Recent Wisconsin “Occurrence” Decisions Need Clarification
Today, standard liability insurance policies require an occurrence to trigger coverage. The common definition of occurrence is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” or something substantially similar. While policies have not always contained a specific occurrence requirement, policies have historically required that the bodily injury or property damage for which coverage was sought result from an accident. Since 2013, the Wisconsin Supreme Court has decided four cases on the issue of what constitutes an occurrence to trigger insurance coverage under a liability policy. Instead of clarity, however, these four cases have resulted in confusion.
History of the Definition of Occurrence in Liability Policies1
Before 1966, standard liability policies had no occurrence requirement. Instead, the policies required the insured to prove that the bodily injury or property damage resulted from an accident. Accident was interpreted to mean a sudden, identifiable event.2 In 1966, policies were changed to include the word occurrence, and occurrence was defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”3 In 1986, the definition of occurrence was changed again. In particular, the phrase “not expected or intended from the standpoint of the insured” was moved—from the definition of occurrence in the insuring agreement to the intentional acts exclusion.4 Thus, a brief review of the history of the definition of occurrence in liability policies shows the historical focus on whether an accident took place from the standpoint of the insured.5
Four Wisconsin Supreme Court Decisions Analyzing Occurrence Since 2013
Since 2013, the Wisconsin Supreme Court has decided four cases on the issue of what constitutes an occurrence to trigger insurance coverage under a liability policy.
Schinner v. Gundrum6
In Schinner, decided July 12, 2013, the Wisconsin Supreme Court was tasked with determining whether there was an occurrence to trigger coverage under a liability insurance policy in the factual context of a guest assaulted by a third party at an underage drinking party held at a shed at the insured’s family-owned business.7 The insurance carrier argued that it had no duty to defend and indemnify the insured because his actions as a party host were intentional, such that there was no occurrence to trigger coverage.8
The insuring agreement of the policy provided coverage for “damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies.”9 The policy defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”10 The policy did not define accident.11
To determine whether there was an occurrence, the court took a two-step approach. First, it considered the appropriate standpoint from which to determine whether an injury is accidental. Second, it considered what constitutes an accident. The court determined that the appropriate standpoint from which to determine whether an injury is accidental is the standpoint of the insured, not the injured party:
Analyzing an accident from the standpoint of the injured party goes against recent insurance decisions in Wisconsin, which considered whether the insured acted with lack of intent in a particular situation. This approach is consistent with the idea that a court should interpret an insurance policy from the standpoint of a reasonable person in the position of the insured. Moreover, when interpreting an insurance contract a court should give effect to the intentions of the parties, not the intent of a third party.12
With this in mind, the court turned to what constitutes an accident, determining that the means or cause of the “injury-causing event” must be accidental, not the result: “A result, though unexpected, is not an accident; the means or cause must be accidental.”13 The court further noted that, as a general rule, there is no insurance coverage for injury resulting when an insured acts intentionally to cause bodily harm to another.14 The court also looked to public policy, noting that public policy weighed against finding an occurrence and allowing the host to escape responsibility for his intentional and illegal actions.
The court concluded that there was no occurrence under the policy:
We conclude that [the insured’s] intentional actions in hosting a large underage drinking party—actions that were illegal—and providing alcohol to an individual known to become belligerent when intoxicated, were a substantial factor in causing [the guest] bodily injury. These causes were not accidental. Since there was no occurrence under the homeowner’s policy, there was no initial grant of coverage to [the insured] under the policy.
Notably, while the dissent, authored by Justice Bradley, agreed with the majority on the appropriate standpoint from which to determine whether an injury is accidental and what constitutes an accident, it urged the opposite result—a finding that there was an occurrence to trigger insurance coverage. The dissent reasoned as follows:
As even the majority acknowledges, there is nothing in the record that suggests that [the insured] intended the assault or any subsequent injury to [the guest]. Accordingly, when viewed from the standpoint of the insured, the assault was unintended and was an ‘accident,’ constituting an ‘occurrence’ under the policy.15
Wilson Mutual Insurance Company v. Falk16
Approximately one and one-half years after Schinner, the Wisconsin Supreme Court decided (on the same day—December 30, 2014) two insurance coverage cases involving pollution-type property damage. One issue facing the court in both cases was whether there was an occurrence to trigger insurance coverage.
