The Myth of “Accident-Based” Policies
Folklore sometimes develops regarding a particular insurance issue, to the point where the actual policy wording is ignored or forgotten. One such area is the common discussion about the supposed difference between "accident based" and "occurrence based" coverage. According to this fairy tale, "Once upon a time, policies covered only events called ‘accidents'...." The story goes on to reveal how subsequently the insurance industry decreed that coverage would expand to events called "occurrences," and there was much rejoicing among insureds. This story, though, is a fallacy which completely ignores both the terms of the pre-1966 policy wording, and the entire context of the changes made in the 1966 ISO policy. In short, it is simply incorrect to say that the earlier policies covered "accidents" and the later policies covered "occurrences." This story (if believed) deprives insureds of the broad coverage to which they are entitled under the pre-1966 wording. By treating the word "accident" as a noun, carriers argue the pre-1966 policy applies only to "boom-type events" and not gradual and progressive harm, a severe (and non-existent) restriction on coverage.