There’s an old story about famous Greek orators. When Demosthenes would speak, the people would say, “My, what a pretty speech!” But when Cato would speak, the people would say, “On to Carthage.” That’s because Cato was a one-issue guy (“Carthage must be destroyed”), and was excellent at convincing his listeners of the need for immediate action.
My first boss was kind of like that, except, instead of “Carthage must be destroyed,” he would say, “Occurrence is ambiguous.” No matter what insurance issue was presented, the answer was always the same: “Occurrence is ambiguous.” And, in many contexts, he was correct. Think, for example, about how many millions of dollars in legal fees were spent arguing over whether the terrorist attack on the World Trade Center was one occurrence for insurance purposes, or two. (The answer to that question was not even the same across policy forms.)
An interesting issue along these lines recently came up in federal court in California. Moon Marine (USA) is an importer and distributor of canned tuna. Unfortunately, consumers who bought the tuna got more than they bargained for in terms of what was in the cans, and ended up with salmonella poisoning. Moon Marine recalled the tuna, and filed a claim with its general liability carrier. The policy had a $1M per occurrence limit with a $2M aggregate. The carrier, General Insurance Company of America, argued that the 25 underlying claims for salmonella poisoning were a single “occurrence” under the insurance policy, and that the policyholder’s recovery was therefore confined to the single occurrence limit of $1M. According to General, Moon Marine’s liability arose from a single cause – the importation and placing into distribution of contaminated tuna from a single supplier in India.
Moon Marine, on the other hand, argued that each claimant’s injurious exposure to salmonella was itself a separate occurrence. Moon Marine also argued, alternatively, that the underlying cause of the salmonella outbreak remained unknown, and that a factual dispute remained as to whether there was a single cause, or multiple causes representing independent occurrences.
The factual background of the contamination was, well, disgusting. The FDA inspected the processing facility in India, and found multiple possible sources of contamination. The FDA noted, for example: “Tanks used for the storage of process waters have apparent visible debris, filth, and microbiological contamination…Apparent bird feces were observed on the ice manufacturing equipment at [the facility]; insects and filth were observed in and on the equipment…Some of the floor and wall tiles in the tuna processing area are broken and cracked, not allowing for proper cleaning. After cleaning, the ceiling directly above the in-process tuna line was observed to have visible product residue. After cleaning, product residue and rust were observed on knives and utensil storage boxes. These knives were used to cut raw tuna.” (Hungry yet?)
Faced with this record, the Court framed the issue as follows: “The question is whether… Distributors measure the number of occurrences by the number of proximate causes of the harm, or whether their distribution merges all proximate causes into one.” The Court noted that “in the majority of jurisdictions, the number of occurrences is determined by the number of proximate causes rather than the number of individual injuries.”
In the end, the Court punted, writing as follows: “In order to decide what the occurrence is in this action, we need to trace the accused products back to the original source to determine the nature of the specific defect, recognizing that according to the FDA multiple strains of salmonella might have been at work. This might be accomplished by tracing the defect to multiple batches to see if one particular strain was at fault.” The case of the disgusting tuna continues.
And so, once again, my boss was right: Occurrence is ambiguous.