Do You Understand the Basis of Every Insurance Policy?

Fortuity & Other Issues

Adapted from Zalma on Insurance Claims Part 104 Second Edition: A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims now available  here.

Because the purpose of insurance is to protect insureds against unknown, or fortuitous, risks, fortuity is an inherent requirement of all insurance policies that take on the risk of loss accepted by the policy. [Two Pesos, Inc. v. Gulf Ins. Co., 901 S.W. 2d 495, 502 (Tex. App. Houston [14th Dist.] 1995, no writ)]. The fortuity doctrine precludes coverage for both a “known loss” and a “loss in progress.” A “known loss” is a loss the insured knew had occurred prior to making the insurance contract.

The doctrine has its roots in the prevention of fraud: because insurance policies are designed to insure against fortuities, fraud occurs when a policy is misused to insure a certainty. Inland Waters Pollution Control, Inc. v. Nat’l Union Fire Ins. Co., 997 F. 2d 172, 175-77 (6th Cir. 1993) and Scottsdale Insurance Company v. William Barret Travis, Maintenance, Inc., No. 05-99-01831-CV (Tex. App. Dist. 5 05/29/2001).

The California Supreme Court considered the complex questions of insurance policy coverage interpretation that arose in connection with a federal court-ordered cleanup of the state’s Stringfellow Acid Pits waste site. The Supreme Court initially addressed the “‘continuous injury’ trigger of coverage,” as that principle was explained in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, (P.2d 878 (1995)and the “all sums” rule adopted in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 55-57 (Aerojet). The California Supreme Court brought to an end the dispute that started in the 1960’s when the Stringfellow Acid Pits began to leak. (State of California v. Underwriters at Lloyd’s London (2006) 146 Cal.App.4th 851 (54 Cal. Rptr. 3d 343))

Oddly, the fortuity principle never appears in insurance contracts. The principle is rooted in common law and in the statutes of at least six states. M. Elizabeth Medaglia, et al., The Status of Certain Nonfortuity Defenses in Casualty Insurance Coverage, 30 Tort & Ins. L. J. 943, 986 (1995) (listing state statutes).

The fortuity principle has the effect of an exclusion. That is, an all-risk policy might provide coverage for all risks minus named exclusions, but never provides coverage for nonfortuitous events, even though nonfortuitous events are not named exclusions in the policy. For this reason, the fortuity principle is sometimes called the unnamed exclusion. Stephen A. Cozen & Richard C. Bennett, Fortuity: The Unnamed Exclusion, 20 Forum 222, 222 (1985).

An accident exists when any aspect in the causal series of events leading to the injury or damage was unintended by the insured and a matter of fortuity.’ [Merced Mutual Ins. Co. v. Mendez, 213 Cal. App. 3d 41, 49 (1989)]

The California Court of Appeal attempted to silence this problem in Home v. Landmark, 205 Cal. App. 3d 1388, 253 Cal. Rptr. 277 (1988), which held that only the insurer on the risk at the time of first manifestation of loss is responsible for the entire loss. Trial courts have been loath to follow the loss in progress rule and tend to keep all insurers in the lawsuit for fear of letting the wrong one out and depriving the insured of a remedy. As will be seen below, the ruling of the California Supreme Court in Prudential-LMI Commercial Insurance v. Superior Court, 51 Cal. 3d. 674, 274 Cal. Rptr. 387, 798 P.2d 1230 (1990) should silence all dispute on the subject in California. It is yet to be seen whether other states will follow California’s lead.

The loss in progress rule is designed to protect against contingent or unknown risks of harm that happened before the insurance policy came into effect. A fortuitous loss, if it occurred before the policy came into effect cannot be covered by a liability policy.

The California Court of Appeal in Snapp v. State Farm Fire & Casualty Company, 206 Cal. App 2d 827, 24 Cal. Rptr. 44 (1962), expressed its concern with the cancellation of a policy after a continuing loss had occurred and was still occurring. It concluded that the insurer could not absolve itself of the loss until the problem had been rectified or it had paid the full amount of indemnity owed. It did not, as some might argue, conclude that the policy continued after its expiration, only that the loss had changed from a contingent event to an actual event. The occurrence of the damage causing events determines what policy responds to the loss.

The argument has no effect, however, on other conditions of the policy. Snapp only stands for the proposition that once the contingent event insured against has occurred, the insurer is required to indemnify its insured even if damages continue to occur after the expiration of the policy. In fact, Snapp is authority for the loss in progress rule.

