Some consider insurance coverage law as exciting as watching paint dry on a basement wall. Others approach the subject matter with enthusiasm, akin to delving into a spirited philosophical argument about the nature of truth, beauty, or excellence.
The understanding of the term “occurrence” in an insurance policy sometimes feels more like philosophy than law. The subject may involve the exploration of temporal and spatial relationships, the unfortunate event test, and intervening agents and factors.
In Selective Ins Co of America v Rensselaer (COA), the New York’s Court of Appeals recently examined the definition and application of the term “occurrence” used in a police professional liability policy issued to the County of Rensselaer by Selective Insurance Company. The Policy defined “occurrence” as “an event, including continuous or repeated exposure to substantially the same general harmful conditions, which results in …’personal injury’… by any person or organization arising out of the insured’s law enforcement duties.” The policy went on to cite four specific examples that were “agreed to constitute one ‘occurrence’.” Of significance, the Policy also contained a deductible of $10,000 per occurrence, inclusive of legal fees and expenses.
In Selective, the County was faced with a class action involving about 800 class members arising out of the County’s policy of strip searching all people entering its jail regardless of the nature of the crimes alleged to have been committed. The problem was the 2nd Circuit previously declared such policies unconstitutional. Faced with such bad law, the County and its insurer Selective elected to settle the action for $1,000 per class member and $5,000 for the class representative.
After the settlement funds were paid by Selective, it demanded payment of the Policy’s deductible from the County and argued that the search of each class member was a separate occurrence. Thus, according to Selective, the County was responsible for the entire indemnity payment of about $800,000 plus associated legal fees. In response, the County countered that the entire action constituted a single occurrence and refused to pay more than a single $10,000 deductible.
The Court held that the claim of each separate class member constituted a single occurrence. It emphasized that unambiguous provisions in an insurance policy should be given their plain and ordinary meaning and noted that “a court is not free to alter the contract to reflect its personal notions of fairness and equity.” A good omen for Selective.
The Court of Appeals enforced what it considered the “plain language” of the Selective policy: the improper strip searches of arrestees over a four-year period constituted separate occurrences under the policy language. The definition of an “occurrence” in the Policy covered personal injuries to an individual as a result of harmful conditions. It did not permit the grouping of individuals unless that group was part of an organization. Each strip search performed over a multi-year period harmed a specific arrestee as an individual and constituted a single occurrence.
The Selective case confirms New York’s reputation as a “pro-insurer” state. The Selective Court’s language should temper a lower court’s urge to re-write a plainly written policy provision. The Selective decision also highlights the necessity of hammering out before a settlement is reached whether a civil suit involves one or multiple “occurrences,” particularly when a significant policy deductible applies.