Thursday, September 11, 2008

Some occurrence issues

In a previous post I discussed occurrence-based policies. Basic to those policies is what the word "occurrence" means. Although policy definitions of occurrence have some variation, a typical definition is "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

In the vast majority of cases, whether or not something is an occurrence is straightforward. A car accident is an occurrence. A doctor accidentally amputating the patient's wrong leg is an occurrence. A power saw malfunctioning and injuring someone's hand is an occurrence. A fire is an occurrence. An assault by an insured person is not an occurrence; but an assault by an employee of an insured business may be an occurrence.

Not surprisingly, disputes over whether or not an event was an occurrence have to do with the intentions of the insured. If the insured expected or intended to cause an injury, there is no occurrence.

About a year ago, in the case of Terra Nova Ins. Co. v. Fray-Witzer, the Supreme Judicial Court of Massachusetts addressed the question of whether unsolicited faxes sent by an auction company, Metropolitan, were an occurrence. Metropolitan had purchased and faxed, through a contractor, unsolicited advertisements, including 360,000 such advertisements to Massachusetts fax machines. Unfortunately for Metropolitan, it is illegal under federal and Massachusetts law to send unsolicited faxes. When Metropolitan was sued in a class action lawsuit over the faxes, it sought insurance coverage from its commercial general liability insurers.

The Supreme Judicial Court of Massachusets decided that the sending of unsolicited faxes were not an occurrence. The class action plaintiffs (who would benefit from the insurance coverage) argued that although Metropolitan may have intended to transmit the advertisements, they did not intend to violate the law. The court disagreed with that argument. It stated that the injury to the class members (the consumption of paper and toner and unwanted use of the fax machines) was an inherently foreseeable result of Metropolitan's conduct.

In future posts I will discuss other issues raised by the definition of occurrence.

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