Written by Andrew Strobo, Esq.
Edited by Bill Pfund. Esq.
Occurrence-based liability insurance policies are peculiar because the term “occurrence” is ambiguous and unhelpful to insureds. In fact, the Merriam-Webster dictionary simply defines the term occurrence as “something that occurs.” Moreover, occurrence-based policies do not provide coverage based on when the “occurrence” takes place, but rather when either bodily injury or property damage “occurs” within the policy period. This raises an important question: what is an “occurrence” and what role does it play in determining coverage?
Occurrence-based liability policies insure against loss arising from bodily injury or property damage, but only when an “occurrence” causes such loss. Although the meaning of an “occurrence” may differ from policy to policy, most define the term as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” In other words, an “occurrence” is an accident. Indeed, the Virginia Supreme Court has recognized that “[t]he terms ‘occurrence’ and ‘accident’ are ‘synonymous…” AES Corp. v. Steadfast Ins. Co., 283 Va. 609 (2012). As a result, what is and is not an accident is an important question in determining coverage. After all, practically every person seeking coverage will claim that an accident caused his or her damages regardless of what actually happened.
Under Virginia law, an intentional act directly resulting in harm is obviously not an accident. The Virginia Supreme Court has held that an “accident” is “commonly understood to mean an event which creates an effect which is not the natural or probable consequence of the means employed and is not intended, designed, or reasonably anticipated.” AES Corp. v. Steadfast Ins. Co., 283 Va. 609 (2012). In other words, an “accident” occurs when (1) the actor does not subjectively intend for the result of his action and (2) the result is not a natural or probable consequence of the insured’s actions. This second, objective criteria serves an important limitation that holds insureds personally accountable because it presumes that they are aware of the natural or probable consequences of their intentional acts and omissions. Thus, “[i]f an insured knew or should have known that certain results were the natural or probable consequences of intentional acts or omissions, there is no ‘occurrence’ within the meaning of a CGL policy.” Id (emphasis added).
In conclusion, Virginia law assumes that an insured is aware of the natural and probable consequences of his or her actions such that an occurrence-based liability policy may not provide coverage even if the insured subjectively did not anticipate the claimant’s damages.