A Video Explaining “Fortuity” as an Unwritten Exclusion
The Fortuity Doctrine
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Because the purpose of insurance is to protect insureds against unknown, or fortuitous, risks, fortuity is an inherent requirement of all insurance policies that take on the risk of loss accepted by the policy. [Two Pesos, Inc. v. Gulf Ins. Co., 901 S.W. 2d 495, 502 (Tex. App. Houston [14th Dist.] 1995, no writ)]. The fortuity doctrine precludes coverage for both a “known loss” and a “loss in progress.” A “known loss” is a loss the insured knew had occurred prior to making the insurance contract. [Burch v. Commonwealth Mut. Ins. Co., 450 S.W. 2d 838, 840-41 (Tex. 1970)].
The doctrine has its roots in the prevention of fraud: because insurance policies are designed to insure against fortuities, fraud occurs when a policy is misused to insure a certainty. Inland Waters Pollution Control, Inc. v. Nat’l Union Fire Ins. Co., 997 F. 2d 172, 175-77 (6th Cir. 1993) and Scottsdale Insurance Company v. William Barret Travis, Maintenance, Inc., No. 05-99-01831-CV (Tex. App. Dist. 5 05/29/2001).
The California Supreme Court considered the complex questions of insurance policy coverage interpretation that arose in connection with a federal court-ordered cleanup of the state’s Stringfellow Acid Pits waste site. The Supreme Court initially addressed the “‘continuous injury’ trigger of coverage,” as that principle was explained in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, (P.2d 878 (1995) and the “all sums” rule adopted in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 55-57 (Aerojet). The California Supreme Court brought to an end the dispute that started in the 1960’s when the Stringfellow Acid Pits began to leak. [State Of California v. Underwriters at Lloyd’s London (2006) 146 Cal.App.4th 851 (54 Cal. Rptr. 3d 343)]
© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.
He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
He is available at http://www.zalma.com and zalma@zalma.com. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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