Trigger Revisited: The Return Of Injury-in-Fact Trigger In Florida

The insurance concept of “trigger” is a bit esoteric, so let’s start with a little background.  Trigger is one of the most important concepts in insurance law.  It is also one of the most misunderstood.  It is often mistaken for allocation, but the two concepts are different.  Trigger determines which years of coverage apply to a loss, whereas allocation determines how the loss is allocated over the triggered years (e.g., on an “all sums” basis as opposed to pro-rata or time-on-the-risk).  When the loss is a single-point trigger (a “boom” loss), there is no question what the trigger point is.  Examples of single point triggers are explosion cases, fires, car accidents, and just about any occurrence that happens at a distinct point in time. The insurer on the risk at the time of the “boom” covers the loss.

When trigger is disputed, the claim typically involves progressive injury or a latent defect.  Examples are asbestos exposure and latent construction defects (such as a defect in a roof that causes small leaks over time), where it may not be clear when the damage period began.  The trigger determination can make the difference between a full insurance recovery and recovering little or no insurance proceeds.  For example, in jurisdictions where the triggering event is exposure, if a claimant was first exposed to a substance like asbestos decades ago, the insurance limits may be very low or the insurance company may be out of business.  In a jurisdiction that applies a manifestation trigger, if coverage was not maintained there may not be any insurance available by the time damage is discovered.  This has become a frequent problem in latent construction defect cases, since the slow economy and housing market has put many contractors out of business.  If the contractor does not buy an extended reporting period (or “tail”), it will not have any coverage for a latent injury claim discovered years after the work was performed, if a manifestation trigger applies.

Traditionally, occurrence-based liability policies did not have trigger provisions.  However, more recently some insurers have put trigger clauses into their policies.  In addition, claims-made policies have explicit trigger requirements, typically requiring the claim to be made and reported within the policy period (and often also requiring the damage to have incepted subsequent to the policy’s retro date).  To the extent that a policy has an explicit trigger clause, that clause will control.  However, most CGL policies do not have such guidance, leaving the courts to determine the appropriate trigger period.

There are four types of trigger: exposure, manifestation (also called discovery), injury-in-fact, and continuous (also called “triple trigger”).  An exposure trigger gets you an early trigger date, since it is based on the date of first exposure, or when harm first started to occur.  A manifestation trigger gets you a late trigger date, since it is based on the date when the damage or injury was discovered.  The injury-in-fact trigger triggers all policies in effect when the damage actually occurred, to the extent that can be determined.  Finally, the continuous trigger is the best trigger for policyholders, since it triggers all policies in effect from the time of first exposure to the time of manifestation.  It is sometimes referred to as a triple trigger, since it triggers coverage based on all three of the previously-discussed triggers: upon exposure, during the period of active harm, and up to the time of manifestation or discovery of the damage.

The reason why courts have developed trigger rules is that it can be very difficult to determine when damage actually occurred in a progressive injury or latent defect case.  The injury-in-fact trigger is the purest form of trigger, and the one that courts often attempt to apply.  The reason it is so hard to apply is because latent damage is by its nature stealth: difficult to detect and to pin down temporally.  Since many disputes lack a factual basis to apply an injury-in-fact trigger, courts often resort to one of the other triggers, particularly when a judge is looking for a bright-line rule to apply.

OK, end of Insurance 101.  Let’s talk about trigger in Florida, and why the recent decision in Axis Surplus Insurance Co. v. Contravest Construction Co., No. 11-cv-320 (M.D. Fla. June 5, 2012) is important.  For a long time in Florida, there was very little trigger caselaw.  Then the Eleventh Circuit decided Trizec Properties, Inc. v. Biltmore Construction Co., 767 F.2d 810 (11th Cir. 1985), and it looked like Florida was an injury-in-fact trigger jurisdiction.  Then CSX Transp., Inc. v. Admiral Ins. Co., 1996 U.S. Dist. LEXIS 17125 (M.D. Fla., Nov. 6, 1996) came along and applied a continuous trigger.  Since then, most Florida courts that have addressed the issue (coincidentally, all federal courts), have mainly applied what they called a manifestation trigger.  The court in Mid-Continent Cas. Co. v. Siena Home Corp., 2011 WL 2784200 (M.D. Fla. July 8, 2011) reviewed the recent caselaw and essentially determined that Florida courts had settled on the manifestation trigger.

Although the court in Sienna Home said it and other recent decisions were applying a manifestation trigger, in reality these recent decisions have applied a hybrid manifestation/injury-in-fact trigger.  The reason is that the manifestation test in Florida developed into this: coverage is triggered when damage is discovered or when it could have been discovered upon reasonable inspection.  This has led to a battle of the engineering experts in construction defect claims, with each expert opining on when the damage could have been discovered had certain testing been performed.  The bright-line manifestation rule became a muddied, fact-intensive inquiry into when the damage actually could have been discovered.  In other words, in practice the test became essentially an injury-in-fact test, or at least a discoverable-damage-in-fact test.  Summary judgment on trigger has become almost impossible to obtain given the inevitable disputed factual issues.

Now the Middle District of Florida has weighed in on trigger again in the recent Contravest decision.  In Contravest, Judge Antoon rightfully questioned why Florida federal courts have wandered afield of Trizec, given that the Eleventh Circuit, applying Florida law, was clear that an injury-in-fact trigger should apply.  If the Florida Supreme Court, or Florida appellate courts, had weighed in on the issue, Florida’s federal courts would be duty-bound to follow those state court decisions.  But in the absence of state precedent, Florida federal courts should be following the lead of the Eleventh Circuit.

Judge Antoon came to the right decision in following Trizec and applying an injury-in-fact trigger, and deserves praise for having the courage to swim against the tide of other federal courts that have either ignored Trizec or have unconvincingly distinguished it.  In a way, by bringing Florida trigger law full circle back to an injury-in-fact trigger, Judge Antoon applied a similar test that other courts had been applying with the label of manifestation trigger.  The significance of the Contravest decision therefore is not so much that it represents a major shift in the way Florida federal courts address the trigger issue, but rather in the way trigger is conceptualized.  Injury-in-fact trigger was, and remains, the proper trigger test in Florida.  That is, until and unless Contravest is appealed, and the Eleventh Circuit chooses to finally certify the trigger issue to the Florida Supreme Court for the final word.