United States: Hunton Insurance Recovery Blog: Ambiguous "Occurrence" Language Results In Payment Of Single Deductible Despite Multiple Assaults

The Scott Fetzer Co. v. Zurich American Insurance Co. matter involved a dispute over coverage for sexual assault claims against Fetzer. Three women filed suit against Fetzer, claiming that John Fields, an independent dealer of vacuums manufactured by Fetzer, verbally and sexually assaulted them. Fetzer's alleged liability was premised on, among other things, its negligence in supervising its independent contractor's hiring process. Fetzer settled with each of the three women.

Fetzer's insurer, Zurich, acknowledged coverage but the parties disputed the number of occurrences. Under the policies, Zurich was required to pay $2 million per occurrence and Fetzer was required to first pay a $1 million deductible. Only one of the three settlements between Fetzer and the plaintiffs exceeded the $1 million deductible. Zurich claimed that Fields' assault of each woman was a separate occurrence such that Fetzer had to pay $3 million while Zurich would only pay for a portion of the one settlement that exceeded $1 million. Fetzer argued that the relevant occurrence was Fetzer's alleged negligent supervision such that there was one occurrence. Under that theory, Fetzer would pay $1 million and Zurich would pay everything else up to the $2 million limit.

The Sixth Circuit reversed the lower court's ruling finding multiple occurrences. Emphasizing that, under settled Ohio law, all Fetzer had to "do to prevail is show there is ambiguity in the contract and provide a fair interpretation of the ambiguity under which it qualifies for coverage," the court said its job was to decide whether Fetzer's interpretation was reasonable, not whether it was the best.

The court found that Fetzer's interpretation was indeed reasonable, relying on "ample case law" that the term "occurrence" could refer to the policyholder's negligent supervision even if that negligent supervision resulted in harm to multiple parties. The court reached that conclusion despite stating that Fetzer's interpretation may not be "the natural and commonly accepted meaning" of words in the contract and "may be semantically awkward." That interpretation remained reasonable and Fetzer's burden was "not to prove that its reading was the most reasonable one." The court's reasoning turned in large part on Zurich's concession of coverage and deducing that because an assault cannot constitute an "occurrence," since there would be no accident, a necessary component of an "occurrence," whatever the "occurrence" may have been, it was not the individual assaults. From that reasoning, the concluded that the negligent hiring was at least plausibly the "occurrence" in this instance.

This decision highlights two important aspects of insurance coverage. First, the number of occurrences can often greatly affect both the amount of coverage available and the amount of liability that the insured must absorb before coverage becomes available. Second, policyholders should conduct their own, independent analysis of the relevant events and not simply accept their insurer's decision on what constitutes the occurrence. As the Fetzer decision illustrates, even presenting a plausible alternative may be sufficient to defeat the insurer's position since, under the law governing policy ambiguities, policyholders generally prevail by advancing a reasonable alternate interpretation of the policy.

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