Trigger of Coverage – Which Trigger Applies?
By Amanda K. Anderson, Esquire
Boyle, Gentile, Leonard & Crockett, P.A.
I. What is Trigger?
Typically, a Commercial General Liability (“CGL”) policy covers “property damage [that] occurs during the policy period,” when the damage is caused by an “occurrence.” “Occurrence” is defined by the typical post-1986 ISO CGL form as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” This type of policy is referred to as an “occurrence policy.” Arad v. Caduceus Self Ins. Fund, Inc., 585 So. 2d 1000 (Fla. 4th DCA 1991). Today, some CGL policies explicitly refer to a “trigger of coverage,” and if so, that “trigger” applies.
Trigger is simply “a label for the event or events that under the terms of the insurance policy determines whether a policy must respond to a claim in a given set of circumstances.” Robert D. Fram, End Game: Trigger of Coverage in the Third Decade of CGL Latent Injury Litigation, 454 PRACTICING L. INST. 9 (1993). In most circumstances, the event causing damage occurs simultaneously with the resulting harm. The issue is more complex where the damage occurs (or is reasonably alleged to have occurred), but is not discovered until a later time. Courts in different jurisdictions have reached disparate conclusions under comparable facts and identical policy language. In continuing damage or delayed discovery cases, which is the only time a trigger argument applies, courts have adopted no fewer than five trigger theories. Dow Chems. Co. v. Assoc. Indem. Corp., 724 F. Supp. 474, 478-79 (E.D. Mich. 1989).
II. Five Main Theories Regarding Trigger of Coverage.
First is the continuous trigger approach, which holds that all policies on the risk from the initial exposure through manifestation are triggered. See e.g., Keene Corp. v. Ins. Co. of N. Am., 667 F.2d 1034 (D.D.C. 1981).
Second is the exposure theory, which presumes that damage occurs when exposure to the causative agent or event takes place and not when the symptoms of the exposure become evidence. See e.g., Ins. Co. of N. Am. v. Forty-Eight Insulations, Inc., 633 F.2d 1212 (6th Cir. 1980).
Third is the actual injury or injury-in-fact theory, which focuses on when the injury or damage actually occurred, irrespective of when it was found, who found it or who was capable of finding it. (This trigger is sometimes referred to as the “actual damage” or “damage-in-fact” trigger, though the more common phrase uses the term “injury”, regardless of whether the context is property damage or bodily injury.) If it happened in more than one policy period, then multiple policies of insurance may be triggered. See Axis Surplus Ins. Co. v. Contravest Construction Co., 2012 WL 2048303, at * 1 (M.D. Fla. June 5, 2012), 23 Fla. L. Weekly Fed. D. 279; Johnson-Graham-Malone, Inc. v. Amerisure Ins. Co., 18 Fla. L. Weekly Supp. 870 (Fla. 4th Cir. Apr. 29, 2011) appeal dismissed by Amerisure Ins. Co. v. Johnson-Graham-Malone, Inc., 66 So. 3d 415 (Fla. 1st DCA 2011); see e.g., Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W. 3d 20 (Tex. 2008); Am. Home Prods. Corp. v. Liberty Mut. Ins. Co., 565 F. Supp. 1485 (S.D.N.Y. 1983), aff’d as modified, 748 F.2d 760 (2d Cir. 1984).
Fourth is the manifestation theory, which holds that policies are triggered when the damage becomes “manifest,” or is discovered. Eagle-Picher Indus., Inc. v. Liberty Mut. Ins. Co., 682 F.2d 12 (1st Cir. 1982). The question always remains: to whom must the property damage have manifested.
Last, there is a double-trigger theory, which holds that there are two triggers, exposure and manifestation, regardless of whether damage continues between those two events. See e.g., Zurich Ins. Co. v. Raymark Indus., Inc., 514 N.E. 2d 150 (Ill. 1987). As Dow Chemicals counsels, however, “trigger rulings are most appropriately derived by reference to the operative policy language, as opposed to the judicial gloss placed upon similar language in ostensibly analogous cases.” Dow Chemicals 724 F. Supp. at 479.
III. Case Law in Florida
There are two main theories of trigger in Florida: (1) injury-in-fact; and (2) manifestation. The focus is on the “property damage” as the signaling event – the only event under the language of the CGL – that must “occur” during the policy period in order to be covered. See Travelers v. C.J. Gayfer’s, 366 So. 2d 1199 (Fla. 1st DCA 1979); Johnson-Graham-Malone, 18 Fla. L. Weekly Supp. 870; and Trizec v. Biltmore, 767 F. 2d 810 (11th Cir. 1985)(Florida courts have rejected the “manifestation trigger” in favor of coverage triggered by property damage alone taking place during the policy period).
a. Plain Meaning Analysis and Florida’s Rules of Contract Construction Support the Injury-in-Fact Trigger
The primary case in Florida holding that the “injury-in-fact” trigger applies is Axis Surplus Ins. Co. v. Contravest Construction Co., 2012 WL 2048303, at * 1 (M.D. Fla. June 5, 2012), 23 Fla. L. Weekly Fed. D. 279. The court reasoned that because the policy at issue required the insurer to cover “property damage . . . caused by an occurrence,” just as the court in Trizec did, the physical injury or destruction of tangible property had to occur during the policy period in order to trigger coverage, and thus, “injury-in-fact” was the applicable trigger. Id.
