find that injuries from repeated expo-
sures occurred over time, triggering mul-
tiple policies. The typical Bermuda form
seeks to avoid this result in the Coverage
section by requiring that the occurrence
or claim first be reported to the company
within the policy period or the discovery
period. Unlike the occurrence policy, it is
the notice to the company, not the occur-
rence of injury or damage, that defines
which policy will apply. Unlike the typi-
cal claims made policy, it is the notice
to the company, not receipt of a claim by
the insured, that defines which policy
will apply. This has led to the policy
being referred to as an "occurrence-
reported" policy. The applicable limits,
retention, terms, conditions and exclu-
sions are to be determined under the
policy in effect on the date of first report
of occurrence or claim. This difference in
coverage can create discontinuities with
lower level policies which apply on a
typical occurrence or claims made basis.
The discovery period is like the
extended reporting period in a claims
made policy. For a premium, which is a
percentage of the policy premium, the in-
sured can extend the period for reporting
additional occurrences and claims which
came within the original policy cover-
age but were not known until after the
termination of the policy. The purchase
of the discovery period coverage does
not extend coverage to occurrences or
bodily injury or property damage after
the policy has terminated. All occur-
rences and claims reported during the
discovery period are handled under the
policy terms and limits in the policy im-
mediately prior to termination.
1. occurrence
Additional limitations on coverage are
derived from the "occurrence" definition.
The definition is separately stated as to
occurrences not involving the insured's
products and occurrences involving the
insured's products.
The definition of occurrences not
involving the insured's products restricts
the policy to occurrences that start after
the policy inception or retroactive date,
also intended to prevent the claim from
triggering multiple policies, as occurred
under the CGL policies. This language
also raises serious risks of occurrences or
claims not being covered by any policy.
Take, for example, a repeated exposure
type of injury from being located near
the insured's plant that starts during one
insurer's policy period and continues
during another insurer's policy period,
when injury finally manifests and a claim
is made. This claim would not meet
the requirement of involving exposures
commencing after the inception date of
the second policy and it would not meet
the requirement of reporting the claim
during the first policy. Thus, it is very
important whenever there is a policy
change, the discovery period option be
seriously considered. That would satisfy
the reporting requirement under the
first policy. For long tail type claims,
where the time between first exposure
and manifestation of injury is 10 or 20 or
more years, it is likely that the discovery
period option will not have been pur-
chased and the claim will not be covered.
The occurrence definition with
respect to the insured's products treats
injuries spanning policy periods differ-
ently. Instead of requiring the event or
exposure start after the Inception Date,
the policy prorates the liability to that
portion of the event or exposure which
occurs during the policy period.
This definition still requires that the
personal injury or property damage take
place after the Inception Date or Ret-
roactive Date and prior to the Termina-
tion Date, and also that it arise from the
insured's products. If the personal injury
or property damage commenced prior to
the Inception Date or Retroactive Date,
then the company is only liable for a pro-
rata share based on the period of injury
or damage during the policy compared to
the total period of injury or damage.
This provision is intended to avoid
the "all sums" rulings of the courts, in
which each triggered insurance policy
has to pay "all sums" for which the in-
sured is liable up to its limit of liability,
and many courts allowed the insured
to pick which policy it wanted to apply,
insurers.
It is questionable, however, whether
this language accomplishes that purpose.
While it limits the policy's liability for
the bodily injury or property damage to a
pro-rata share, that does not necessarily
limit its liability for the damages caused
by that bodily injury or property dam-
age. The Coverage agreement applies to
"damages" on account of bodily injury
or property damage. With an indivisible
type of bodily injury or property damage
(such as asbestosis), liability for all the
damages could be assessed to any part of
the bodily injury, making all parts jointly
and severally liable for all the damage.
Indeed, in the liability case a manufac-
turer that is responsible for a portion of
the claimant's exposure could be jointly
and severally liable with all other defen-
dants for all the damages assessed.
Perhaps a scenario more likely to
be faced by an insured is one where
its product causes injury over time and
during that time the insured changes in-
surers and gets a new policy and doesn't
buy Coverage B (the discovery period)
from the first insurer. The second insurer
might claim it is liable for only a portion
of the damages. But the insured could be
liable for all the damages because of the
portion of the injury that occurs during
either one of the policies. So the second
insurer might be held liable for all the
damages.
Other issues from the Occurrence
definition arise from the requirement that
the personal injury or property damage
be "neither expected nor intended from
the standpoint of the insured." This is a
concept carried over from CGL poli-
cies. Some Bermuda forms contain what
is called a "Maintenance Deductible."
That is not a term which actually appears
in the policies. What it does is recognize
that some products are expected to cause
a certain number of injuries, such as
vaccines. In order to keep the insurer
from arguing that all injuries from the
vaccines are expected and intended, the
policy preserves coverage to the extent
the claims are "fundamentally differ-