Once it is determined that there is bodily injury and/or property damage caused by an occurrence, it may become critical for both the carrier and the policyholder to determine whether there was one or multiple occurrences. That determination is not always easy or straightforward. Disagreements about how many occurrences there were can arise, e.g., where the facts present numerous causes; where the insured committed numerous tortious acts; where there are numerous claimants, events occurring over several consecutive policy periods, or multiple layers of coverage; or some combination of all of the above.
The number of occurrences is a key issue because it can dramatically affect the dollars involved in the claim. For example, pre-1980s policies and some modern-day policies do not contain aggregate limits, so the number of occurrences directly affects the number of limits available under the policy. Most modern policies contain both per occurrence and aggregate limits, so if the insured is sued for an amount in excess of policy limits, establishing that there is more than one occurrence may increase the amount available for indemnity if the aggregate limit is more than the per occurrence limit. By the same token, the existence of more than one occurrence also increases the number of deductibles or self-insured retentions (SIRs) the insured must pay before a defense or indemnity is owed. The occurrence analysis could favor the insurer in one case and the policyholder in another, depending on policy language, the facts of the claim, the amount of the limits and deductible/SIR as compared with the potential exposure in the underlying claims, as well as how the court analyzes the issue.[1]
To determine the number of occurrences, it is necessary to carefully consider the policy language, including the definition of “occurrence,” limits of liability, non-cumulation clauses, and other pertinent language; the facts of the underlying case; and the governing law. As we shall see in our survey of cases below, a full understanding of these factors is often critical to determining the number of occurrences arising from an incident.
“Occurrence” is defined in the most recent Insurance Services Office (ISO) commercial general liability (CGL) main form as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”[2] Some non-standard forms have added a significant word, “related,” so that the term is defined as “including continuous, repeated, or related exposure to substantially the same general harmful conditions.”[3]
Courts employ several tests to determine the number of occurrences.[4] The categorization of tests varies, and commentators and courts do not necessarily agree on what the tests are or how they should be categorized.[5] A useful way to conceptualize the issue is that the tests analyze either cause or effect. The catch is that there are often different ways of viewing cause or effect, which can significantly complicate the analysis. In most cases, the outcome is likely to depend on how the court views the facts.
The majority of jurisdictions use the “cause” test.[6] Under this test, courts variously determine the number of occurrences by looking to the number of causes or causal factors,[7] liability-triggering events,[8] or “unfortunate events” leading to the injury or damage.[9]
In applying the cause test in situations involving negligent omissions by the insured, some courts add as another element of the test a determination of whether the cause and result are closely linked in time and space.[10] Under this time-and-space variant of the cause test, there is only one occurrence if such a close linkage exists; if it does not, there are multiple occurrences.[11]
A minority of jurisdictions employ the “effect” analysis. Under this approach, courts examine the number of injuries, or effects, of the insured’s act to determine the number of occurrences. The focus is on the number of injuries resulting from the act, not the number of acts performed by the insured.[12]
Below, we summarize recent cases in which the courts considered the number of occurrences.