Across the Spectrum: Utah’s Recent Move Toward a Proper Interpretation of “Occurrence” In Commercial General Liability Policies

Fortunately for Utah policyholders, a recent District of Utah decision has continued the trend toward liberalizing Commercial General Liability (“CGL”) coverage in Utah. In The Cincinnati Ins. Co. v. Spectrum Devel. Corp, the District of Utah held that defective construction can be an “occurrence” so as to trigger coverage under a CGL policy.

CGL policies generally cover amounts that an insured “becomes legally obligated to pay as damages because of property damage” caused by an “occurrence.” The standard definition of “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Utah courts have had considerable difficulty determining whether defective construction is an “accident.”

The previous rule in Utah was that conduct, and the result of conduct, is not accidental if it is deliberate or intentional, even if the result was neither deliberate nor intentional. Until recently, Utah courts borrowed the reasoning of the Washington Court of Appeals, which put it this way:

 [A]n accident is never present when a deliberate act is performed, unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result[.]

Safeco Ins. Co. of Am. v. Dotts, 38 Wash.App. 382, 685 P.2d 632, 633-34 (1984).

Two previous Utah cases, Rosenberg and Geary, illustrate the above rule. In Geary, the Utah Court of Appeals held that bodily injury resulting from a shotgun blast was not accidental because the shooter deliberately pulled the trigger, whether or not he had any intention to harm the victim. See State Farm Fire & Cas. Co. v. Geary, 869 P.2d 952, 955-6 (Utah Ct. App. 1994).  Similarly, in Rosenberg, bodily injury resulting from a cherry bomb was not accidental because the bomb was deliberately and intentionally thrown. See Fire Ins. Exchange v. Rosenberg, 930 P.2d 1202, 1205 (Utah Ct. App. 1997).

In a 2008 decision, N.M. on behalf of Caleb v. Daniel, the Utah Supreme Court frowned on the above cases. The court held that accidental conduct is conduct whose result is unintended or unexpected. See N.M. on behalf of Caleb v. Daniel E., 175 P.3d 566, 570-1 (Utah 2008). Five years later, in AMSCO Windows, the District of Utah acknowledged that under Caleb, defective construction can be an “occurrence.” See The Cincinnati Ins. Co. v. AMSCO Windows, 921 F. Supp. 2d 1226 (D. Utah 2013).

Two years later, we arrive at this article’s namesake, the District of Utah’s recent decision in The Cincinnati Ins. Co. v. Spectrum Devel. Corp, No. 2:11-cv-0015, 2015 WL 730020 (D. Utah Feb. 19, 2015). Spectrum dealt with construction defects allegedly caused by a general contractor’s negligent supervision of its subcontractors. The court noted the Caleb rule that “when determining whether there is an accident, the court is not to examine whether the underlying act is intentional, deliberate, or foreseeable, but rather whether the result of the act was intended or expected from the perspective of the insured.” Id. at 4. Following this logic, the court held that there had been a covered occurrence. Id. Spectrum thus confirms that Utah courts are moving in a new direction regarding the definition of “occurrence” in CGL policies—one that analyzes the result of conduct, rather than the conduct itself, to determine whether there has been an “accident.”