§17.8 - Has There Been an "Occurrence" Under the Policy?

• Jurisdiction: Washington

§17.8 Has There Been an Occurrence Under the Policy?

The determination of whether there has been an occurrence under a policy is discussed below.

(1) Has property damage occurred during the policy period?

The typical CGL policy provides:

We will pay those sums that the insured becomes legally obligated to pay as damages because of ... property damage to which this insurance applies ....

***

This insurance applies to ... property damage; only if:

(1) The ... property damage is caused by an occurrence...;

(2) The ... property damage occurs during the policy period ....

***

Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

***

Property damage means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it.

ISO Form GL 00 01 (Ed. 12 07) (emphasis added).

Because environmental claims tend to span extensive periods of time, the prior versions of the CGL form remain relevant to many claims. The 1973 and 1966 versions of the form have the same insuring agreement:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of ... property damage to which this insurance applies, caused by an occurrence ....

ISO Form GL 00 00 (Ed. 01 73) (emphasis added), reprinted in Tod I. Zuckerman & Mark C. Raskoff, Environmental Insurance LitigationLaw & Practice app. B (2d ed. West 1994); ISO 1966 CGL Form (emphasis added), reprinted in Tod I. Zuckerman & Mark C. Raskoff, Environmental Insurance LitigationLaw & Practice app. C (2d ed. West 1994).

However, the two forms have different definitions of occurrence and property damage. In 1973, the terms were defined as follows:

Occurrence means an accident including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

***

Property damage means

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or

(2) loss of use of tangible property which has not been physically injured or destroyed, provided such loss of use is caused by an occurrence during the policy period.

ISO Form GL 00 00 (Ed. 01-73) (emphasis added), reprinted in Tod I. Zuckerman & Mark C. Raskoff, Environmental Insurance LitigationLaw & Practice app. B (2d ed. West 1994).

The 1966 version of the CGL defined the terms as follows:

Occurrence means an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

***

Property damage means injury to or destruction of tangible property.

ISO 1966 CGL Form (emphasis added), reprinted in Tod I. Zuckerman & Mark C. Raskoff, Environmental Insurance LitigationLaw & Practice app. C (2d ed. West 1994).

Thus, a significant threshold question in the coverage context is whether property damage, that is, physical injury to tangible property or loss of use thereof, has occurred during the policy period. It is the policyholders burden to prove such damage, because that is an element of the basic grant of coverage. See, e.g., McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724, 731, 837 P.2d 1000 (1992); see also Mark N. Thorsrud et al., Insurance Coverage for Pollution Liability in Washington. What Constitutes an Occurrence? The Insurers Perspective, 28 Gonz. L. Rev. 579 (1992-93) (extended discussion of occurrence defense).

(2) Washingtons subjective standard for the expected or intended defense

The expected or intended issue is perhaps the most frequently litigated issue in the environmental coverage context. As set forth in §17.8(1), above, a typical definition of occurrence in a CGL policy based on the 1966 and 1973 forms is an accident ... which results ... in ... property damage neither expected nor intended from the standpoint of the insured ....

The 2000 edition of the CGL form places the expected or intended language in the exclusions: This insurance does not apply to ... property damage expected or intended from the standpoint of the insured .... ISO Form CG 00 01 (Ed. 12 07) (emphasis added).

Thus, the factual question of whether there has been a covered occurrence under the policy generally hinges upon whether a claim for bodily injury or property damage is expected or intended.

Washington courts have historically taken the position that an objective, rather than a subjective, standard should be applied to determine whether property damage or bodily injury was expected or intended by the policyholder. Safeco v. Butler, 118 Wn.2d 383, 408, 823 P.2d 499 (1992). Under an objective standard, a particular result is expected or intended by the policyholder if the result is reasonably or substantially foreseeable, such that a reasonably prudent person could determine that the particular results would follow from the persons acts. Queen City Farms, Inc. v. Cent. Natl Ins. Co. of Omaha, 126 Wn.2d 50, 882 P.2d 703 (1994), amended, 891 P.2d 718 (1995). By contrast, under a subjective standard, the inquiry is directed towards whether a particular policyholder actually expected or intended the harm. Id.

Prior to Queen City Farms, Washington insureds successfully took the position that the appropriate standard of expected or intended required substantial certainty. For example, in one case the U.S. District Court for the Western District of Washington instructed the jury that [p]roperty damage is expected by an insured if the insured knows or believes that such damage is substantially certain to result from its act. It does not matter whether the insured wants or does not want the damage to occur. Boeing Co. v. Aetna Cas. & Sur. Co., No. C86-352WD (Courts Instructions to the Jury, No. 16) (W.D. Wash. Sept. 18, 1990) (Dwyer, J.), (emphasis added), reprinted in Tod I. Zuckerman & Mark C. Raskoff, Environmental Insurance LitigationPractice Forms, Form V-6, at V-149 (1994).

In Queen City Farms, 126 Wn.2d at 68, however, the Supreme Court departed from its earlier decisions and held that a subjective standard applies. Occurrence was defined in the policies at issue as an accident or happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in ... property damage .... Id. at 64.

The occurrence definition in the companion case, Key Tronic Corp., Inc. v. Aetna (CIGNA) Fire Underwriters Insurance Co., 124 Wn.2d 618, 622, 881 P.2d 201 (1994), was more similar to the ISO definitions quoted above in that it contained the neither expected nor intended from the standpoint of the insured...