Expected or Intended: The Fortuity Doctrine
The fortuity doctrine arises from the basic concept upon which insurance is founded: that insurance covers risks, not losses that were planned, intended, or anticipated by the insured. It has always been the view of insurers that losses that were expected by the insured could not be insured. To do so would have a counterproductive effect. No one would buy insurance until they were certain they would have a loss. The concept of spreading the risk on which insurance is based would be defeated. The creation of losses would be encouraged.
An accident or occurrence is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage. When the injury was caused by the insured’s manufacture and sale of products the manufacture and sale of products without right were deliberate and intentional acts, and there was no additional, unexpected, independent, and unforeseen happenings that caused the infringement alleged by the plaintiff or the indemnity obligation. The court concluded that the conduct giving rise to the underlying action was not an “accident” nor an “occurence” within the coverage provision. Because there was no potential basis for coverage, there is no duty to defend.
The loss-in-progress rule codifies a fundamental principle of insurance law that an insurer cannot insure against a loss that is known or apparent to the insured. (See Bartholomew v. Appalachian Ins. Co. (1st Cir. 1981) 655 F.2d 27, 28-29.) The public policy rule is premised on the view that to hold the insurer liable for a progressive and continuing property loss that was discovered before the carrier insured the risk would be to impose upon the insurer a guaranty of the good quality of the property insured, which liability under the policy the insurer had not assumed. (Greene v. Cheetham (2d Cir. 1961) 293 F.2d 933, 937.)
In Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 691, 693 where the existence and extent of injuries were unknown from the insured’s “standpoint,” coverage of continuous or progressively deteriorating property damage under a CGL policy did not offend the loss-in-progress rule.
The fortuity doctrine or “loss in progress” rule, where damage began to occur prior to the inception of the policy, requires that, as a matter of law, no part of the loss may be insured against. The fortuity doctrine only precludes a party from insuring against a loss that has occurred or is certain to occur within the term of the policy.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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