What is The Difference Between Occurrence and Accident in Insurance
by E Sneneh, Property and Liability Insurance Agent, Chicago

There is normally discussion in the policy "insuring agreements" where insurance companies may covers only injuries “caused by accident.” Certain types of damages for which an customer may be liable are not “caused by accident.” The word  “accident” reflects an un-planned, forceful, sudden and unexpected event. It generally pertains  a single happening that can be attributed to a definite time, place and cause. The concept also generally annuls a purposely  intended act, even though the act may have an unexpected consequence.

Accidents Have a Problematic Definitions

Phrasing of the words “accident” and “caused by accident” has proven problematic. Court precedents are by not  in harmony. For instance, liability was rejected for disease of a tenant said to have resulted out of the landlord’s failure to supply heat. There are cases on both
camps of the issue as to if or not the gradual contracting of a disease or illness (such as radium poisoning or dust diseases) over a long period comprises an accident. Another difficult group of cases is that involving the natural and foreseeable outcome (even though not deliberate) of acts deliberately and purposely undertaken. For instance, dribbling paint down the side of a dwelling by an insured person working on the dwelling was held not to be “caused by accident.” . Constructing a structure - an intentional act - by mistake over the property line was held not to be an accident.

Deliberate Assault or Trespassing Can Be an Accident

Injuries and damages caused by an assault or purposeful trespass by an insured is, normally, not “caused by accident”, but that is , of course, from the viewpoint of such insured. Even in this instance, the courts have found that in certain instance that the coverage is valid, based on the fact that the injuries and damages were sudden and accidental (as looked at from the perspective of the injured party). For that reason and in order to protect against an insured’s vicarious liability for assault and battery committed by the staff while they are performing their work duties, liability insurance policies usually indicate that assault and battery shall be considered an accident unless committed by or at the instruction of the insured.

Replacing "Accident" by "Occurrence" Has A Price

For the above discussion it is clear that the term "occurrence" is far more comprehensive that the term "Accident". For additional premiums, some insurance companies may restate their language to indicate  that the term “caused by accident” may be deleted and the word “occurrence” substituted. This substitution will influence not only the coverage but also the limits of liability applicable to allied items of injuries and damages, which may be costly exposure to the insurer. These endorsements usually define “occurrence” as an event or continuous or constant exposure to conditions, which unpredictably results in bodily during the policy period. Exposure from a single source is ruled to be one occurrence and thus subject to the applicable liability limit.

"Occurrence" Basis  for Property Damage Is Very Costly

At the same time  occurrence coverage is generously offered for bodily injury, insurers' underwriters are less willing to award an “occurrence” endorsement when applied to property damage liability. And in the event the underwriters do make the change, the cost of the endorsement is significantly high. This endorsement is specifically dangerous from an underwriting perspective in connection with property damage liability sold under the products-completed operations hazard group. Getting rid  of the “caused by accident” language in such cases may have the unplanned result of making the policy a kind of “manufacturers’ malpractice” insurance coverage, protecting against usual and expected claims for re-execution of work or replacement of products because of faulty design or workmanship.

WTC, One Occurrence or Two Occurrence.

Using vague language by some insurers can hurt them sometimes. The WTC case is a prominent example. The WTC, which was recently acquired by Larry A. Silverstein. An insurance policy underwritten by 24 insurance companies was issued few weeks before the terrorist attack, covering the tower buildings for collective face amount of $3.55 billion. After the attack Larry Silverstein argued that the attack was 2 separate attacks, hence he would be entitled to double the face amount or $7.1 billion. The insurance companies argued that it was one attack that was planned by the same terrorists and was carried out simultaneously (although separated by 16 minutes between the actual impact of the planes.) It took courts several years when they finally divided the 24 insurers into two groups based on their definitions of 'occurrence.' The courts found in April 2004 that 10 of these companies did indeed have narrow definitions of 'occurrence' where the attacks were interpreted as a single occurrence. These companies managed to minimize their losses, and paid only based on share of coverage of $3.55 billion. The remainder of the companies have more liberal wording for 'occurrence' where the sequence of the 911 terrorist attack was interpreted as two occurrences, hence subjecting these companies to pay based on a total loss of $7.1 billion!
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