HNRK Coverage Corner

On July 2, 2018, Justice Platkin of the Albany County Commercial Division issued a decision in Dan Tait, Inc. v. Farm Family Cas. Ins. Co., 2018 NY Slip Op 28205, holding that a series of thefts by an employee constituted a single “occurrence,” subject to a single $15,000 coverage limit, under the “Employee Dishonesty” section of a business insurance policy.

The employee stole a total of $500,000 from the insured, employing several different methods.  The insured argued that each of the employee’s schemes should be treated as a separate occurrence based on the common law “unfortunate-event” test, which considers “whether there is a close temporal and spatial relationship between the incidents giving rise to the injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors.” Appalachian Inc. Co. v. General Elec. Co., 8 N.Y.3d 162, 170 (2007).  Justice Platkin disagreed and held that the policy’s definition of “occurrence” required  that “[a]ll loss or damage . . . [c]aused by one or more persons; or . . . [i]nvolving a single act or series of acts” be treated as a single “occurrence.”  The Court explained:

It is black-letter law that courts resolving an insurance coverage dispute must first look to the language of the policy.  Thus, the unfortunate-event test is applied only where the language of the policy is silent on the issue of aggregation[.] . . . The Court therefore concludes that it would run counter to settled principles of New York law to apply the common-law definition of "occurrence" to an insurance policy that speaks directly to the issue of aggregation.

Here, of course, the Policy does include language demonstrating a clear intent to aggregate into a single "occurrence" the losses caused by an employee "[i]nvolving a single act or series of acts" (§ I [G] [3] [d]). The Court therefore agrees with Farm Family that all losses resulting from Young's "series of [dishonest] acts" over a multi-year period must be considered to be "one occurrence" under the plain language of the Policy. Indeed, while arguing in favor of multiple occurrences, Dan Tait does not contend that its losses arose from anything other than a "series of [dishonest] acts" committed by Young.

. . .

[W]hile the "series of [dishonest] acts" committed by Young involved several different methods of theft — unauthorized withdrawals from Dan Tait's credit line, unauthorized purchases with Dan Tait's credit cards, and unauthorized taking of Dan Tait's inventory and property for his personal use — the clear and unambiguous language of the Policy requires these theft incidents to be aggregated into one "occurrence."

Whether a loss constitutes a single “occurrence” or multiple “occurrences” can have a dramatic impact on the available coverage.  In one famous example – with billions of dollars at stake – the attacks on the World Trade Center on 9/11 were found to be one occurrence under certain insurance policies and two occurrences under others.  See SR Int'l Bus. Ins. Co. v. World Trade Ctr. Properties, LLC, 467 F.3d 107, 121 (2d Cir. 2006).  In some instances, it can be in the insured’s interest to aggregate losses into a single occurrence.  For instance, if multiple losses each fall below a per-occurrence deductible, there may be no coverage unless the losses can be aggregated.