Occurrence Insurance

Recent insurance changes have resulted in two types of occurrence wording forms. You need to be aware of some of the limits of the new Insurance Bureau of Canada (IBC) CGL 2100 form. When a claim is presented to the insurance adjuster the determination has to be made, does this trigger the policy?

A policy is triggered if the incident occurs during the policy period - so when did the event happen and what is the policy term is examined. Next the adjuster looks for property damage or bodily injury as it is defined in the policy. Lastly, the exclusions, limitations and warranties are examined.

The "old" wordings determined that the date of loss is determined by certain ways. One is the exposure theory - the first exposure to the condition that caused the damage or injury - in this case ingesting a toxic substance. Also date of loss can be determined by the actual date of the loss - called the actual injury in fact. This could be a water damage claim and the first drop of water to land on your hardwood floors. There is also when the damage manifests itself - the first stain on the floor or the start of an illness due to the ingestion of the toxin. The last is called the triple-trigger theory and it could include all of the above. This last situation can result in a "long tail" claim.

The "new" wordings no longer recognize the triple-trigger for determining which policy will respond to an alleged loss. The date of the loss is the date on which the insured becomes aware of it. This opens up the possibility that the policy limits are not sufficient and you, the insured could now have financial responsibility at some point for your legal defense and indemnity.

Some claims which could develop into a long tail could include a construction defect, an illness resulting from the chemicals in plastic water bottles or problems in health developing from lead in children's toys. All of these are current issues we hear about in the media.

Since the coverage triggers are different for these two policies so it is important to consider any "long tail" losses. A long tail loss is very complex, can occur over a long period of time and out of sight. It is difficult to know a claim will develop into a long tail ahead of time. It is very important that you discuss this with your agent or broker when moving from one insurance company to another.