The Wisconsin Supreme Court unanimously held last week that a wildfire which “burned 7,442 acres over the course of three days” and damaged or destroyed 104 structures constituted a single occurrence under a comprehensive general liability policy. See Secura Ins. v. Lyme St. Croix Forest Co., No. 2016AP299, 2018 WL 5534110 (Wis. Oct. 30, 2018).
The May 2013 “Germann Road Fire” was allegedly sparked by logging equipment owned by Ray Duerr Logging. Id. at 3. A CGL policy issued by Secura to Dueer contained a $1 million per occurrence limit and a $2 million general aggregate limit. Id. However, the policy also contained a “Logging and Lumbering Operations Endorsement” which reduced the $1 million per occurrence limit to $500,000 for property damage “due to fire, arising from logging or lumbering operations.” Id. After Duerr sought coverage from Secura for claims filed by property owners, Secura brought a declaratory judgment action, asserting that “the $500,000 policy limit from the Logging and Lumbering Operations Endorsement was applicable, rather than the $2 million aggregate limit.” Id. at 4.
Both the trial court and the Court of Appeals rejected the insurer’s argument and held that the $2 million aggregate limit applied. Id. at 5. In reaching that determination, the courts relied on Wilson Mut. Ins. Co. v. Falk, 360 Wis.2d 67 (2014) in which the Wisconsin Supreme Court held that there was a separate occurrence each time manure seeped into a unique well. Secura, at 4-5. As explained by the trial court, “although there was one uninterrupted cause of the fire, each ‘seepage’ of fire onto another’s property constitute[d] a separate occurrence for purposes of the policy.” Id. at 4.
The Wisconsin Supreme Court reversed. According to the Court, the lower courts had improperly analogized the forest fire to the seepage of manure into well water. Id. at 12. As the Court explained, “[i]n Falk, the manure seeped over the course of an unspecified period of time” whereas the forest fire “burned continuously for three uninterrupted days” and “[a] three-day fire in a discrete area caused by a single precipitating event would reasonably be considered by the average person to be one event.” Id. at 12-13. In addition, the Court determined that the lower courts, in finding that “the fire had to spread to each piece of real property for another property owner to suffer property damage due to the fire” improperly “focus[ed] not on the cause of the damage, but on the effect on individual property owners” and thus “strayed” from the Court’s established precedent for determining the number of occurrences based on the “cause theory” as opposed to the “effect theory.” Id. at 13.
Accordingly, the Court concluded that the fire “constitutes a single occurrence,” and that “the $500,000 per occurrence limit for property damage applies” (and not the $2 million general aggregate limit). Id. at 15.