Scottsdale Ins. Co. v. Thrower, No. 20-376 (Ark. Ct. App. June 2, 2021) involves the tragic case of a 3-year-old boy who died from choking on a hot dog at a daycare in Arkansas.  The insurer for the daycare settled the underling claim for the policy limit of $1,000,000.  However, the insurer wanted to limit its payment to $995,000, on the basis that it had already paid out $5,000 under the medical expense coverage.  Thus, as the insurer saw it, since the claim was a single occurrence, its maximum liability, collectively, was the policy’s $1,000,000 occurrence limit.

The trial court disagreed, concluding that the policy was ambiguous.  The Arkansas Court of Appeals agreed. 

The opinion is brief and I’ll spare all of the policy language here – which is, in any event, not unfamiliar.  In general, the court concluded that, despite there being just one “occurrence” at issue, the policy’s $2,000,000 general aggregate applied.  Thus, the insurer could be liable here for $1,005,000, under a policy with a $1,000,000 “occurrence” limit.   Try as it might, the insurer could not convince the court that the general aggregate limit only applies if there is more than one “occurrence.”  As the court saw it, the policy language did not say that the general aggregate limit only applied if there was more than one “occurrence.”    

The court got it wrong.  The policy language here clearly supports the argument that the claim involves a single “occurrence” and the insurer’s maximum liability is $1,000,000 collectively under coverage A (“bodily injury”) and coverage C (medical expenses). 

In fact, the decision is so wrong that I can’t imagine it being followed by other courts.  But it’s not an ideal situation for insurers to have an appellate decision stating that a portion of the Limits of Liability section of the ISO commercial general liability form – which is not exactly the provision about sidetrack agreements -- is ambiguous