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Save Those Liability Insurance Policies!

Governmental entities should maintain indefinitely copies of their general liability insurance policies. City, county and state governments are sometimes sued for bodily injury or property damage which allegedly occurred over many years. General liability policies, in which the insurer promises to defend and indemnify the insured against claims for bodily injury or property damage occurring during the policy period, may cover such claims even though their individual policy periods expired years—even decades—ago. Indeed, under California law, bodily injury and property damage which allegedly continues or progressively deteriorates throughout multiple policy periods may be covered by all general liability policies in effect during the period of injury or damage.

Saving older policies is especially crucial in certain instances. For example, over the years, general liability insurers first reduced and then eliminated coverage for pollution claims. In such instances, older policies may be the only ones that will cover the insured’s liability.

If a governmental entity has already disposed of its old insurance policies, all is not necessarily lost. When an insurance policy has been lost or destroyed, secondary evidence—such as premium receipts, broker records, correspondence with the insurer, claims documents, even oral testimony—may be used to establish the existence and essential terms of the policy. For example, during trial court proceedings concerning the State of California’s insurance coverage for liability arising out of the Stringfellow Acid Pits, the State used secondary evidence to successfully establish the existence and terms of a lost policy issued to it in 1964.

The policy, or secondary evidence of it, may also be located through formal discovery or by retaining an insurance archaeology firm. If the situation arises, with the clock ticking as to that long ago coverage, a time-is-of-the-essence, “full court press” approach should be employed through the agents, coverage attorneys, risk managers and insurance archeologists to secure evidence of coverage.

Still, the surest and safest method is to permanently maintain a copy of all general liability policies. You never know when you’ll need them!

ABOUT THE AUTHOR

This article originally appeared in the July 2005 issue of Insurance Bulletin published by Cotkin, Collins & Ginsburg.

riskVue | The webzine for risk management professionals
September 2006