CGL policies are occurrence-based policies. This means, in a nutshell, that loss or damage needs to occur during the CGL policy’s period in order to trigger potential coverage under the policy.
How do you determine whether loss or damage occurred during a CGL policy’s period?
Typically courts have applied the manifestation theory as the theory to determine whether an occurrence triggered a CGL policy. Under the manifestation theory, an occurrence is triggered on the date loss or damage is discovered (manifests itself).
For example, assume construction on a project took place between January 1, 2013 through January 1, 2015. Post-completion, on May 1, 2015, you as the owner of the project discover water damage. Under the manifestation theory, May 1, 2015 would be the date of the occurrence. Thus, the CGL policy in effect on May 1, 2015 would be triggered for potential coverage.
Lately, however, there has been the trend to apply the injury-in-fact theory to determine whether an occurrence triggered a CGL policy. Under the injury-in-fact theory, an occurrence is triggered when the damage actually occurs, even if the damage does not manifest itself until months or years later.
Using the same example as above, assume that even though water damage was discovered on May 1, 2015, there is expert testimony that shows that the damage actually occurred during construction on January 2, 2014. Under the injury-in-fact theory, January 2, 2014 would be the date of the occurrence and the CGL policy in effect on January 2, 2014 would be triggered for potential coverage.
The injury-in-fact theory is sometimes better for claimants and insureds. Again, using the same example as above, assume the contractor does not have CGL coverage on May 1, 2015. Or, assume the contractor has CGL coverage for lesser policy limits than it had on January 2, 2014. In this scenario, the claimant and insured would want the injury-in-fact theory to trigger coverage in furtherance of maximizing potential insurance to cover a claim.
Remember to consult with counsel if you discover construction defects or are a contractor and receive notification of construction defects so that you can best maximize potential insurance to cover a claim and/or defend your interests with respect to the claim.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.