Policy Expires, Accident Occurs: Insurer on the Hook (Why You Can Never Read a Policy Too Carefully)
Applying Georgia law, the 11th Circuit has concluded that the definition of “occurrence” is ambiguous. The take away is: don’t assume that, if there is an accident after a policy expires, there is no coverage.
The facts are simple. In Lee v. Universal Underwriters Insurance Company, the insured negligently repaired the claimants’ vehicle, the occurrence-based policy expired and then the claimants were involved in a serious car crash.
The claimants sued the insured and then entered into a $5.4 million consent settlement and asked the insurer to pay it. The insurer denied coverage because the policy expired before the crash. The definition of occurrence was:
“OCCURRENCE”, with respect to COVERED POLUTION DAMAGES, INJURY Groups 1 and 2 means an accident, including continous [sic] or repeated exposure to conditions, which results in such INJURY or COVERED POLLUTION DAMAGES during the Coverage Part period neither intended nor expected from the standpoint of a reasonably prudent person.
The insurer argued the language unambiguously required the injury to take place during the policy period. The 11th circuit said, “Not so clear.”
Instead, the court found the policy does not clearly state that it applies only to injuries occurring during the policy period or the types of accidents that might trigger coverage. The policy identifies injury as distinct from “occurrence” and “accident,” and, as a consequence, the court said it was reasonable to interpret the policy to require that either the accident (which it held was the negligent repair) or the injury occur during the policy period. On that basis the policy was ambiguous, and, since the “accident” occurred during the policy, there was coverage.
Read the policy very, very carefully and don’t assume the traditional interpretation of “occurrence” is going to apply in every case.
Image Credit: Kermit Frosch
Posted In: Policy Construction