The first case, Wilson Mutual, involved a determination of whether well contamination caused by spreading manure as fertilizer constituted an occurrence to trigger insurance coverage.17 The insureds sought coverage for claims from their neighbors that they had negligently spread manure on their property and polluted their neighbors’ wells.18 The insureds sought coverage for each contaminated well, not the spreading of manure. The court accepted this argument, concluding that an occurrence took place “each time a unique well was contaminated,” as opposed to the single occasion of “the spreading of manure as fertilizer.”19
The insuring agreement of the two farm owner policies provided coverage for “‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’”20 The policy defined an occurrence as “an accident, 47 including repeated exposures to similar conditions, that results in ‘bodily injury’ or ‘property damage’ during the policy period.”21 The policy did not define accident.22
The court noted that Wisconsin is in the “jurisdictional majority” of states that define an occurrence as “unexpected or resultant damage.”23 On this basis, the court determined that because the seepage of manure into the wells was not expected or intended, the well contamination was an accident, and the exposure of manure to each unique well constituted an occurrence under the insurance policy.24 It is worth noting, though, that when determining how many occurrences had taken place, the court stated, “Wisconsin has adopted the ‘cause theory’ to determine the number of occurrences.”25
Notably, both the concurrence, authored by Justice Bradley, and the dissent, authored by Justice Abrahamson, criticized the majority’s analysis of occurrence. Justice Bradley agreed with the majority that Wisconsin defines an occurrence as “unexpected or unintended resultant damage,” and also agreed with the majority’s application of that definition to the facts of the case, but disagreed with the majority when it “stray[ed] from its original occurrence analysis and inconsistently state[d] that Wisconsin has adopted a cause theory.”26 Justice Abrahamson was critical that the majority’s approach to occurrence was inconsistent with the court’s approach to the issue in Preisler, the other case being decided simultaneously with Wisconsin Mutual and discussed below, and asked that her dissents in the two cases be read together.27
Preisler v. General Casualty Insurance Company28
Preisler involved a determination of whether decomposing septage seeping into the water supply constituted an occurrence to trigger insurance coverage.29 The complaint brought by the insureds’ neighbors alleged that the insureds (a septic pumping service) negligently applied and stored the septage, which seeped into the neighbors’ water supply.30
The insuring agreements of the commercial and contractor general liability policies provided coverage for “‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’”31 The policies defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”32 The court looked to Couch on Insurance for “its description of ‘occurrence’” in pollution exclusion cases:
Due to the fact that most policies define an “occurrence” to mean an “accident,” the pollution coverage issue often turns upon the intent of the insured. In making this determination, jurisdictions have focused on different aspects of the polluting process to assess the mindset of the insured. Most courts have focused on the damage caused by the pollution and have concluded that there is an occurrence when the insured did not expect or intend the resultant damage.33
The court then considered whether the circumstances fell within the policy definition of occurrence, noting that “[a] result, though unexpected, is not an accident; the means or cause must be accidental.”34 The court determined that the accident was the seepage of decomposing septage into the neighbors’ water supply and that, because the seepage was not intended, anticipated, or expected, the seepage constituted an occurrence to trigger insurance coverage.35
Like in Wilson Mutual, both the concurrence, authored by Justice Bradley, and the dissent, authored by Justice Abrahamson, criticized the majority’s analysis of occurrence. Justice Bradley was critical that the majority’s approach to occurrence was both unclear and inconsistent with Wilson Mutual, “a case decided on the same day, on the same issue”:
It is unclear whether the majority is embarking on a cause approach or damage approach in determining what constitutes an occurrence…. [T]he majority appears to take a cause approach to occurrence.
