Commercial General Liability Policies – Occurrence – Fires
SECURA Ins. v. Lyme St. Croix Forest Co., 2018 WI 103 (filed 20 Oct. 2018)
HOLDING: A fire that spread over multiple properties was considered a single occurrence for purposes of coverage under a commercial general liability (CGL) policy.
Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
SUMMARY: In 2013 the “Germann Road Fire” burned 7,442 acres, destroying the real and personal property of many owners. The fire was sparked by a piece of logging equipment owned by Ray Duerr Logging LLC. Secura Insurance insured Ray Duerr Logging under a CGL policy that contained a $2 million general aggregate policy limit and a $1 million per-occurrence limit. The CGL policy also contained an endorsement that reduced the per-occurrence policy limit to $500,000 for property damage “due to fire, arising from logging or lumbering operations” (¶ 7).
Secura brought this declaratory-judgment action to determine its exposure. It argued that the $500,000 logging limit governed. Parties seeking damages argued that the $2 million limit applied because each “seepage” of the fire onto another’s property constituted a separate occurrence. The circuit court agreed, relying on Wilson Mutual Insurance Co. v. Falk, 2014 WI 136, 360 Wis. 2d 67, 857 N.W.2d 156. On this issue the court of appeals affirmed in an unpublished decision.
The supreme court reversed in an opinion authored by Justice A.W. Bradley.
The policy defined an occurrence as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions” (¶ 18). Case law recognizes two distinct approaches when determining whether an event constitutes a single occurrence or multiple occurrences. Wisconsin case law follows the “cause theory,” not the “effect theory.” The cause theory holds that “where a single, uninterrupted cause results in all of the injuries and damage, there is but one ‘accident’ or ‘occurrence’” (¶ 21).
The supreme court held that contrary to the court of appeals’ reasoning, the “seepage” theory applied in Falk was not controlling. Falk involved wells polluted by manure. The supreme court distinguished Falk on four grounds, also finding support for its conclusion in case law from other states.