On September 23, 1998, after Umbrella discovered William Birkin's secret deal, they sent in a team of armed security forces to assassinate Birkin and gather important virus samples from his lab. However, before the armed forces could take him out, he quickly injected himself with a sample of the G-Virus.
William mutated into something completely monstrous and seemingly invincible, and proceeded to go on a rampage, attacking and killing the Umbrella security forces before they could escape. In the process of doing so, many of the T-Virus samples broke open amid the chaos that ensued, spilling all over the floor. Rats in the area quickly became infected with the T-Virus samples as they curiously inspected the liquid matter. This led to the city's water supplies and sewers becoming infected, which ultimately led to the Raccoon City outbreak.
As zombies swarmed the streets and mass killings ensued, the U.S. military quarantined the city. Around the same time, Umbrella sent in their own armed forces, the Umbrella Biohazard Countermeasure Service (UBCS). Their purpose was presumably to try and quell the situation and provide protection to the city's residents. However, it turns out Umbrella sent them into the city to test the waters and see how the T-Virus would perform against armed combatants in what became a sick real-world experiment. After all, the T-Virus was created as a bio-weapon for war, and Umbrella must have figured they might as well gain something useful out of an inconvenient situation.
Claire's venture into the police station took a different journey, as she found paperwork confirming that her brother, Chris Redfield, had already departed the city weeks prior in order to investigate Umbrella elsewhere. Claire also discovered a young girl, Sherry Birkin, who happens to be the daughter of William Birkin, the creator of the G Virus and the one who caused this entire outbreak. Shortly thereafter, Sherry is kidnapped by the sadistic Chief of Police, Chief Irons.
It turns out that Chief Irons was in the pockets of Umbrella all along, and helped cover up the mansion outbreak that transpired in the first game months prior in the timeline, which explains why no more investigations into the matter had followed. Had investigations took place, per the advice and insistence of surviving Alpha team members, it can be theorized that this may have led authorities to Umbrella and Birkin's research earlier on and a mass outbreak could have been avoided.
As Leon and Ada headed downward into the sewers, the story introduced players to Annette Birkin, the wife of William Birkin and mother of Sherry Birkin. She tried desperately to stop Ada from obtaining a sample of the G Virus.
Meanwhile, Claire found Sherry in the Raccoon City orphanage where Chief Irons took her. But William Birkin had already injected Irons with a G Virus at some point earlier in the plot, resulting in a gruesome mutation and fight against Claire.
Leon confronted Ada demanding answers, but he received none as Annette shot Ada in the shoulder, causing her to fall off a ledge and into the lab's dark depths. She fell with the G-Virus sample still in her possession, leaving players to wonder if she died or not. Annette died minutes later, due to earlier injuries she sustained from William Birkin, in what could probably be described as uncontrollable G-Virus-induced roid rage.
As Leon, Sherry, and Claire prepared to board a train that lead outside of the facility for a final escape, the facility's self-destruction feature was activated giving them limited time to get out. Mr. X also showed up again. Ada suddenly made a brief return, tossing a rocket launcher to Leon, which he used to kill Mr. X once and for all.
As the three of them tried to escape on the train, William Birkin showed up to ruin their plans one last time in his final and most monstrous form, but was ultimately defeated, as the facility blew up moments later and engulfed him in flames. The three of them were able to exit the train and make their way to the surface where they found safety far outside the confines of Raccoon City.
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