This conflicts with the apparent approach embraced in Wilson Mutual, which we also release today. Wilson Mutual acknowledgesthat “Wisconsin is in the jurisdictional majority in defining an occurrence as unexpected or unintended resultant damage.” Which precedent should future attorneys follow?36
Again, Justice Abrahamson was critical that the majority’s approach to occurrence was inconsistent with the court’s approach to the issue in Wilson Mutual and asked that her dissents in the two cases be read together.37
Wisconsin Pharmacal Company, LLC v. Nebraska Cultures of California, Inc.38
In Wisconsin Pharmacal, decided on March 1, 2016, the court considered whether there was an occurrence to trigger insurance coverage in the factual context of supplying an incorrect ingredient to be incorporated into a dietary supplement and a claim that supplying the incorrect ingredient was a breach of contract.39 The insuring agreement of the Netherlands CGL policy provided coverage for “‘bodily injury’ or ‘property damage’ … caused by an ‘occurrence.’”40 The policy defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”41 The policy did not define accident.42
The court focused on what constituted the occurrence:
While [the insured] intentionally provided a probiotic ingredient, the parties do not dispute that [the insured’s] provision of a defective ingredient was accidental. However, we are not persuaded, simply because [the insured] accidently supplied a defective ingredient, that this constitutes an “occurrence” for purposes of coverage under the policy.43
After surveying several Wisconsin cases, the court explained that an action may give rise to injury or property damage caused by an occurrence without the action itself constituting an occurrence.44 Accordingly, the court concluded that, while a breach of contract may give rise to property damage caused by an occurrence, a breach of contract, standing alone, does not constitute an occurrence.45 Thus, the court determined that accidentally providing a defective ingredient did not constitute an occurrence in and of itself, such that there was no occurrence to trigger coverage under the Netherlands policy.46
The dissent, authored by Justice Abrahamson, disagreed with the majority, finding that providing the wrong probiotic bacteria was an occurrence to trigger insurance coverage under the Netherlands policy.47
Conclusion: “Which Precedent Should Future Attorneys Follow?”48
As discussed above, there are two parts of the occurrence analysis: (1) the appropriate standpoint from which to consider whether an injury is accidental; and (2) what constitutes an accident. There seems to be no dispute that the appropriate standpoint from which to consider whether an injury is accidental is the standpoint of the insured. First, a brief review of the history of the occurrence requirement in liability policies shows that the historical focus has been on whether an accident took place from the standpoint of the insured. Second, the Wisconsin Supreme Court clarified this issue in Schinner, and the cases since Schinner have not suggested otherwise.
However, what constitutes an accident is now much less clear in light of the recent Wisconsin Supreme Court decisions. What is clear is that there are two potential approaches to what constitutes an accident: the cause approach and the damage approach. Schinner is clear in taking the cause approach. Wilson Mutual seems to take the damage approach, although, as Justice Abrahamson points out in her dissent, the opinion is ambiguous. However, Preisler (again, decided the same day as Wilson Mutual) seems to take the cause approach. Finally, Wisconsin Pharmacal appears to take the damage approach.
Ultimately, Justice Bradley’s question in her concurrence in Preisler remains largely unanswered, and what constitutes an accident to satisfy the occurrence requirement to trigger insurance coverage remains unsettled.
Mollie Kugler is an associate in the Milwaukee, Wisconsin office of Hinshaw & Culbertson LLP. She focuses her practice on insurance services, with an emphasis on insurance coverage issues. She also litigates many types of insurance defense cases. She received her J.D. from Fordham University School of Law in New York City in 2011, and her B.A. from Georgetown University in Washington, D.C., in 2008.
