Insurance policies are valuable assets that often don’t become obsolete once the policy period has expired. Learn how insurance is often a permanent corporate asset and what to do when you can’t find the policies.
I. - CGL POLICIES COVER THIRD-PARTY LIABILITY CLAIMS – Suppose a governmental agency demands that your company pay for environmental remediation at a landfill that your company used 30 years ago, or several individuals allege that their cancer was caused by exposure to hazardous chemicals your company manufactured in the 1940s through the 1960s. When faced with either of these legal problems, corporate counsel should immediately look for their historic Commercial General Liability (CGL) policies.
CGL insurance is the most commonly held type of business insurance, and it is designed to provide policyholders with coverage for all forms of third-party liability. In particular, CGL insurance provides coverage for liabilities to third parties who have, through the policyholder’s alleged negligence, suffered bodily injury or property damage. CGL insurance became available in the early 1940s when the insurance industry combined several forms of specific hazard liability insurance (elevators, products, premises, and so on) into a single standard form all-risk policy. Most CGL policies from the 1940s to 1986 provide coverage for environmental claims while policies from the 1940s to the present provide coverage for toxic tort claims. The asbestos exclusion did not start appearing in CGL policies until the mid-1980s.
II. – FINDING POLICY EVIDENCE – USE OF INSURANCE ARCHAEOLOGISTS – Insurance policies are very valuable assets that don’t become obsolete once the policy period has expired; but over time, a company’s insurance policies are often destroyed because the company is not aware of their ongoing value, or they are simply “lost.” Unfortunately, when contacted for help locating historic coverage, many insurance companies claim to no longer have copies of policies they issued to their insureds. Thus, it is vital that policyholders locate and properly maintain their historic and current policies in order to establish coverage for any claims they may have against their insurers. If the policies cannot be located, coverage may still be available to the policyholder if secondary evidence of coverage is introduced. When reconstructing historic insurance policy evidence, insurance archaeologists, like those at SandRun Risk, can help. Insurance archaeologists look for policies issued as far back in time as applicable to the offense – i.e., the first sale of the offending product, the first pollution activity, the first alleged exposure, etc. They search for primary as well as umbrella and excess policies in order to reconstruct the highest possible limits of coverage. Located umbrella and excess policies will often specifically identify underlying coverage, and primary policies will often reference earlier coverage, thus providing valuable evidence.
Insurance archaeologists determine where the search will be conducted, how much time it will take, who will perform the work and the cost of the project. They also identify possible sources to investigate. Interviews of key individuals associated with the policyholder are often worth their weight in gold. Someone who has been with the company for a long time often has valuable information to convey regarding company procedures, company history and the names of former and current employees who may have knowledge of the insurance policies. Internal policyholder files often contain evidence of insurance policies. Insurance companies are another fruitful source of insurance documents since many insurance companies maintain the policies in hard copy or on microfiche. Other sources include insurance agents or brokers, attorney files, accountant or bookkeeper records, the national archives, military archives, federal and state court files, regulatory agencies, customer files, business partner files, state agencies, and independent archives, to name a few.
Predecessor and successor company policies are identified and located. Frequently, the company that allegedly caused the problem has been sold or dissolved. Under the law of successor liability, any company in line of title is potentially at risk for a problem allegedly caused by a predecessor. The starting point of any policy reconstruction is to identify the offending company and all succeeding companies. Acquisition and divestiture agreements may contain important indemnity and insurance language concerning the assumption of liabilities.
Once the policy evidence is found, the insurance archaeologists properly record and maintain the information. The secondary evidence is copied and a document identification form is attached to record when and where it was found. Then, the policy evidence is safely stored. Safe storage can include a vault or a fire proof file. Scanning the policy evidence and keeping a backup of the hard copy on the computer is advisable. A computer database can also be used to record the following key information:
- Policy Number
- Policy Periods
- Occurrence/Claims Made
- Occurrence Limits/Aggregates
- Deductibles and SIRs
- Insurance Layers
- Aggregate Erosion
Insurance archaeologists can help maximize a policyholder’s insurance asset by locating the actual missing policy or secondary evidence of it. Even when the actual policy cannot be found, an insurance company may accept secondary evidence as proof of the policy’s terms and address the claim based on that evidence. If the insurer and insured reach an impasse due to the insurer’s refusal to accept secondary evidence as proof of coverage, a lawsuit may ensue.