Long-Tail Claims and
Insurance Archeology
Why You Need Historic Insurance
and How to Reconstruct It
By Robert M. Horkovich and Diana Shafter Gliedman
O
ld insurance policies that cover long-tail claims
such as asbestos, environmental or latent defect
claims are worth more than their weight in gold.
However, many businesses follow strict document
destruction policies to clear the clutter from company
file rooms. While no sane businessperson knowingly
would throw away a shoebox full of hundred dollar bills to make room for next year’s performance
reviews, many companies made the mistake of throwing away an asset worth millions, or even hundreds of
millions of dollars: their old insurance policies.
Historic Insurance: Why Those Old Polic ies
Are Worth Their Weight in Gold
Upon being named in a lawsuit, many policyholders immediately notify their current insurance
companies. That would seem to make sense — if
you’re sued in 2014, wouldn’t your 2014 insurance
policy apply? Well, perhaps — but only if your 2014
policy is a “claims made” policy, which provides
coverage for claims or lawsuits that are brought
within the policy period, regardless of when the
alleged injury occurred.
Most general liability insurance policies, however,
are not claims made — rather, they are written
on an “occurrence” or “accident” basis. The policies cover events that happen during their policy
period even if claims against your company are not
filed until years, or decades, later. In other words, it
doesn’t matter when the lawsuit is filed; it matters
when the event that gave rise to coverage allegedly
took place. So, a lawsuit filed in 2014, alleging that
someone was injured in 1964, probably would be
covered by the company’s 1964 commercial general
liability policy, or CGL.
A CGL policy typically requires the insurance company to pay for “all sums” that the policyholder is legally
liable to pay as damages arising from an occurrence
that resulted in “property damage” or “bodily injury”
during the policy period, up to the limits of the policy.
Moreover, primary first-dollar CGL policies generally
cover the costs of a legal defense, and often those costs
are outside the limits of the policy, i.e., unlimited.
Courts have interpreted these policies broadly and
have found coverage for all kinds of liabilities, asbestos, environmental, latent defects, etc.
Old Injuries, New Claims
But how likely is it that your company will be sued
for an injury that allegedly took place before the
bicentennial? More likely than you’d think. Claims
of illness from exposure to asbestos are an example
of the type of bodily injury covered by historic CGL
policies. Asbestos routinely was used in all types of
construction, insulation of homes, and in a wide
variety of consumer products (such as hairdryers
and cosmetic products) up until the 1970s. Asbestosrelated diseases may not exhibit symptoms for decades after exposure, and have resulted in billions of
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