1 The Wisconsin Supreme Court outlined the history of the definition of occurrence in standard liability policies since 1966 in Schinner v. Gundrum. See 2013 WI 71, ¶¶ 41- 43, 349 Wis. 2d 529, 833 N.W.2d 685 (citing 3 Martha A. Kersey, New Appleman on Insurance Law Library Edition, § 18.02[a] (Jeffrey E. Thomas & Francis J. Mootz, III, eds., 2012)).
2 See id.
3 See id.
4 See id.
5 A brief review of the history of the definition of occurrence also shows a long-standing connection between the occurrence requirement and the intentional acts exclusion. Today, insurers often argue both that there is no coverage under a policy’s insuring agreement because there was no occurrence and that there is no coverage under a policy because the intentional acts exclusion applies to preclude coverage.
6 2013 WI 71, 349 Wis. 2d 529, 833 N.W.2d 685.
7 Id., ¶ 2.
8 Id., ¶ 3.
9 Id., ¶ 12.
10 Id., ¶ 13.
11 Id., ¶ 39.
12 Id., ¶¶ 51-52 (internal citations omitted).
13 Id., ¶¶ 66, 69 (citing Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶ 37, 268 Wis. 2d 16, 673 N.W.2d 65).
14 Id., ¶ 70.
15 Id., ¶ 100. The concurrence, authored by Justice Crooks, agreed with the dissent that the assault constituted an occurrence.
16 2014 WI 136, 360 Wis. 2d 67, 857 N.W.2d 156.
17 Id., ¶ 2.
18 Id., ¶ 1.
19 Id., ¶ 28.
20 Id., ¶ 29.
22 Id., ¶ 30.
23 Id., ¶ 32 (citing 9 Steven Plitt, et al., Couch on Insurance, § 127:4 (2d ed. 2008)).
24 Id., ¶¶ 32-33.
25 Id., ¶ 66. How many occurrences had taken place was significant because the policy provided $500 of coverage per occurrence. Id., ¶ 65.
26 Id., ¶¶ 73-74 (internal citations omitted).
27 Id., ¶ 82.
28 2014 WI 135, 360 Wis. 2d 129, 857 N.W.2d 136.
29 Id., ¶ 17.
30 Id., ¶ 21.
31 Id., ¶ 24.
33 Id., ¶ 25.
34 Id., ¶ 26 (citing Am. Girl, Inc., 268 Wis. 2d 16, ¶ 37).
35 Id., ¶ 28.
36 Id., ¶¶ 61, 64.
37 Id., ¶¶ 70-71.
38 2016 WI 14, 367 Wis. 2d 221, 876 N.W.2d 72.
39 Id., ¶ 51.
40 Id., ¶ 23.
41 Id., ¶ 51.
42 Id., ¶ 134 (Abrahamson, J., dissenting).
43 Id., ¶ 51.
44 Id., ¶¶ 52-55. Notably, one of the cases the court looked to was the American Girl case, the case frequently cited in support of the cause approach to accident and occurrence.
45 Id., ¶ 55.
46 Id., ¶ 56.
47 Justice Abrahamson further criticized the majority’s narrow approach to accident: “An insured’s intentional conduct that results in unintended consequences can be an ‘accident’ under an insurance policy. As Professor Pryor explains, ‘[i]f the insured intended the act that caused the injury, is this enough to take the claim outside the definition of accident? The answer is universally, and properly, no. To read the definition of accident so narrowly would exclude all but inadvertent acts, and would exclude much of the realm of negligent acts causing personal injury.’” Id., ¶ 138 (Abrahamson, J., dissenting) (quoting Ellen S. Pryor, The Economic Loss Rule and Liability Insurance, 48 Ariz. L. Rev. 905, 906, 920 (2006)). This critique seems directed at the majority’s analysis of the Evanston insurance policy, to which California law applied. However, Justice Abrahamson’s criticism is also worth considering in the context of the Netherlands policy (to which Wisconsin law applied), given that she determined there was an occurrence under the Netherlands policy, without further explanation.
48 See Preisler, 360 Wis. 2d 129, ¶ 64.