Insurance policies define “Occurrence.” Generally, policies define an “occurrence” as an “accident” or “repeated exposure to the same or similar” conditions. Liability policies require an occurrence for coverage and require an insured to give prompt notice of any “occurrence” that could result in a claim.
First-party coverage, however, often does not rely on the word “occurrence.” Most policies require an insured to give prompt notice of a “loss.” Recently, the United States District Court for the Western District of Virginia determined if “occurrence” and “loss” meant the same thing and what impact the use of each word had on an insured’s duty to timely report a first-party claim.
In Wheeler v. Standard Fire Ins. Co., 2016 U.S. Dist. LEXIS 38255, Wheeler suffered damage to her barn when trees fell on the porch of the barn. Thinking that the barn repair cost would be less than her deductible, Wheeler had unidentified day laborers repair the damage. She did not notice any other damage at the time.
Several months after the repair, Wheeler heard rumbling noises and then the foundation basement wall of the barn collapsed on the same side of the barn where the trees fell. Wheeler reported the earlier damage and the wall collapse to her insurer. Experts determined that the trees falling months earlier led to the wall collapsing. Despite that, the insurer denied coverage for several reasons, the first that Wheeler did not “promptly” report her “loss” to the insurer. The insurer claimed that Wheeler should have reported her claim when the trees fell on the barn.
The Honorable Norman K. Moon first noted that “occurrence” is defined in the policy but “loss” is not. An “occurrence” is an “accident” or an “event” according to the policy. The Court resorted to dictionary definitions for “loss,” applying “its ordinary meaning” to the claim. A “loss” is “synonymous with damage or harm, particularly in the insurance context.” Citing several cases, the Court noted that a “loss” is more of a “condition” “rather than an event or ‘occurrence.’” For first-party coverage, the policy required that an insured report a “loss” as opposed to an “occurrence.” (See page 11-12 of Wheeler).
The Court ruled that that the falling of the trees was an “occurrence” that caused “loss.” “Only a ‘loss’ triggered [Wheeler’s] duty to notify.” Id. The Court found a “loss” occurred when damage happened, i.e. when the wall collapsed. Failure to notify the insurer when the trees fell did not breach the notice provisions with regard to the wall collapse. The Court rejected the insurer’s summary judgment motion based on a late notice coverage denial.
An insurer chooses its policy language and Courts strictly construe the policy language against the insurer. If a policy does not define a term or word in the policy, particularly an important term like “loss,” an insurer can often get an unintended result in Court. It is important to know your policy definitions and, if necessary, issue endorsements better defining important policy provisions to avoid results like Wheeler.