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The Hidden Power of Historical Commercial Insurance Policies

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By Kristen Drake
Managing Director, PolicyFind

Over 25 years ago, PolicyFind’s CEO Steve Henshaw, P.G. discovered the power contained within historical commercial general liability (CGL) insurance policies in the face of a lawsuit or environmental issue. He then assembled a team of Insurance Archeologists, led by David O’Neill, J.D., to perfect a process of unearthing and reconstructing CGL coverage for companies and organizations representing a diverse span of commercial sectors. Over the next few decades, PolicyFind built its reputation for success by locating over $5 billion dollars of usable funding for policyholders.

Our clients commonly face immense challenges and deadlines, and they rely on our strengths to provide solutions for them. Our team understands the unique set of circumstances that businesses face when liabilities from past business operations arise. With our help, they can overcome their inevitable feelings of anxiety, powerlessness, and uncertainty.

Time after time, our clients tell us that hiring an Insurance Archeology team was one of the best investments they’ve made in their company’s success. Once historical coverage information is discovered, it opens a door to potential funding for their current liabilities, and can be considered an indispensable resource for any unfortunate FUTURE situations.

PolicyFind works diligently every day to put the power of the policy back in the policyholder’s hands – where it belongs.

 

Kristen Drake brings more than a decade of research and managerial experience in broadcast journalism to the field of insurance archeology. Since joining the PolicyFind team in 2015, Mrs. Drake has successfully documented liability insurance programs on behalf of municipalities, manufacturers and dry cleaners. She continues to translate her expertise in source procurement and digital fact-finding, performing insurance research activities at a very high level, providing on-time execution of contracted performance goals.

Indiana Subcontractor’s Unsatisfied SIR Endorsement Leaves Contractor’s CGL Coverage Untriggered

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[author] [author_image timthumb=’on’]https://i0.wp.com/www.policyfind.com/wp-content/uploads/2015/12/oneill_dave.jpg?zoom=2&w=1080[/author_image] [author_info]Director of Investigations, Insurance Archeology[/author_info] [/author]

 

 

Indiana contractors seeking indemnity from their subcontractors will want to pay heed to a recently published opinion by the Court of Appeals of Indiana regarding a case in which a subcontractor’s failure to make the claims payment required in its self-insured retention endorsement left the contractor without coverage under that policy.

In what it called “a case of first impression,” the Appellate Court recently upheld a summary judgment by the Lake County Superior Court in favor of the insurer in a case styled Walsh Construction Company v. Zurich American Insurance Company.

Walsh Construction was sued by a motorist injured in a work zone of an Interstate Highway improvement project. The motorist alleged that the injury was due to an unsafe traffic pattern. Walsh Construction’s subcontractor, Roadsafe Traffic Systems, Inc. had been working on this section of the highway and had entered into a contract with Walsh Construction requiring it to provide a “safe traffic pattern” through the work zone. The contract also required Roadsafe to indemnify Walsh for any failure or negligence in its work and name Walsh Construction as an additional insured on its CGL policy.

When Roadsafe neither indemnified nor defended Walsh in court as its contract required, Walsh put Roadsafe’s insurer (Zurich American) on notice of the motorist’s claim, seeking a defense under Roadsafe’s policy. The policy Roadsafe had purchased was a policy that included a “$500,000 per occurrence self-insured retention endorsement” that required it to pay “all damages and ‘pro rata defense costs’ for each ‘occurrence’ until you have paid damages equal to the Per Occurrence amount.”  When Zurich denied Walsh’s request, Walsh filed a declaratory judgment action and Roadsafe joined in, seeking coverage for Walsh under its policy.  After a hearing, the court entered summary judgment for Zurich, stating that given these facts, Zurich had no obligation to cover Walsh as an additional insured on Roadsafe’s policy.

Walsh appealed the pro-Zurich judgment. The Court of Appeals determined that the question presented was “whether the SIR endorsement amended Zurich’s obligation under the CGL policy to defend Walsh.”  Walsh and Roadsafe argued that while the SIR endorsement amended Zurich’s obligation under the policy with respect to Roadsafe, it did not do so with respect to Walsh.

The Court found precedent for the rule that an insured’s duty to defend is not triggered unless and until the SIR has been exhausted, however it determined that “the question of whether a SIR applies only to the insurer’s relationship to the named insured or also applies to additional insureds was a question of first impression” for Indiana courts.

The Court noted that the language of the Zurich SIR endorsement obliged the named insured as follows:

“If a Per Occurrence [amount that the named insured or any additional insured

Must pay] is shown….., [the named insured] shall be responsible for payment of all damages and ‘pro rata defense costs” for each ‘occurrence’[] until [the named insured] has paid damages equal to the Per Occurrence Amount…..”

The Court found that this and other parts of the policy “unambiguously manifest the intent of the parties (Zurich and Roadsafe) for the SIR endorsement to control their relationship such that Roadsafe assumed all costs and liability for the first $500,000 of any claim that might be made under the CGL policy, regardless of whether that claim was against Roadsafe or an additional insured.”  The fact that Roadsafe had not satisfied this requirement meant that Walsh’s coverage under that policy remained untriggered and because no claim was yet made against Roadsafe, it could not offer settlement to satisfy the SIR amount.

