“Trigger” is a term of art used by legal and insurance practitioners that you will not find in the CGL policy. It is a useful term that simply describes how and when coverage is activated. In the CGL occurrence form, property damage must occur during the policy period.
In the context of insurance claims, most of the time there is no controversy. The cause (occurrence) and effect (property damage) are definite in both time and place, and readily apparent. It is simple to pinpoint when the property damage occurred and it is when the property damage occurs that triggers coverage, not when the work is done, for example, in a construction defect claim.
But in the case of latent (hidden) damage, the effect may not become apparent until sometime after the work is completed so the timing of the property damage is unclear and the controversy begins.
Furthermore, latent property damage can be characterized by a continuous and progressive process (and practically indivisible if there are multiple causes). This is the rule and not the exception in the construction defect claim world. Even experts cannot agree on when property damage occurs.
A coverage analysis begins with the requirement that property damage happen during the policy period as the result of an occurrence. The insured has the burden of demonstrating at least the potential that an occurrence caused property damage during the policy period.
The trigger of coverage analysis includes an examination of the underlying facts and the law in a particular state. Because of the challenge of determining when property damage and bodily injury occur in continuous damage/injury claims, various trigger theories have developed. The impetus for these theories actually preceded the proliferation of construction defect claims. Asbestos and environmental claims provided fertile ground for controversies concerning when injury and damage actually occur, so these trigger theories evolved in an attempt to defuse these controversies.
Brief descriptions of the major trigger theories follow. There are also variations of these theories. But, while useful, these theories are not definitive and do not relieve the claim professional from examining the defect/damage process. Whether a particular trigger theory should apply in the first place depends on the underlying facts and the prevailing case law.
To facilitate an understanding of these theories, our focus is on the insured’s work and one identifiable cause, or faulty work. The typical construction project and the claims that arise, however, are not so neat and clean. The insured is frequently not alone on the project so an analysis is complicated by the existence of multiple parties and multiple causes.
Before tackling the trigger theories, when analyzing the underlying facts, it is useful to create a chronology of construction events. When property damage occurs may not be known exactly, but a good chronology can help narrow down when property damage may have occurred. Specific dates and activities can not only define the parameters of when property damage may have occurred, they can also rule out when property damage definitely did not occur. A chronology generally, however, cannot determine how much property damage occurred at a particular point in time, only when property damage may have occurred.
For example, the date of the insured’s construction contract, the dates of work, including completion and acceptance dates, the certificate of occupancy date, etc., should generally be available. These dates, and the dates insurance coverage are available to the insured, can aid in the establishment of a chronology that narrows down the triggered periods. The following simple chronology illustrates the point:
5/1/04 Date of subcontract
8/1/04 Date insured’s work completed/accepted
11/1/04 Date of substantial completion
12/1/04 Certificate of Occupancy issued
6/1/05 – 6/1/06 Insurer A policy
6/1/06 Insurer B policy begins
12/1/06 First documented complaints of water intrusion
6/1/07 Insurer B policy ends
6/1/08 Lawsuit filed
The manifestation trigger holds that the policy in effect at the time the property damage becomes apparent, either subjectively or objectively, is activated. A subjective manifestation occurs when the property damage actually becomes apparent and is discovered. On the other hand, an objective manifestation is one in which the property damage should have become apparent and discovered. For example, an inadequately designed foundation on expansive soil, i.e. soil that expands and contracts, will start to fail before the symptoms become apparent and eventually are discovered. In either case only one policy is triggered.
The exposure trigger requires that all policies in effect during the period that the property is exposed to the harmful, damage-causing agent be activated. Consequently, more than one policy can be triggered. For example, in the case of a defective foundation, all policies are triggered from the moment of installation through the period during which the office building is exposed to the defective foundation and is damaged.
Continuous Injury or Damage
The continuous injury trigger, the broadest trigger, begins with the time of the defective work through to when the work manifests or is discovered, and possibly beyond. More than one policy is triggered.
Injury-in-fact stays true to the policy requirement that only property damage that occurs during the policy period is covered, whether detectable or not. In the context of latent, continuous and progressive damage, more than one policy can be triggered.
When Does a Construction Defect Cause Property Damage?
Until property damage is discovered, has it occurred? A manifestation or discovery jurisdiction would say no.
The CGL policy requires that property damage occur during the policy period. It does not say that the property damage has to be seen, heard, or discovered. So, it must be conceded that property damage can begin before it is discovered or becomes manifest. But what does the law of a particular state say? In other words, while it is easy to conceptualize that property damage can begin the moment of the creation of the defect and continue undetected, it is necessary to determine when the law says the property damage occurred.
One cannot forget logic and common sense, however, when analyzing when property damage occurred. For example, suppose a roof is installed but flashing at the chimney is not. Three months later water damage is discovered. The damage occurred before discovery but did it occur during the entire three months? Suppose it did not rain for the first two months
Care must be taken to avoid being so mired in theories and legal concepts that logic and common sense are trumped by an automatic, mechanistic approach to coverage for a claim.