Is Uncertainty Over the Meaning of “Occurrence” Susceptible to a Drafting Solution?

Ken Adams, who runs the Adams Drafting blog, is a Lecturer in Law at the University of Pennsylvania Law School, and the author of the Manual of Style for Contract Drafting, asked me to write some commentary regarding the drafting of insurance policies and the interpretation of “occurrence.”  I was honored by the request, because Ken has been described as “a leading authority on modern and effective contract drafting.”

Ken asked, on his blog:

Can astute contract drafting can forestall all contract disputes? No, it cannot. Most contract disputes, sure. But not all.

Ken thought about this issue in the context of insurance policies, specifically, as to the interpretation of the term “occurrence.”

So here’s my question: Couldn’t insurance companies draft policies—and an insurance policy is just another kind of contract—in such a way as to bring clarity to the meaning of “occurrence”?

Ken, however, explains that he is not an expert in the area of insurance.  To get some perspective on the issue, he turned to Professor Adam Scales and me:

Normally I think through such issues on my own. But I know next to nothing about insurance, and I’m not inclined to give myself a crash course in the subject, so for my own edification I consulted two people who have experience with this issue. I offer you their thoughts, in case this is an issue of any interest to you.

In my discussion of the issue, I explain:

The meaning of “occurrence” is a question that has been contested for some time in courts across the United States, with questions of whether potential or actual underlying liability against a policyholder is considered an occurrence, and, if so, just how many occurrences are there under one or multiple insurance policies. Adding to the complexity, the question has been answered in multiple ways by state and federal courts (not to mention arbitrators) across the country.

* * *

Although the term was designed to be a clarification of coverage, it comes as no surprise to someone who represents policyholders when claims have been denied that insurance companies would have courts believe that instead, “occurrence” was designed to support coverage denials or limitations. Insurance companies also are happy to argue conflicting interpretations of “occurrence,” depending on which interpretation will mean less coverage for the policyholder in the dispute at issue.

For the conclusion that I offer, as well as the comments that Ken Adams and Adam Scales offer, head on over to the Adams Drafting blog to read more.

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