What Is an Occurrence in Insurance?

An insurance policy functions as a contract, with its language dictating terms and conditions. Understanding specific terminology is fundamental for policyholders to comprehend coverage. A central concept in liability insurance, particularly within Commercial General Liability (CGL) policies, is the “occurrence.” Grasping its precise meaning clarifies when an insurance policy’s protections are activated. This article will explain the definition of an “occurrence” and its implications for insurance coverage.

The Core Definition of an Occurrence

In general liability insurance policies, an “occurrence” refers to an accident, which includes continuous or repeated exposure to conditions. This event must result in bodily injury or property damage that was neither expected nor intended from the perspective of the insured. The definition emphasizes that the damage or injury must be accidental, meaning it was unforeseen and unintended. If an incident arises from deliberate actions, coverage may be denied.

The phrase “continuous or repeated exposure to conditions” acknowledges that not all damaging events are sudden. For example, gradual damage from a slow leak or ongoing exposure to a harmful substance, like asbestos, can qualify as a single occurrence if it stems from the same general harmful conditions. The critical element remains that the resulting bodily injury or property damage was not anticipated or planned by the insured, thereby distinguishing accidental harm from intentional acts. A roofing contractor accidentally dropping a tool and damaging a car, or overspray from painting affecting nearby property, serve as examples of unintended incidents that would typically qualify as an occurrence.

Distinguishing an Occurrence from a Claim

While often used interchangeably in everyday conversation, an “occurrence” and a “claim” have distinct meanings in insurance. An occurrence represents the underlying event or incident that causes bodily injury or property damage. This event is the trigger for potential coverage under an insurance policy. For instance, a customer slipping and falling in a business due to a wet floor constitutes an occurrence.

In contrast, a claim is the formal demand made by an injured party to the insurer for compensation following an occurrence. The customer who slipped on the wet floor would then file a claim seeking medical costs or other damages. This distinction is important for policyholders because it dictates when and how coverage is activated.

Determining a Single or Multiple Occurrences

Determining whether a series of related events constitutes a single occurrence or multiple occurrences is a complex aspect of insurance coverage, directly impacting policy limits and deductibles. Most policies provide coverage limits per occurrence, meaning a single event might be subject to a specific cap. Insurers and courts often rely on the “cause test” or the “effect test” to make this determination.

The “cause test,” which is the majority approach in most states, focuses on the proximate cause or causes of the injury or damage. Under this test, if a single root cause leads to multiple injuries or damages, it is considered one occurrence, even if the injuries manifest at different times or locations. For example, a single faulty product batch distributed to multiple customers that subsequently causes injuries to several individuals over time would be deemed a single occurrence under the “cause test.” Similarly, continuous discharge of pollutants from a single source resulting in environmental damage over an extended period might also be treated as a single occurrence.

Conversely, the “effect test,” a minority approach, focuses on the number of distinct injuries or damages. Under this test, each individual injury or instance of property damage could be considered a separate occurrence, potentially leading to multiple claims and the application of multiple per-occurrence limits. The specific wording of the insurance policy and the factual context of the loss are factors courts consider in these determinations.

Understanding Occurrence-Based Coverage

Occurrence-based insurance policies are designed to cover incidents that happen during the policy period, regardless of when the claim is reported. The coverage is triggered by the date the bodily injury or property damage actually occurs, not by the date the claim is filed. This characteristic provides lasting protection for events that took place while the policy was active, even if the policy has since expired or been canceled.

This type of policy is particularly relevant for “long-tail” claims, which involve injuries or damages that may not become apparent until years after the initial occurrence. For instance, a chemical exposure or a structural defect in a building might lead to health issues or property damage decades later. An occurrence-based policy active at the time of the exposure or defect would respond to a claim filed years later. This differs from “claims-made” policies, which typically only cover claims made and reported during the policy period. Understanding the occurrence trigger date is important for policyholders, especially when considering potential liabilities from past operations or latent injuries, as it ensures coverage remains available for incidents that occurred within the policy’s effective dates.