No “Accident” that “Occurrence” has Broad Definition in CGL Policy: Both Insureds and Insurers Benefit by Understanding Implications of Mass. Appeals Court Decision

Pierce Atwood partner Michael Daly successfully represented an insured food processing company in an appeal before the Massachusetts Appeals Court to obtain insurance coverage for accidentally damaging its customer’s product. The appeal turned on the issue of whether an unexplained cause of damage to property constitutes an “occurrence” under a commercial general liability (CGL) insurance policy.

The insurance dispute arose after a customer sued the food processing company in federal court for damaging its product during the processing phase, although the precise cause of damage was unknown. Applying the res ipsa loquitur doctrine, which permits a finding of negligence based on certain unexplained accidents, the federal court entered judgment against the processing company for over $600,000.

In Massachusetts Superior Court, the food processor sought insurance coverage for its liability to its customer. The CGL policy provided coverage for liability for property damage caused by an “occurrence,” which the policy defined as an “accident.” The insurer denied coverage on the grounds that an insured cannot prove an “occurrence” when the cause of damage remains a mystery. 

The Massachusetts Appeals Court rejected the insurer’s argument and agreed with the food processor that the unexplained nature of the damage was sufficient to establish an “occurrence.” In doing so, the court observed that if it were to accept the insurer’s argument, “an insured would never have a reasonable expectation of proving that damage was caused by an occurrence if it could not specify the precise cause of such damage” and that “such a blanket rule would undermine the broad construction of CGL policies required by our precedent, and unfairly limit coverage.”  Accordingly, the appeals court remanded the case for further proceedings, allowing the food processor to continue to pursue its claim for coverage.