What is an 'Occurrence'?

Photo via FreeImages.com, courtesy of Peter Hellebrand

Photo via FreeImages.com, courtesy of Peter Hellebrand

You've seen 'Per Occurrence' on your Homeowner's and/or your Commercial General Liability insurance declarations page, but what does that actually mean? What is the definition of an 'occurrence'? Why is this term important?

Most people have 'Per Occurrence' limits in the hundreds of thousands of dollars, and some policies provide limits into the millions of dollars. While this may seem like a lot, it really depends on the situation. As with most things in insurance, the best way to explain is to provide an example:

Say you built a deck on the side of your building and you host a small gathering of a dozen people. At one point, all of your guests end up on the deck, and, consequently, the deck collapses. Each person is injured, and injuries range between minor bruising to complete paralysis. With this scenario in mind, let's say you have one million dollars of per occurrence liability coverage--how does your insurance respond?

First, we have to figure out what the 'occurrence' was. A mistake that's often made in determining the 'occurrence' is thinking that each injured person is a separate 'occurrence'. However, in this example, all injuries were caused by the same root cause--the deck's collapse--and thus only one 'occurrence' happened. This then results in a maximum payout of one million dollars for the twelve people injured, whether or not that covers everything that is ultimately owed. And if someone has been seriously injured, it's doubtful that a million dollars would cover that person's injuries, let alone the injuries of multiple people!

So to recap, if there is clearly one root cause of injuries or damages, it will be deemed a single 'occurrence', subject to the 'per occurrence' limit, regardless of how many people are affected. 

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Colten Zamrzla, CPCU

Colten first started in the insurance industry in 2010. He then pursued a Bachelor's degree in Finance & Insurance from the University of Nebraska at Lincoln. Once graduated, he immediately started studying for the CPCU and achieved it in just shy of a year. He is solely focused on commercial insurance, able to assist all types of businesses and nonprofits in risk management.

Colten has dedication and passion for his clients and the insurance industry as a whole. He dedicates time to furthering his knowledge on all things business and insurance, and he volunteers for the Independent Insurance Agents of Nebraska, a state-based trade association.