How Many Times Does the Insurer Pay – Multiple Occurrences’

January 5, 2005

With the recent news that some insurers will be liable for “two events” relating to the World Trade Center attacks on Sept. 11, many in the insurance world have focused their attention to the “number of occurrences” question.

Historically, there are certain claims or sets of claims that can be considered “one occurrence” under the terms of a CGL policy. These “one occurrence” claims are often factually similar and extend beyond one policy period triggering numerous policies. In fact, the number of occurrences question comes up in a variety of different fact settings such as those involving: food poisoning claims, construction defect and building claims, discrimination claims, environmental claims, and asbestos claims.

The determination of whether a certain grouping or set of claims may be considered “one occurrence” can have a profound impact on the amount of coverage available to the insured. Thus, the “number of occurrences” question is most often presented when there is a question as to calculations associated with the erosion of an aggregate, whether umbrella or excess coverage should be pierced, or whether the insured should be responsible for numerous deductibles or self-insured retentions.

The disputes that develop concerning whether a particular set of claims can be considered as arising from one occurrence finds their genesis in the language of the CGL policy. Many policies define “occurrence,” in part, as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Thus, the question develops – What caused the loss?

For instance, was a global decision to discriminate as part of the hiring process the “occurrence,” or was each individual instance of discrimination an “occurrence?” Such questions have caused insurers significant troubles as underwriting and actuarial practices may not have analyzed the potential losses that could follow an adverse “number of occurrences” decision.

Courts have long faced scenarios that may give rise to a finding of more than one occurrence. Unfortunately, courts have not been uniform in their analysis, and several different tests have been utilized to address the complexities of the “number of occurrences” question. Many courts have adopted a cause test where the analysis focuses on whether all of the losses or claims can be traced to one originating cause.

For instance, it has been argued that all bodily injury claims facing a particular insured should be treated as one occurrence (rather than individual claims for each underlying claimant) because the cause of such claims was the insured’s decision to manufacture asbestos containing materials. Other courts have also adopted an effect test. Under the application of an effect test, courts seek to analyze the “end-result” or effect of the claims to determine whether there is one occurrence. Finally, a limited number of courts have employed an unfortunate event test to determine the number of occurrences. Under this approach, courts look to whether the individual losses can be characterized as having occurred close in time or space to be considered one occurrence.

The most difficult aspect of the “number of occurrences” question is that courts may identify a particular test as part of its analysis and subsequently describe factors that are more consistent with the application of an entirely different test. Thus, there is a lack of consistency in application of the tests. In the end, there are a variety of factors that seem to play a significant role in determining how many occurrences are at issue. The amount and type of insurance coverage maintained by the insured can seemingly affect the outcome.

For instance, whether there are deductibles or self-insured retentions to be exhausted, whether the limits are relatively low when compared to the insured’s total exposures, or whether the insured is confronted with insurers who are declared insolvent may all play into the court’s decision-making process when presented with such an issue. Since a finding on this issue may drastically alter the amount of coverage available to the insured, courts often quickly recognize the gravity of an adverse ruling on the issue for the insured.

The number of occurrences question has far reaching effects on many different parties: insureds, insurers, and reinsurers. Clearly, insureds should closely evaluate whether a given set of claims would be ripe for a “number of occurrences” analysis. Failure to examine the possibility of how a group of claims may be classified for “occurrence” purposes could result in a failure to maximize all available coverage. Concurrently, insurers should always be aware that insureds may seek to maximize coverage via a number of occurrence analysis.

In sum, since the application of the tests utilized by the courts to address the problems in this area is inconsistent and quite dependent on what state’s law is applicable to the coverage question, all involved in the claims process should be aware of the how many times the insurer may be asked to pay.

Andrew S. Boris is a partner in the Chicago office of Tressler Soderstrom Maloney & Priess. His practice is focused on litigation and arbitration of insurance coverage and reinsurance matters throughout the country, including general coverage, directors and officer’s liability, professional liability, environmental, and asbestos cases. Questions and responses to this article are welcome at The Tip of the Month runs each month on

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