Deductible Applies to Each Occurrence

Wrongful Strip Search a Single Occurrence Per Arrestee

Liability insurance policy deductibles are odd things because the insured is only required to pay them after a claim is resolved while a self-insured-retention (SIR) which requires the insured to expend the SIR amount before the insurer is required to pay anything. Both deductibles and SIRs have problems in a class action where the number of occurrences are at issue.

In Selective Ins. Co. of America v. County of Rensselaer, Court of Appeals of New York, 2016 N.Y. Slip Op. 01001, — N.E.3d —-  2016 WL 527098 (2016) litigation arose because the County of Rensselaer implemented a policy of strip-searching all people who were admitted into its jail, regardless of the type of crime the person was alleged to have committed. At that time, the Second Circuit’s precedent suggested that such a policy was unconstitutional. Believing the County’s strip-search policy to be unconstitutional, Nathaniel Bruce and other named arrestees commenced a proposed class action suit in 2002 against the County in federal court. Seeking to defend itself against the suit, the County invoked plaintiff Selective Insurance Company’s duty to provide a defense under the policies that the company sold to the County.


In 1999, the County obtained year-long liability insurance coverage from Selective for, among other things, personal injury arising out of the conduct of its law enforcement activities. As relevant to the case the County renewed the policy in 2000, 2001, and 2002. Where the County is sued based on a covered personal injury, each policy provides that Selective’s “obligation … to pay damages on behalf of the insured applies only to the amount of damages in excess of any deductible stated in the [d]eclarations.” The deductible was $10,000 per claim under the 1999, 2000, and 2001 policies and $15,000 under the 2002 policy. The deductible applied to all covered damages “sustained by one person or organization as the result of any one ‘occurrence.’ “Additionally, the County’s deductible amount applied to each “occurrence” and “include[d] loss payments and adjustments, investigative and legal fees and costs, whether or not loss payment [wa]s involved.”

An “occurrence” was defined as follows: “‘Occurrence’ means an event, including continuous or repeated exposure to substantially the same general harmful conditions, which results in … ‘personal injury’ … by any person or organization and arising out of the insured’s law enforcement duties. All claims arising out of (a) a riot or insurrection, (b) a civil disturbance resulting in an official proclamation of a state of emergency, (c) a temporary curfew, or (d) martial law are agreed to constitute one ‘occurrence.’”

Selective defended the County in the action for personal injury damages that resulted from the suit. Ultimately, during negotiations, the County and Selective’s counsel agreed to settle the case instead of challenging class certification, as Selective’s counsel informed the County that there were no viable defenses. They agreed to settle the actions for $1,000 per plaintiff, later determined to be sightly over 800 individuals in total, with additional attorney’s fees also being recoverable. The court approved a $5,000 payment to the named plaintiff Nathaniel Bruce, and a $1,000 payment to all other class members. The settlement also set the members’ attorney’s fees at $442,701.74. Selective paid the settlement. The County then refused to pay Selective anything more than a single deductible payment.

Selective sued the county arguing that each class member was subject to a separate deductible. The trial court determined that a separate deductible payment applied to each class member and that all legal fees should be allocated to one policy. The Appellate Division affirmed.


In determining a dispute over insurance coverage appellate courts first look to the language of the policy. Unambigous provisions of an insurance contract must be given their plain and ordinary meaning . Therefore, if a contract on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.

The plain language of the insurance policy indicates that the improper strip searches of the arrestees over a four-year period constituted separate occurrences under the policies. Finding that the definition of “occurrence” in the policies is not ambiguous the court that  the language of the insurance policies makes clear that they cover personal injuries to an individual person as a result of a harmful condition. The definition does not permit the grouping of multiple individuals who were harmed by the same condition, unless that group is an organization, which is clearly not the case here. The harm each experienced was as an individual, and each of the strip searches constitutes a single occurrence.

Moreover, the policies’ definition of “occurrence” specifically describes four large-scale events that may constitute a single occurrence: (1) a riot or insurrection, (2) a civil disturbance resulting in an official proclamation of a state of emergency, (3) a temporary curfew, or (4) martial law. None of these listed circumstances encompasses a civil class action suit based upon a common policy. Thus, under the plain language of the insurance policies, each strip-search of the class members is a separate and distinct occurrence subject to a single deductible payment and the County must repay Selective $1,000 for each member of the class since its deductible exceeded the amount of the settlement with each member of the class.

The County also asserts that Selective exhibited bad faith by not challenging the class certification in the underlying action and reaching a settlement that made the County liable for all the damages recovered by the class members. To establish a prima facie case of bad faith, the insured must establish that the insurer’s conduct constituted a gross disregard of the insured’s interests — that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer.

Under the terms of the policies, Selective had discretion to investigate and settle any claim or suit commenced against the County. The County, however, has failed to meet the high burden of demonstrating that Selective acted in bad faith in negotiating the underlying settlement here. There is no indication from the record that Selective’s conduct constituted a gross disregard of the County’s interests. Selective hired competent attorneys to defend the County in the underlying action and played an active role in the negotiation. Thus, the County’s bad faith argument lacks merit.

Based on the policies’ definition of occurrence, the injuries sustained by the class members do not constitute one occurrence but multiple occurrences. Selective thus asserts that as a result of these multiple occurrences the attorney’s fees should be allocated ratably among the deductibles. Equally reasonable is the County’s assertion that given that there was one defense team for all class members, the fee should be attributed only to the named plaintiff, Bruce. It is undisputed that the policies are silent as to how attorney’s fees would be allocated in class actions and therefore ambiguous on this point.

Where the language of the policy at issue is ambiguous, and both parties’ interpretation of the language is reasonable, the policy language should be interpreted in favor of the insured. The policies’ silence on how to allocate attorney’s fees in a class action creates ambiguity as both Selective’s and the County’s contentions are reasonable. Consequently, the courts below correctly interpreted the policies in favor of the insured — the County — and the attorney’s fees were properly charged to the named plaintiff, Bruce.

The appellate court concluded that the underlying class action civil rights suit at issue does not constitute one occurrence under the relevant policies’ definition of “occurrence” and that the attorney’s fees generated in defending that suit were properly allocated to the named plaintiff.


This is a classic case of you win some and you lose some. The insurer paid $800,000 to settle with the individual plaintiff members of the class and the court ordered to country to pay Selective $800,000 as its 800 individual deductibles. The insurer sought to spread attorneys fees into 800 separate parts but, because its policy was ambiguous, was called upon to pay the full attorneys fees judgment of $442,701.74.  It might be prudent to rewrite the policy wording to cover awards of attorneys fees for class actions or change the deductible clause to an SIR.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness 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 founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

Check in on Zalma’s Insurance 101 – a Videoblog – that allows your people to learn about insurance in three to four minute increments at

Look to National Underwriter Company for the new Zalma Insurance Claims Libraryat  The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide

The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at

Mr. Zalma’s new e-books  “Getting the Whole Truth,” “Random Thoughts on Insurance – Volume III,” a collection of posts on this blog; “Zalma on California SIU Regulations;”  “Zalma on California Claims Regulations – 2013″ explains in detail the reasons for the Regulations and how they are to be enforced; “Rescission of Insurance in California – 2013;”  “Zalma on Diminution in Value Damages – 2013; “Zalma on Insurance,” “Heads I Win, Tails You Lose,”  “Arson for Profit”  and others that are available at

Mr. Zalma’s reports on World Risk and Insurance News’ web based television programing,  or at the bottom of the home page of his website at on Tumbler at and Twitter at Follow me on Twitter at

Legal Disclaimer:

The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
This entry was posted in Zalma on Insurance. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.