PER OCCURRENCE vs. AGGREGATE
LEVELS OF INSURANCE

QUESTION: When it speaks of $3,000,000 does this mean the association must maintain $3,000,000 per occurrence or can a policy affording $2,000,000 per occurrence with $4,000,000 aggregate annual limit meet the limit referred in the code?

ANSWER: Policies with an aggregate limit of $4 million but a $2 million single occurrence limit do NOT satisfy the statute. Because of the language found in Civil Code §1365.9(b), "Any cause of action in tort . . .", associations wishing to limit owner liability must maintain the prescribed limit "per occurrence" and not rely on an annual aggregate.

    Aggregate Limit. The maximum coverage under a liability policy during a specified period of timeusually one year or the policy periodregardless of the number of separate losses that may occur. Losses paid under coverages subject to aggregate limits reduce the amounts available for future losses.

    Occurrence Policy. A policy that provides coverage for "occurrences" or events that happen during the policy period regardless of when the claim is actually made. The opposite is a "claims made" policy, which insures claims only when the claim is reported during the policy.

    Commercial Umbrella. An umbrella policy can be used to meet the coverage requirement. If the underlying policy together with the umbrella satisfy the per occurrence limits, the policy would satisfy the statute.

Updated 7/18/2008