'Time and Space' Test Applied To Deaths
February 24, 2009
The Illinois Supreme Court recently held that an insurance company has the burden of proving that the one occurrence limit, rather than the two occurrence limit, applied under a liability insurance policy, and that because of the uncertainty about the timing of two accidental deaths, the insurer did not meet its burden, so that the two occurrence limit would apply. Addison Insurance Co. v. Fay, 2009 WL 153859 (Ill. Jan. 23, 2009).
The insurer, Addison, was represented by Brian A. Schroeder of the Novoselsky Law Offices, Chicago. Michael G. Mahoney of Burke, Mahoney & Wise, Chicago, represented the claimants.
Two teenage boys became trapped in an excavation pit near the home of one of them, apparently while walking back from a nearby fishing lake during bad weather on the evening of April 30, 1997. Their bodies were not found until three days later. Investigators concluded that one became trapped in saturated sand and clay, and that the second became trapped when trying to rescue the first.
One boy died from hypothermia and the other from drowning secondary to hypothermia. No one could determine with certainty the time of death of either boy, or how closely in time the boys had died.
The owner of the property, Donald Parrish, had liability coverage through Addison. The boys' estates brought suit against the insured for negligent maintenance of the property, and Addison agreed to settle the claims for the policy limits. The policy provided a general aggregate limit of $2 million and an each-occurrence limit of $1 million. The parties disagreed which limit applied.
Addison brought a declaratory judgment action to determine the number of occurrences. The insured's negligence was not in issue. The trial court, apparently following trial on written submission, found that the deaths were the result of two occurrences, and that the aggregate limit of $2 million therefore applied. The appellate court reversed, finding that the one occurrence limit applied. The estates petitioned for leave to appeal, which was allowed.
In an opinion by Justice Rita B. Garman, the Supreme Court reversed the appellate court. As a preliminary matter, she addressed the standard of review, with Addison arguing that a de novo standard applied, and the estates arguing in favor of a manifest weight standard.
Garman observed that the trial court heard no live testimony and that all testimony was submitted by admitting discovery depositions into evidence. The trial court made factual findings based upon the exact record presented to both the appellate court and to the Supreme Court. Under these circumstances, she said, a reviewing court is not bound by the trial court's findings and would review the record de novo.
As a further preliminary issue, the parties disputed which side had the burden of proof with respect to the number of occurrences. Garman observed that an insured typically has the burden with respect to proving that a claim falls within the coverage of an insurance policy, and that the burden then shifts to the insurer to prove that a limitation or exclusion applies.
Here, the defendants had provided the necessary facts to demonstrate that their claims fell within the coverage of the policy, and also established the value of the loss. It was only after they established coverage that Addison brought this declaratory judgment action to limit coverage. Since Addison was seeking to apply a stricter limit than the policy's aggregate limit, Garman concluded that it bore the burden of proving that the two deaths constituted one occurrence.
She then turned to the single or multiple occurrences issue. She noted that, while the policy used a standard definition of occurrence, it did not indicate when an injury would be treated as a separate occurrence, and that the policy would have to be construed in light of the facts of the case.
Garman relied on Nicor Inc. v. Associated Electric & Gas Insurance Services Ltd., 223 Ill.2d 407, 860 N.E.2d 280 (2006), for application of the ''cause theory'' rather than ''effect theory'' in determining the number of occurrences. Under the ''cause theory,'' which was adopted in Nicor, the court determines the number of occurrences by referring to the number of causes of the damage, rather than looking to the number of individual claims, which would involve the ''effect theory.''
Applying the cause theory, the Nicor court looked to determine whether a ''systemwide failure'' caused the individual injuries, or whether the injuries were the result of multiple individual acts of negligence. Applying the same logic here, Addison contended that it was Parrish's sole negligent act of failing to properly secure and control his property that caused the two deaths, and that a one occurrence analysis therefore should apply.
Garman distinguished Nicor, however, on the ground that it involved individual affirmative acts of negligence, whereas, in this case, Parrish's liability arose from his negligent failure to maintain his property. Moreover, focusing on the sole negligent omission of failing to maintain the property would allow two injuries, days or weeks apart, to be considered one occurrence. In Garman's view, Parrish could not have intended to expose himself to the per occurrence limit over an extended period of time.
Therefore, according to Garman, where a continuous negligent omission results in insurable injuries, some limiting principle must be applied. She turned to Doria v. Insurance Co. of North America, 210 N.J. Super. 67, 509 A.2d 220 (1986), for application of a ''time and space'' test. Under that test, if cause and result are simultaneous or so closely linked in time and space as to be considered as one event, then the injuries will be deemed the result of one occurrence. This is an analysis, she said, that must be made on a case-by-case basis.
Applying the test here, Garman said that the facts were not sufficient to conclusively demonstrate that the deaths of the two boys constituted only a single occurrence. The evidence suggested that the two boys did not become trapped simultaneously, and the policy investigators could not determine whether it was minutes apart or longer.
This uncertainty persuaded Garman that Addison could not meet its burden of proving that the two boys' injuries were so closely linked in time and space as to be considered one event. Because Addison could not meet its burden, she concluded that the two deaths constituted two occurrences.
Accordingly, the court reversed the judgment of the appellate court and affirmed that of the circuit court.