Under Florida law, courts must construe insurance policies according to the plain meaning of the policy language. Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000); see also Fla. Stat. § 627.419(1) (“Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any application therefore or any rider or endorsement thereto.”). Florida rules of insurance policy interpretation do “not allow courts to rewrite contracts, add meaning that is not present, or otherwise reach results contrary to the intentions of the parties.” Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979). If a policy is silent on an issue, a court may not “add to or read in language not contained on the face of the policy.” Meister v. Utica Mut. Ins. Co., 573 So. 2d 128, 130 (Fla. 4th DCA 1991).
Furthermore, in the case of Mid-Continent Cas. Co. v. Frank Casserino Const., Inc., the Middle District interpreted a CGL policy in support of the proposition that damage must occur during the policy period even if it is not discovered until after the policy expires by holding that that a plaintiff’s expert’s affidavit could provide support showing that even though damage had not yet been discovered, that damage was occurring during the policy period. Mid-Continent Cas. Co. v. Frank Casserino Const., Inc., 721 F. Supp. 2d 1209 (M.D. Fla. 2010).
Additionally, Judge Hugh A. Carithers of the Duval County Circuit Court of the Fourth Judicial Circuit, in the case of Johnson-Graham-Malone, Inc. v. Amerisure Ins. Co. held that the carrier owed the insured a duty to defend because the operative underlying complaint gave rise to at least a potential that covered property damage actually occurred during one or more of the carrier’s CGL policies. Johnson-Graham-Malone, Inc, 18 Fla. L. Weekly Supp. 870 appeal dismissed by Amerisure Ins. Co. v. Johnson-Graham-Malone, Inc., 66 So. 3d 415 (emphasis added). Judge Carithers relied on the case of Travelers Insurance Co. v. C.J. Gayfer’s & Co., 366 So. 2d 1199 (Fla. 1st DCA 1979).
C.J. Gayfer’s is one of many Florida cases that have long held that, under an occurrence-based CGL policy where damage and the causative event do not occur simultaneously, it is the damage that must occur, or be fairly alleged to occur, during the policy period, in order for coverage to exist and not the happening of the event or act that caused the damage. The applicable line of cases begins in 1964 with New Amsterdam Casualty Co. v. Addison, 169 So. 2d 877 (Fla. 2d DCA 1964), in which the Second District Court of Appeal held, as a matter of first impression in Florida, that “[t]he time of the occurrence of an accident, within the meaning of a policy of liability, is generally deemed to be the time when the complaining party actually was damaged and not when the wrongful act was committed.” Id. at 886.
Relying on New Amsterdam Casualty Co. v. Addison, the First District Court of Appeal in 1978 similarly held that occurrence-based liability coverage is triggered “when the complaining party is damaged,” regardless of when the causative act occurred. Hertz Corp. v. Pugh, 354 So. 2d 966, 969 (Fla. 1st DCA 1978). A year later, the same court held in C.J. Gayfer’s, that “the phrase ‘caused by an occurrence’ informs the insured that an identifiable event other than the causative negligence must take place during the policy period.” C.J. Gayfer’s, 366 So. 2d 1199. The term ‘occurrence’ is commonly understood to mean the event in which negligence manifests itself in property damage or bodily injury, and it is used in that sense [in the policy].” Id. at 1202. Although the court used the term “manifest”, it applied the actual injury/injury-in-fact trigger: the date the water damage actually occurred. See Id.
As discussed supra, in Trizec, the Eleventh Circuit relied in part on this line of cases to hold that under Florida law and the language of an occurrence-based policy, damage that continues, or is fairly alleged to continue, through multiple policy periods can trigger coverage under each successive policy. Trizec, 767 F. 2d 810. The court specifically rejected manifestation as a trigger of coverage. Id. at 813 (emphasis added). Under facts similar to those here, Trizec involved a carrier’s duty to defend its policyholder against a claim alleging property damage caused by negligent construction of a roof deck. Id. The construction took place from 1971 to 1975, the carrier was on the risk from 1972 to 1976, and the damage was discovered in 1979. Id. The carrier claimed it did not have a duty to defend, arguing “the occurrence of the damage can only trigger coverage where it is discovered or has ‘manifested’ itself.” Id.
