Insurance Blog: Wisconsin Follows "Cause Theory" in Determining Number of Occurrences
By Andrew W. Miller on January 07, 2019
In Secura Insurance v. Lyme St. Croix Forest Company, LLC, No. 2016AP299 (Oct. 30, 2018), the Wisconsin Supreme Court determined the number of occurrences arising from a large forest fire that took place in May of 2013. The fire in question allegedly began in a piece of logging equipment and quickly spread to an adjacent grass pile and eventually the surrounding forest. In total, the fire consumed 7,442 acres over three days, damaging the real and personal property of many individuals and businesses.
Ray Duerr Logging, Inc., the owner of the piece of equipment that ignited and caused the fire, sought coverage for damage to third-party property under a commercial liability policy issued by Secura. That policy contained a general aggregate limit of $2,000,000, but a sub-limit of $500,000 per occurrence “due to fire, arising from logging operations…” The policyholder took the position that the fire constituted several occurrences; specifically each time the fire spread to a new property represented a new occurrence. Secura, in turn, argued that the entire fire constituted a single occurrence.
In finding that the fire was a single occurrence, the court noted that Wisconsin followed the “cause theory” as opposed to the “effect theory” when determining whether an event is a single occurrence or multiple occurrences. Under the cause theory, “‘where a single, uninterrupted cause results in all of the injuries and damage, there is but on accident or occurrence.’” Secura Insurance at P21 (quoting Welter v. Singer, 376 N.W.2d 84 (Ct. App. 1985)). Alternatively, “the effect theory suggests that the wording ‘each accident’ ‘must be construed from the point of view of the person whose property was injured.’” Id. At P22 (quoting Anchor Cas. Co. v. McCaleb, 178 F.2d 322, 324 (5th Cir. 1949)).
The policyholder’s position – that each time the fire spread to a new property represented a new occurrence – fit with the effect theory of causation, as from the standpoint of each property owner, the damage to their own property was a new, separate accident. However, the court could not square this view with the cause theory. Here, the cause of the fire in question all traced back to the fire in the logging equipment. Further, the court noted that while the fire spread over a large area, it was all within the same geographic area. And the fire was continuous – there was no temporal break over the three days that the fire spread. In sum, there was no way that the fire could be considered anything other than a single cause, meaning that coverage under Secura’s policy was limited to a single, $500,000 occurrence limit.
This case highlights the importance of purchasing adequate occurrence limits. Here, while the policyholder purchased $2,000,000 in coverage, $1,500,000 of the limits was unavailable due to the triggering of the applicable per-occurrence limit in the policy.