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Insurance Policy Language: Per Claim vs. Per Occurrence

November 15th, 2018

Insurance Language Policy Image

Widespread natural disasters struck several areas in 2018. Wildfires, hurricanes, flooding and even volcanic eruptions left plenty of damage in their wake. Most business owners are aware how their insurance coverage responds to a natural disaster but what if your business experiences a catastrophic event due to non-natural causes, such as an equipment fire sparking a fugitive emissions risk? Insurance policy language (how your insurance policy is written) can create a fine line as to how your policy responds when such a claim occurs.

Simple language like claim versus occurrence may leave a company exposed to major lawsuits and potentially excessive monetary damages. It may even obsolete your insurance policy.

The difference between per occurrence vs. per claim

Per Claim is the amount of first-dollar loss paid by the insured for each loss. Per Claim will respond to individual claims brought against you, even if it arises out of one singular event or accident. This coverage can leave you with several deductibles as opposed to one.

Per Occurrence is the maximum amount the insurer pays for all claims resulting from a single occurrence, no matter how many people are injured, how much property is damaged, or how many different claimants may make claims. Per Occurrence coverage protects a company from millions, by combining it into one deductible.

In 2008, a prospective client with a policy written on Per Claim language experienced a fire in their facility, which is located across the street from an elementary school with 1,400 students. This fire led to a potential class action, due to the poor air quality for the students.

Thankfully the loss was contained but had fire not been put out the possibility of the hazardous materials burning to create enough fugitive emissions to trail over to the school and make the children and everyone else in the vicinity sick is a real risk.

In this scenario, because of the language in the policy, our client would have been exposed to a Per Claim deductible of $5000 per claim, meaning a possible deductible of $7 million ($5k x 1400 lawsuits).

A comprehensive policy review allowed our Brown & Brown advisors to discover and remedy the language inaccuracy in this client’s current policy by recommending they opt for a Per Occurrence deductible policy in lieu of Per Claim coverage.

With the Per Occurrence policy providing broader coverage, it offers protection against paying multiple deductibles for one incident. Insurance coverage and requirements vary for each business but in this instance, the Per Occurrence policy coverage means this client pays a higher deductible ($10,000), but that $10,000 deductible provides the necessary coverage for an event such as this, as opposed to paying a lower deductible and potentially being exposed to $7 million in lawsuits with Per Claim, as each claim is considered new and separate.

If you are curious about your insurance policy language and how it applies, contact our Brown & Brown advisors today. Our Recycling team is available to answer your questions.

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