasonable foreseeability." To be a substantial probability, the indications must be strong enough to alert a reasonably prudent person not only to the possibility of the results occurring, but also must be sufficient to forewarn him that the results are highly likely to occur.^[250]

Insurance Companies have raised the argument that there has been no occurrence because the property damage was expected or intended from the...