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District Court Sends Valentine to Washington State Policyholders Finds that PRP “Scarlet Letters” Trigger Duty to Defend

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David A. O’Neill, JD

PolicyFind

 

On February 10, 2017, the U.S. District Court for the Western District of Washington issued its opinion in King County v. Travelers Indemnity Co. et al.  The District Court held in that case that letters from state and federal regulatory authorities designating the County as a PRP at a property damage site were the “functional equivalent of a suit,” triggering its insurers’ duty to defend under its historical general liability insurance policies.

Although its insurers argued that mere PRP notice letters were not “adversarial and coercive” enough to trigger a duty under their policies, the District Court found that the USEPA and Washington State Department of Ecology had “assumed an adversarial posture by exercising their statutory authority to designate King County as a strictly-liable PRP.” In its opinion, the court reasoned: “Once a party bears the scarlet letters ‘PRP,’ it may be called upon at any time to assume responsibility for the cleanup effort.”

Noting that both CERCLA and the Washington state MTCA are “strict-liability schemes that require responsible parties, once notified, to participate in and fund all remedial action,” the District Court found that once notified,  “It makes no difference whether an insured voluntarily cleans up contamination or waits until government intervention—it is liable either way.”

The King County decision relied on the Washington Court of Appeals 2014 ruling in Gull Industries v. State Farm. In that case, the court had found that the term “suit” in general liability policies was ambiguous and may encompass claims for administrative enforcement actions if they are “adversarial and coercive” in nature.  Noting that the Gull Industries decision had gone for the insurer, Travelers argued that the PRP notices in the King County case were “exactly the type of letter that the Gull court expressly found did not trigger a duty to defend.” The District Court however distinguished between the letters in Gull and those in King County, noting that the agency letters to Gull Industries stated that it had not yet determined that it was a PRP, while in the King County case the PRP designation was clear. The DOE’s letter in Gull had been a “passive acknowledgement” that voluntary remediation was underway. The Kings County letters clearly identified it as a PRP.

Defense Lawyers Risk Federal Court Sanctions for Failure To Investigate and Present Applicable Insurance Evidence

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Increasingly, America’s civil courts are demanding that insurance defense attorneys be duly diligent in the handling of their client’s evidence of applicable insurance. Where attorneys fail to investigate and present what coverage may be available in their client’s insurance portfolio, they risk court sanction.

Tenth Circuit Upholds Counsel’s Duty to Investigate Coverage

Federal Rule of Civil Procedure 26(a)(1)(A)(iv) requires that parties to civil litigation in possession of insurance policies that may provide coverage be forthcoming even before discovery requests for insurance policies are made. It reads:

“[A] party must, without awaiting a discovery request, provide to the other parties… any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.” Fed. R. Civ. P. 26(a)(1)(A)(iv).”

So when Sun River Energy’s trial counsel argued before the District Court that it had born no duty to examine his client’s Director’s & Officer’s Liability insurance policy to see whether it provided coverage for securities violations and present it to opposing counsel, the 10th Circuit Court of Appeals found his argument wanting. In the case styled Sun River Energy v. Nelson decided in September, 2015, the appellate court determined that the District Court had not abused its discretion in sanctioning trial counsel for not disclosing its client’s policy until coverage had lapsed. It ruled that the attorney’s obligation “inherently includes an exercise of legal judgment regarding the possible availability of coverage under the specific terms of any insurance policies held by a party.” Where Sun River’s trial counsel “never took a serious look at whether there was applicable insurance,” the appellate court found that sanctions were in order even without a finding of intentional misrepresentation.

North Carolina Attorney Sanctioned for Failing to Disclose Umbrella Coverage

Not only is it necessary to investigate insurance coverage and present it to opposing counsel in discovery but it is necessary to present all the evidence of insurance in the client’s possession in addition to that policy under which you are providing a defense. In the recent case styled, Inc. Palacino v. Beech Mountain Resort, the U.S. District Court for the Western District of North Carolina found it necessary to sanction an insurance defense attorney for failing to properly discuss and review applicable insurance in her client’s insurance program. There, the attorney had revealed the first $1 million layer of commercial general liability insurance coverage but had failed to make additional inquiry that would have revealed a $10 million umbrella policy above the underlying coverage.

Insurance Archeology a Necessary Part of Defense

Given the growing insurance expertise demanded of insurance defense counsel, the hiring of an insurance archeologist to assist in the preparation of insurance evidence during discovery makes increasing good sense. Defense attorneys can likely protect against sanctions by showing that they were duly diligent in the accumulation and evaluation of applicable insurance documents at trial.

