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The use of the term "event" in an excess liability insurance policy was, at best, ambiguous and must be resolved in favor of the policyholder, according to the Supreme Court of Vermont.
The city of Burlington fueled its electric generation plant with wood chips supplied by the Moffatts.
The Moffatts sued the city, claiming the latter refused to purchase the volume of wood chips called for in their contract.
They sought damages for bodily injury, including severe emotional distress as well as economic losses. The city was insured under a primary liability policy. Associated Electric & Gas Insurance Services Ltd. provided excess coverage.
Both insurers declined to defend or indemnify the city in the Moffatt suit. Thereafter, the city settled with Moffatt for an undisclosed amount exceeding $100,000.
The excess policy covered an "occurrence," defined as "an accident, event or continuous or repeated exposure to conditions which result in bodily injury, personal injury or property damage."
The trial court concluded that the excess insurer was not liable. The appellate court said an insurance policy is a consensual contract. "If an insurance carrier makes a business decision to take on such an obligation," the court said, "we must enforce it for the insured who is entitled to the benefits of the bargain made."
The court pointed out that the dictionary definition of "event" did not suggest that the term was limited to an action that is accidental or unintended, as argued by the insurer.
According to the court, the term was ambiguous and was to be resolved in favor of the insured city. Therefore, the court said the excess insurer had a duty to indemnify the city.
City of Burlington vs. Associated Electric & Gas Insurance Services Ltd., Supreme Court of Vermont, Sept. 22, 1995 (BI/01/Ju.-$10).