Sudden & Accidental coverage is tied to a discovery and reporting period, and generally covers bodily injury and property damage caused by a pollution loss. If a claim comes in and is a gradual loss or is not discovered and reported in the time allowed under the policy form, there is no coverage in place.
Through the years, the term “Sudden & Accidental” pollution has been litigated vigorously and there has been much debate about the meaning of Sudden and Accidental versus a Non-Sudden and Gradual (gradual) pollution event. A classic example of the complexity of this issue involves the circumstance where an area of a site has staining, and the cause of the staining has been determined to be a leak from a pipe. A question is posed as to whether the staining was caused by a sudden and accidental event or a gradual event. If one believes that it is a result of a sudden and accidental event – is it because the event was the first drop (and everything subsequent to that was the same occurrence)?
Conversely, was the staining the result of a non-sudden & gradual, consistent stream of drops over time? Even if it was determined that the stain was a result of a gradual release, shouldn’t the first drop be considered an sudden and accidental event and therefore, some amount of the staining would fall into the sudden and accidental category? There are many opinions that one might have with regard to this simple example and this is only a glimpse of how complicated this debate became.
What is the difference between Sudden & Accidental Coverage vs. Non-Sudden and Gradual Coverage?
The word “sudden” had been litigated extensively in many courts, and was initially interpreted to mean “unexpected”, rather than “quick”. The word “accidental” was often interpreted as “unintended”. This broad interpretation of sudden and accidental, i.e., “unexpected and unintended”, rather than “quick”, resulted in many court decisions that were advantageous to the insured because of the fact that the unclear interpretation of the words resulted in ambiguities.
Over time, this broad, ambiguous interpretation of sudden and accidental became narrower. In recent years, sudden and accidental has been interpreted to mean that it takes place in its entirety at a specific time and place. Insureds may have difficulty demonstrating that a pollution condition or release of pollutants was sudden and took place at a specific time.
Many, but not all, environmental insurance policies provide coverage for both sudden and accidental and gradual pollution releases. There is no distinction between one or the other in most environmental insurance forms. With gradual coverage in place, the insured does not have to be concerned about meeting the reporting requirements outlined in the time element trigger, or the potential ambiguity of older sudden and accidental forms.
Non-sudden and gradual coverage in premises specific forms is not without its issues as well. It is important for insureds to understand the difference between “unknown” pre-existing conditions and “new” conditions. Sudden & Accidental is typically a coverage enhancement on a Contractors Pollution Liability, Site specific Pollution Liability or a combined/Package Pollution Liability policy for a client that demonstrates the need for the covers due to the nature of their business which could create an Environmental risk due to their business activities.