Damage, not Negligent Acts, is Occurrence

An Insured Can Only Kill a Child Once

When a person is injured or killed as the result of the negligence of another, an insurer is obligated to defend and indemnify its insured up to the limits of liability of the insurance policy. Almost every liability insurance policy contains a per-occurrence limit of liability and an aggregate limit if more than one person is injured by the same occurrence.

In Davis v. Kentucky Farm Bureau Mutual Insurance Company, Court of Appeals of Kentucky — S.W.3d —- 2016 WL 929362 (3/11/2016), the Kentucky Court of Appeals was asked to apply an aggregate limit to a single death because multiple acts of negligence brought about the death.

FACTS

On October 17, 2011, two-year-old Ja’Corey Davis died from asphyxiation after swallowing and choking on a push-pin while in the care and protection of Trina’s. After Ja’Corey’s death, the Cabinet for Health and Family Services investigated Trina’s and discovered multiple violations of Kentucky Administrative Regulations: (1) push-pins within the reach of young children; (2) inadequate staff-to-child ratios; and (3) negligent supervision. The Cabinet issued an emergency order suspending the license and operation of Trina’s.

Davis and Woods, Ja’Corey’s parents and as co-administrators of Ja’Corey’s estate, filed an action against Trina’s in the Jefferson Circuit Court. In a second amended complaint, Davis and Woods alleged direct negligence claims against Trina’s and vicarious liability claims against Trina’s for the acts or omissions of its employees, including the multiple violations cited by the Cabinet.

At the time Ja’Corey choked on the push-pin, Trina’s was insured by a commercial general liability policy issued by Kentucky Farm Bureau covering Trina’s and its employees. The Kentucky Farm Bureau policy limits coverage by the number of occurrences from which the claims arose, stating that each occurrence is limited to $500,000 and provides for an aggregate maximum of $1,000,000. The policy further provides that each occurrence limit is the maximum Farm Bureau will pay “because of all ‘bodily injury’ and ‘property damages’ arising out of any one ‘occurrence.’” Occurrence is defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

Kentucky Farm Bureau and Davis and Woods resolved the claims against Trina’s, its officers and employees subject to an agreement that the dispute concerning the number of occurrences remained unsettled. Subsequently, Kentucky Farm Bureau filed this declaratory judgment action to resolve the dispute. The trial court ruled that the alleged negligent acts “combined to form a single occurrence, which resulted in the death of [Ja’Corey].”

DISCUSSION

Kentucky appellate courts interpret an insurance contract as a matter of law and review the case as if it was sitting as a trial court. In doing so, the appellate court applies certain rules of construction, including that when the terms of an insurance contract are unambiguous and not unreasonable, the terms will be enforced as written.

Although ambiguous terms are to be construed in favor of the insured, there is no requirement that every doubt be resolved against the insurer. Moreover, there must be an actual ambiguity. The mere fact that a party attempts to muddy the water and create some question of interpretation does not necessarily create an ambiguity.

The trial court concluded the claims arose from a single cause and a single occurrence and granted summary judgment in favor of the insurer. Davis and Woods appealed, contending that the trial court erred because it was required to determine the amount of insurance coverage available by the number of causative acts that contributed to Ja’Corey’s death.

Every accident is an occurrence. But not every occurrence is, strictly speaking, an accident. In the context of an insurance policy, “occurrence” is construed as synonymous with an accident or kindred act — an unforeseen occurrence resulting in bodily injury to a person other than the one indemnified which may give rise to a claim against the insured.

For purposes of triggering insurance coverage, the prevailing rule is that the time of the occurrence of an accident is when the complaining party was actually damaged or injured and not the time when the wrongful act was committed. This approach is based on the fundamental notion that the tort of negligence is not deemed to have been committed unless and until some damage is done.

The same approach is not necessarily taken when the question is whether there were multiple occurrences for purposes of the policy limitations. Although in most instances it is clear whether there are one or multiple occurrences, the question of what constitutes a single “occurrence” or “accident” within the meaning of a policy limits clause in a liability insurance policy generally arises under the prevailing cause approach, the number of occurrences is determined by whether there is but one proximate, uninterrupted and continuing cause which resulted in all of the injuries and damages.

The maximum limit of liability of the insurer for any one occurrence was $50,000.00. The policy provided that all bodily injury arising out of continuous exposure to substantially the same general conditions shall be considered as arising out of one occurrence. Davis and Woods present an innovative argument that even where only a single injury results, under the cause approach the amount of coverage available depends upon the number of negligent acts that caused the injury.

While a novel argument in Kentucky, it is arguably supported by only a handful of cases from other jurisdictions. Following the reasoning in Nationwide Mut. Fire Ins. Co. v. Kubacko, 124 Ohio App.3d 282, 706 N.E.2d 17 (1997), the Court considered the definition of occurrence in a case involving burns suffered by a child while in the care of an insured. After the child was burned, the child was placed in a bathtub containing hot water and the insured did not seek treatment for the child until several hours later. The Ohio Court of Appeal concluded that despite the number of negligent acts, the child’s injuries arose from a single occurrence.

Finally, the Court of Appeal was also in agreement with the succinct summation given in Koikos v. Travelers Ins. Co., 849 So.2d 263, 271 (Fla. 2003): “The insured’s alleged negligence is not the ‘occurrence’; the insured’s alleged negligence is the basis upon which the insured is being sued by the injured party. Focusing on the immediate cause – that is the act that causes the damage – rather than the underlying tort – that is the insured’s negligence – is also consistent with the interpretation of other forms of insurance policies.”

Davis and Woods allege various acts of negligence and theories of liability against Trina’s and its employees. As noted by Davis and Woods, they may pursue causes of action against Trina’s for its own negligence and for respondeat superior liability due to the negligent acts or omissions of its employees. They may also pursue claims against the employees individually for their negligence. Moreover, if there had been more than one insurance policy, Davis and Woods would have claims under those policies even though only one accident occurred.

However, merely because there were multiple negligent acts that combined to cause a single injury or multiple causes of action may be asserted, does not mean there were multiple occurrences as that term is unambiguously defined in the Kentucky Farm Bureau policy. There are frequently multiple acts of negligence that cause a single injury. Under the unambiguous language of the policy, the meaning of “occurrence” in the Kentucky Farm Bureau policy is “accident.” There was only one accident, Ja’Corey’s choking on a push-pin. The $500,000 limit applies.

ZALMA OPINION

Insurance is not a benefit provided to those wrongfully injured. It is a contract that must be enforced in accordance with its terms and conditions. Although the loss of a child is tragic and the parents should recover as much as they can from those responsible, the tragedy cannot change the meaning of the contract of insurance nor change the amount of coverage purchased.