Insurance coverage disputes typically activate small phrases that carry huge penalties. Few phrases are as deceptively easy and as consequential as “fortuity.” It sounds summary and educational till you understand it may possibly decide whether or not a policyholder receives tens of millions of {dollars} in protection or nothing in any respect. The phrases “fortuitious” or “fortuity” should not even present in property insurance coverage insurance policies. But, a pending case now earlier than the Arizona Supreme Courtroom deserves the shut consideration of each policyholder and each property insurance coverage claims skilled due to these phrases.
The case arises from a business constructing insured beneath an all-risk coverage. Years earlier than the declare at subject, the constructing proprietor realized {that a} long-term tenant’s water-intensive operations had been contributing to moisture intrusion and concrete deterioration. Engineers advisable repairs and likewise prompt further preventative measures. Some repairs had been made. Others weren’t. The tenant remained. Time handed. Then, through the related coverage interval, the proprietor found that the constructing’s structural integrity had been compromised. The loss was reported. The insurer denied protection, arguing that the injury was not fortuitous as a result of it was fairly foreseeable and virtually sure to happen.
The framing of that denial is the place all the pieces turns into harmful for policyholders.
All threat insurance coverage has by no means promised perfection or immunity from hindsight. It guarantees protection for loss until the loss is excluded or until the loss was a “certainty” within the sense that insurance coverage regulation understands that time period. For many years, courts throughout the nation have defined that fortuity focuses on what was identified on the time the coverage was issued. It doesn’t ask whether or not engineers can later say the injury was inevitable. It asks whether or not the insured knew, with certainty, that the loss would happen through the coverage interval.
On this case, the trial court docket accepted the insurer’s argument and dominated there was no protection as a result of the loss was not fortuitous primarily based on details making the loss fairly foreseeable and virtually sure to happen if preventative steps weren’t taken. 1 That ruling successfully collapsed fortuity right into a negligence and upkeep evaluation. It handled threat administration choices as proof that insurance coverage ought to by no means apply. If that strategy stands, all-risk insurance policies quietly turn into no-risk insurance policies every time a constructing has a historical past, a flaw, or a warning signal that the policyholder is aware of of and fails to handle and take corrective motion.
The Ninth Circuit acknowledged the magnitude of that trial court docket ruling. It did one thing uncommon and vital by certifying the core subject to the Arizona Supreme Courtroom. 2 The licensed query reads as follows:
Is injury to property a ‘fortuitous’ loss when, primarily based on the insured’s information on the time the insurance coverage coverage issued, it was fairly foreseeable that such injury was virtually sure to happen if sure preventative measures weren’t taken?
That single query and its reply will form the way forward for property insurance coverage claims in Arizona. The reply will definitely have an effect past Arizona if the court docket guidelines within the insurer’s favor as a result of different insurers will begin making an identical argument in different states. If fortuity is outlined by hindsight-driven inevitability, insurers will be capable to deny protection every time they will discover an knowledgeable keen to say the injury would have occurred finally. That logic doesn’t simply swallow fortuity. It swallows all threat protection entire. Buildings age. Water intrudes. Supplies fail. House owners make judgment calls day by day about repairs, tenants, and budgets. Insurance coverage exists exactly as a result of these choices contain uncertainty, not certainty.
However, if the Arizona Supreme Courtroom reaffirms that fortuity activates whether or not the insured knew the loss would happen through the coverage interval, the doctrine stays tethered to its correct function. Exclusions like put on and tear, deterioration, and settling nonetheless do their work. Recognized loss and loss in progress doctrines nonetheless bar protection the place applicable. However fortuity doesn’t turn into a blunt instrument that erases protection earlier than the coverage language is ever utilized.
For policyholders, the stakes are apparent. A ruling that equates foreseeability with non-fortuity would punish transparency, diligence, and threat evaluation. It might reward ignorance and discourage investigation. For claims professionals, this choice will outline how losses involving long-term circumstances, gradual processes, and delayed discoveries are evaluated going ahead. It should make clear whether or not fortuity is a slender threshold inquiry or an all-purpose escape hatch.
Insurance coverage is meant to guard towards threat, not towards shock alone. The Arizona Supreme Courtroom can now say whether or not all threat insurance policies nonetheless imply what policyholders fairly imagine they imply. Everybody who handles property claims ought to be being attentive to this final result.
I observed that Amy Samburg is on the briefing for the insurance coverage firm. She is a seasoned insurance coverage protection appellate and trial lawyer. From prior authorized battles along with her, I do know her sharp authorized evaluation, disciplined writing, and talent to border advanced insurance coverage points with readability and precision. These of us who’ve litigated towards her know that she prepares relentlessly and argues forcefully however professionally. I’m not stunned to see her urgent on this advanced subject.
This is a crucial idea to property insurance coverage. I recommend that readers of this weblog take a couple of minutes to think about the next articles we have now written on the subject:
Deconstructing the “All-Threat” Coverage: What Does “All-Threat” Actually Imply?
The Fortuity Doctrine: Deconstructing the All-Threat Coverage
The Fortuity Doctrine, Half 2: Deconstructing the All-Threat Coverage
The Fortuity Doctrine, Half 3: Deconstructing the All-Threat Coverage
Lack of Fortuitous Occasion Sinks Insurance coverage Declare
The Idea of Fortuity and The Put on and Tear Exclusion
Thought For The Day
“The essence of threat is uncertainty.”
— Frank H. Knight
1 Industrial Park Middle v. Nice Northern Ins. Co., No. 2:22-cv-01196, 2024 WL 3553113 (D. Ariz. July 26, 2024).
1 Industrial Park Middle v. Nice Northern Ins. Co., No. 24-4788, — F.4th —, 2025 WL 3716364 (ninth Cir. Dec. 23, 2025).