INSURANCE ARCHEOLOGY & DOCUMENT RETENTION IN THE DIGITAL-ERA

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By Kristen Drake

It’s 2016 and technology is everywhere.  I have a chip in my debit card, a watch that makes phone calls and I watch television through a device called “Roku”.  But, as an Insurance Archeologist, my work life is spent looking for a paper trail.

I spend hours searching for insurance policies.  Specifically, I look for policies that can cover environmental contamination costs.

As you will read in other blogs on this site, if you are a business owner who purchased Commercial General Liability insurance for your business before policies contained absolute pollution exclusion language, you are likely to have insurance coverage that can address environmental contamination.

Continue reading “INSURANCE ARCHEOLOGY & DOCUMENT RETENTION IN THE DIGITAL-ERA”

U.S. District Court Denies Insurer Right to Control Defense and Remediation: Insurer Hired Defense Counsel Cannot Serve Two Masters in Indiana

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

Valley Forge Insurance Company sued scrap yard operator, Hartford Iron & Metal in the U.S. District Court for the Northern District of Indiana, seeking a declaration that it had both the right to control the defense and remediation of the Hartford environmental contamination site.  A settlement agreement entered into by the parties, a U.S. District Court ruled, did not override Indiana case law that defines a “conflict of interest” in the environmental coverage context.

Continue reading “U.S. District Court Denies Insurer Right to Control Defense and Remediation: Insurer Hired Defense Counsel Cannot Serve Two Masters in Indiana”

How to Find Your Company’s Old Insurance to Defend Against Environmental Property Damage Claims

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

Yours is a middle-sized manufacturing company headquartered in the Midwest. Last year, the bank handling your company’s refinancing required that you conduct a Phase One environmental assessment. The Phase One report showed that past use of degreasers had contaminated the soil and possibly the groundwater beneath your plant. As required by law, you reported the findings to your state’s environmental authority. The state then sent a letter requiring that your company take action to determine the extent to which groundwater or adjoining land may have been polluted. Your attorney explained that your company’s general liability insurance policies from years past could provide coverage for the cost of responding to the state’s directives. So he asked you to provide him with copies of any and all general liability insurance policies in your company’s possession.

Continue reading “How to Find Your Company’s Old Insurance to Defend Against Environmental Property Damage Claims”

Proposed Amendments to the Federal Rules of Evidence May Complicate Policyholder’s Burden in Proving CGL Coverage

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

As an insurance archeologist, the location and retrieval of historical insurance policies has long been my business. Policyholders with long-tail claims often rely on liability insurance policies issued decades ago to provide coverage. These policies provide the evidence of insurance necessary to tender environmental property damage claims, toxic tort claims, as well as sexual battery claims to insurance carriers.  Where an actual insurance policy cannot be found, an endorsement, a premium notice, or broker correspondence may serve as the document to be authenticated and form the basis of the policyholder’s claim for coverage. These documents dating to the mid and late 20th century are typically found boxed in off-site storage facilities, in insurance broker archives, in government-retained microfilm collections, etc.

Policyholder’s counsel proffering decades-old documentary evidence in declaratory judgment actions to prove the existence, terms and conditions of liability insurance coverage have long done so with confidence, knowing that these types of documents were “self-authenticating.”  Federal Rule of Evidence 901(b)(8) allows that such an “Ancient Document” can be relied upon as authentic if (a) it is “in a condition that creates no suspicion about its authenticity”; (b) was found “in a place where, if authentic, it would likely be” and (c) “is at least 20 years old when offered.”  Federal Rule 803(16) provides a hearsay exception for these Ancient Documents. Therefore, news this summer that the United States Judicial Conference’s Committee on Rules of Practice and Procedure had issued a report proposing changes to the Federal Rules of Evidence that would repeal the hearsay exception for Ancient Documents is being met with some concern by policyholder’s counsel.

Continue reading “Proposed Amendments to the Federal Rules of Evidence May Complicate Policyholder’s Burden in Proving CGL Coverage”

Two Recent Indiana Court of Appeals “Known Loss” Decisions Focus on Policyholder Awareness of Property Damage Liability

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Written by David O’Neill, JD, Director of Investigations, PolicyFind

The Indiana Court of Appeals opinion in General Housewares Corp. v. National Sur. Corp. 741 N.E.2d 408, 413 (Ind. Ct. App. 2000) established the adoption of the common law known loss doctrine under Indiana insurance law. In that opinion, the Court stated that:

“Simply put, “the known loss doctrine” states that one may not obtain insurance for a loss that has already taken place.”

In General Housewares Corp., the Court of Appeals declared that the doctrine applied where an insured had “actual knowledge that a loss has occurred, is occurring, or is substantially certain to occur on or before the effective date of the policy.” Since that decision, the Court has taken cases on appeal that require it to further define what the term “loss” actually means in the context of what needs to be known to preclude insurance coverage under this doctrine. Its rulings in two of these cases appear at odds and call for some clarification regarding the application of the doctrine to environmental claims in Indiana. Continue reading “Two Recent Indiana Court of Appeals “Known Loss” Decisions Focus on Policyholder Awareness of Property Damage Liability”