Three-day fire damaging multiple properties was a single occurrence under “Cause Theory”

The Wisconsin Supreme Court, applying Wisconsin law, reversed the appellate court’s decision and held that a multi-day fire which damaged multiple properties constituted a single occurrence.  Therefore, the $500,000 per-occurrence limit for property damage applied rather than the $2 million aggregate limit.

On May 16, 2013, a fire broke out in a forest stemming from the use of logging equipment owned by Ray Duerr Logging, LLC (“Duerr”).  The fire burned more than 7,000 acres over the course of three days and caused damage to real and personal property belonging to many individuals.  At the time of the fire, SECURA Insurance, A Mutual Company (“SECURA”) insured Duerr under a CGL policy.  The policy contained a $2 million general aggregate policy limit and a $1 million per-occurrence limit.  However, the policy also incorporated a “Logging and Lumbering Operations Endorsement.”  Pursuant to this endorsement, the per-occurrence policy limit was reduced to $500,000 for property damage “due to fire, arising form logging or lumbering operations ….”

SECURA filed a declaratory judgment action to determine its coverage obligations with respect to Duerr.  SECURA argued that the fire was a single occurrence and the $500,000 policy limit was applicable.  The circuit court rejected SECURA’s argument and concluded that “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.”  Thus, the $2 million aggregate policy limit applied.  The appellate court, on interlocutory appeal, affirmed the circuit court’s ruling regarding the applicable policy limit, finding that “there was an ‘occurrence’ each time the fire – fueled and expanded by the consumption of new materials – spread to a new piece of real property and caused damage.”

The issue before the Wisconsin Supreme Court was whether the fire constituted a single occurrence or whether there was instead a new occurrence each time the fire crossed a property line.  Wisconsin applies the “cause theory” to determine whether an event constitutes a single occurrence or multiple occurrences: “Pursuant to the cause theory, where a single uninterrupted cause results in all of the injuries and damage, there is but one ‘accident’ or ‘occurrence.’  If cause and result are so simultaneous or so closely linked in time and space as to be considered by the average person as one event, then only a single occurrence has taken place.  If, however, the cause is interrupted or replaced by another cause the chain of causation is broken and more than one accident or occurrence has taken place.”  (internal citations omitted).  Thus, Wisconsin courts reject the opposing “effect theory” which finds a new occurrence when property of each claimant is damaged.

Under Wisconsin law, when determining whether there is one occurrence or multiple occurrences, the court must consider elements of time and geography.  A single occurrence takes place if the cause and result were “so simultaneous or so closely linked in time and space as to be considered by the average person one event.”  The Wisconsin Supreme Court found that while the lower courts purported to apply the “cause theory,” by focusing not on the cause of the damage, but on the effect on the individual property owners, the lower courts strayed from the established methodology under Wisconsin law.  According to the Wisconsin Supreme Court, it was clear that the fire and all damage arising from it constituted a single occurrence.  Therefore, the $500,000 per-occurrence limit for property damage applied.  SECURA Ins. v. Lyme St. Croix Forest Co., LLC, 2018 WI 103 (Oct. 30, 2018).