The court disagreed: “the language of the policy itself belies Liberty’s assertions,” adding:
The potential for coverage is triggered when an “occurrence” results in “property damage.” There is no requirement that the damages “manifest” themselves during the policy period. Rather, it is the damage itself which must occur during the policy period for coverage to be effective. Here, the actual date that the damage occurred is not expressly alleged, but the language of the complaint, at least marginally and by reasonable implication, could be construed to allege that the damage (cracking and leaking of roof deck with resultant rusting) may have begun to occur immediately after installation, 1971 to 1975, and continued gradually thereafter over a period of time . . . . Because the complaint alleges facts which fairly bring the cause within the coverage of the insurance contract, there is a potential for coverage and [the carrier] owes [the policyholder] a duty to defend the main action.
Id. at 813 (internal citation omitted); see also Boardman Petroleum, 135 F.3d at 754 n. 13 (“[c]ourts applying Georgia, Florida, and Alabama law . . . have rejected the ‘manifestation trigger of coverage’ approach in favor of an approach under which coverage is triggered by property damage alone taking place during the policy period” citing Trizec)(emphasis added).
b. Cases Supporting the Manifestation Trigger
The primary case holding that “manifestation” is the applicable trigger in Florida is Auto Owners Ins. Co. v. Travelers Cas. & Surety Co. , 227 F.Supp. 2d 1248 (M.D. Fla. 2002). The issue becomes the question of whether there can be more than one manifestation. See Boran Craig Barber Homes, Inc. v. Mid-Continent Cas. Co., Case Number 2:06-cv-00089-UA-SPC (M.D. Fla. Feb. 19, 2009)(holding there can be more than one manifestation).
The Middle District of Florida then uniquely took an odd turn with regard to trigger of coverage decisions, in the Auto Owners case, in support of the position that the appropriate trigger of coverage is manifestation. In Auto Owners, the court was called upon to decide whether a policy covered property damage caused by a leaking pipe, where the leak was discovered after the applicable policy expired but the damage occurred during the policy period. Auto Owners, 227 F.Supp. 2d 1248.
The court started out in the right direction, finding that in Florida “the potential for coverage is triggered when an ‘occurrence’ results in ‘property damage.’ There is no requirement that the damages be ‘manifest’ during the policy period. Rather, it is the damage itself which must occur during the policy period for coverage to be effective.” Id. at 1265-66 (citing Trizec, 767 F. 2d at 813).
Two paragraphs later, however, the court, without explanation or solace in logic and in contravention to Trizec, states, “Florida courts follow the general rule that the time of occurrence within the meaning of an ‘occurrence’ policy is the time at which the injury first manifests itself”, and thus “the ‘trigger’ for coverage for the CGL policies is when the damage occurs and if damage is continuously occurring, the ‘trigger’ is the time the damage ‘manifests’ itself or is discovered.” Id. at 1266. The court then held that the trigger of coverage (and the occurrence) was the date the leaking pipe was discovered, even though the damage caused by the leaking pipe “undisputedly occurred” before it was discovered. Id. at 1268.
The Auto Owners court’s internally inconsistent position resulted from its reliance on an Alabama case: American Motorists Insurance Co. v. Southern Security Life Insurance Co., 80 F. Supp. 2d 1280, 1284 (M.D. Ala. 2000), which in turn relies on C.J. Gayfer’s & Co., 366 So. 2d 1199. Auto Owners, 227 F. Supp. 2d at 1266. The C.J. Gayfer’s court stated that an “occurrence” under the policy “is commonly understood to mean the event in which negligence manifests itself in property damage or bodily injury.” C.J. Gayfer’s & Co., 366 So. 2d 1199. Although the court used the term “manifest”, it applied the actual injury/injury-in-fact trigger: the date the water damage actually occurred. See Id.
Moreover, in the case of Amerisure Ins. Co. v. Albanese Popkin the Oaks Dev. Group, L.P., 2010 WL 4942972 (S.D. Fla. Nov. 30, 2010), the Southern District made the distinction that in Trizec, “[b]ecause the complaint in the underlying case was construed to have alleged that the damage occurred during the policy period, the question of when the damage manifested itself was irrelevant to the analysis,” but recognized Trizec’s holding that with an occurrence policy, “the critical inquiry is when did the insured sustain actual damage.” Id. Despite this, in purposely ignoring any continuously occurring damage, the Southern District found that “[m]anifestation of the damage [was] relevant…because it establishe[d] that…actual damage [was sustained] before the policy became effective.” Id. This holding further demonstrates inconsistencies in Florida as the court concluded that actual damage was sustained when those actual damages were manifest or seen or viewed or discovered and completely ignores any time frame between when the damages began or ended. At some point in time the damage began to happen/occur/exist/take place. At some point in time, prior to repair, those damages were iscovered/seen/observed/viewed/manifest. And there is some point in time that the damages were finally repaired – meaning – the damage ended. The Southern District has seemingly decided this case in a vacuum where time does not exist.
As demonstrated by the case law above, and given the recent Axis case, the courts appear to be shifting away from manifestation trigger and applying actual policy language in holding that the correct trigger is injury in fact.