While the specific language varies from policy to policy, first party property policies require that a loss occur during the policy period in order for coverage to be triggered. Many times, the determination of when a loss occurred is not difficult, for instance, when a hurricane makes landfall. However, in matters typically referred to as “progressive loss” cases, whether a loss is covered under a particular policy or a particular policy period will depend on the specific language of the policy and the “trigger of coverage theory” that the jurisdiction applies. Typical progressive loss cases have included environmental exposure and construction defects, where it may be difficult to determine exactly when the loss began, as knowledge of the loss did not occur until after the loss actually started.
There are four generally accepted trigger theories with respect to liability policies: (1) exposure; (2) manifestation; (3) continuous; and (4) injury-in-fact. The exposure theory typically finds that property damage occurs on the date that the property was first exposed to harmful conditions or upon installation of a defective product. Under the manifestation theory, property damage is typically deemed to occur on the date that the damage is or should be discovered or is discoverable. The continuous trigger theory typically defines property damage as occurring from the date of exposure through the date of discovery. Under the injury-in-fact theory, coverage is typically triggered when the property damage actually occurred.
There are very few jurisdictions with written decisions regarding trigger in the context of first- party policies. Most jurisdictions that have considered the issue in the first party context apply the manifestation trigger as explained in Home Ins. Co. v. Landmark Ins. Co., 205 Cal. App. 3d 1388 (1988) and Prudential-LMI Commercial Ins. v. Superior Ct., 51 Cal.3d 674 (1990). A minority of jurisdictions (North Dakota and Washington) have determined that the injury-in-fact trigger applies to first party policies. Kief Farmers Coop. Elevator Co. v. Farmland Mut. Ins. Co., 534 N.W.2d 28 (N.D. 1995); Ellis Court Apts. Ltd. P’ship v. State Farm Fire & Cas. Co., 72 P.3d 1086 (Wash. App. 2003).
It should be noted that jurisdictions vary widely in the application of particular trigger theories and even when jurisdictions purport to apply the same trigger theory, interpretation of the theory varies in different factual scenarios and depending on the specific policy language.
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When a loss arguably spans more than one policy period (the time period while a particular policy is in effect), the rule of law known as trigger of coverage, along with any policy provision addressing the issue, determines when a loss is considered to have occurred, and thus which policy or policies cover a particular … Continue Reading