The conditions of the policy regarding notice, proof of loss, and suit cannot be ignored. On the contrary, the law is clear that the conditions relating to notice and proof of loss are conditions precedent to suit. [McCormack v. N. British Ins. Co., 78 Cal 468, 21 P 14 (1889); White et. al. v. Home Mutual Ins. Co., 128 Cal. 131, 60 P. 666 (1900); and Basle v. Pacific Indemnity, 200 Cal. App. 2d 207, 19 Cal. Rptr. 299 (1962)].

According to the Supreme Court of Kentucky, “[i]nherent in the plain meaning of ‘accident’ is the doctrine of fortuity. Indeed, the fortuity principle is central to the notion of what constitutes insurance.” The court defined fortuity as consisting of “two central aspects: intent … and control.” [Liberty Mut. Fire Ins. Co. v. Kay & Kay Contracting, LLC, 545 F. App’x. 488 (2013)] At the very least, fortuity excludes intentional or fraudulent losses and normal wear and tear. (City of Burlington v. Indem. Ins. Co. of N. Am., 332 F.3d 38, 47–48 (2d Cir.2003))

In general, failure to file a proof of loss within the time limit is fatal to an action on the policy. In Texas, the Court of Appeals held:

The insurance policies required timely filing of the proof of loss form as a condition precedent to payment of the loss. The appellants were not obligated to make any payment to the Viles unless and until the condition was performed. See Brugette 728 S.W.2d at 764. Unless this condition was met or waived, we hold the appellants had ‘a reasonable basis for denial of claim.’ Security National Insurance v. William, 773 S.W.2d 68 (1989).

A claim for faulty workmanship, in and of itself, is not an occurrence under a commercial general liability policy because a failure of workmanship does not involve the fortuity required to constitute an accident [9A Couch on Insurance § 129:4 (3d ed. 2008); Pennsylvania Natl. Mut. Cas. Ins. Co. v. Parkshore Dev. Corp., 2008 U.S. Dist. LEXIS 71318, 2008 WL 4276917, at *4 (D.N.J.2008)), affd. 403 Fed.Appx. 770 (3d Cir.2010)].

It has been held that although the insured has the burden of proving a loss is fortuitous, the “burden of demonstrating fortuity is not a particularly onerous one.” The determination of whether a loss is “fortuitous” has three components:

  • A loss which was certain to occur cannot be considered fortuitous, and may not serve as the basis for recovery under an all-risk insurance policy;
  • In deciding whether a loss was fortuitous, a court should examine the parties’ perception of risk at the time the policy was issued;
  • Ordinarily, a loss which could not reasonably be foreseen by the parties at the time the policy was issued is fortuitous.

The need for a fortuitous event when dealing with insurance establishes that one may not obtain coverage for a loss that has already taken place. [Indiana Ins. Co. v. Kopetsky, 14 N.E.3d 850, 852 (Ind.Ct.App. 2014)]

Courts, often draw on the Restatement of Contracts, to deal with the need for a fortuitous event for insurance to respond. The Restatement defined a fortuitous event as one that is dependent upon chance, taking into account the knowledge of the parties. [Compagnie des Bauxites de Guinee v. Ins. Co. of N. Am., 724 F.2d 369, 372 (3d Cir. 1983); Magi, Inc., 790 F. Supp. at 1047-48] Courts have further concluded that a fortuity inquiry should look to, among other things, whether a particular loss was certain to occur, the parties’ perception of risk at the time the policy issued, and whether the loss could reasonably have been foreseen. We conclude that the Washington Supreme Court would adopt a definition of fortuity consistent with this trend.

In determining whether an event constitutes an accident so as to afford the insured CGL policy coverage, courts must analyze this issue according to the doctrine of fortuity:

  1. whether the insured intended the event to occur; and
  2. whether the event was a chance event beyond the control of the insured.

If the insured did not intend the event or result to occur, and if the event or result that occurred was a chance event beyond the control of the insured, then CGL coverage covering accidents will apply to the benefit of the insured. [Martin/Elias Properties, LLC v. Acuity, 544 S.W.3d 639 (Ky. 2018)]


Everyone dealing with insurance must understand the doctrine of fortuity – sometimes called the unwritten exclusion. Insurance only provides coverage in the event of a loss due to a contingent or unknown event – that is, if the loss is not fortuitous there can be no insurance.

Adapted from Zalma on Insurance Claims Part 104 Second Edition: A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims now available  here.


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.
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