As almost any company that has been involved in a superfund case knows, the liability associated with historical, legal waste disposal practices extends indefinitely into the future. For the hundreds, or even thousands of companies, institutions and individuals that have received inquiries from EPA recently concerning the former Beede waste oil disposal site in Plaistow, no reminder of the “long tail” of environmental liability is necessary. However, those who face “long tail” environmental liability frequently overlook the availability of old insurance policies to help cover their defense and indemnity costs.
Anyone who receives notice of a potential liability associated with historical waste disposal practices should immediately assess their liability insurance coverage profile from the time of disposal of the waste giving rise to the liability to the present day. Often, because these activities occurred long ago, old insurance policies are not readily available. However, if the policies themselves can be located, or there is good secondary evidence of their existence, this insurance can have very substantial value.
If a governmental notice of potential responsibility is received, one should first determine the time period during which it is alleged disposal activity took place. Insurance policies for that time period should be identified. If the disposal facility continued in operation after your disposal ceased, insurance policies for that time period should also be identified. At a minimum, notice should be given immediately to insurers falling within all of these periods of time.
Of course, locating old insurance policies may be very difficult, and the older the policies, the more difficult the search. A few days of research time that leads to a million dollar policy with a defense obligation, issued twenty years ago, is well worth the effort. As a general rule, when it is reported to you that old insurance policies do not exist, it is time to look more carefully.
Old business records should never be discarded until an effort is made to review them to determine whether insurance policies, or evidence of insurance coverage, is contained among them. If you are unable to locate old insurance policies, you must rely instead on “secondary” evidence. In general, this requires proof that the policy existed, and that it was lost or destroyed without any attempt to prejudice or defraud the insurer. The policyholder will also be required to establish the terms of the coverage provided. Consequently, in order to be in a position to negotiate effectively in an effort to obtain the agreement of insurance carriers to defend or indemnify against current environmental claims, it will be important to find this evidence.
Such evidence of insurance includes corporate minutes, accounting ledgers, annual reports, internal memoranda, transactional records, and even personal appointment calendars. It can also be important to conduct personal interviews. Former employees can often be valuable sources of information. The right person may be able to describe the type of coverage purchased, brokers who were engaged by the company, the manner in which claims were reported to carriers, and contacts at those carriers. Any or all of this information could be of value in trying to determine who provided coverage during timeframes EPA alleges activities giving rise to environmental liabilities took place. The better the quality of the secondary evidence, the better the likelihood of ultimate recovery.
In the absence of a policy itself, nothing is more valuable than locating the insurance policy number. From those policy numbers, the coverage that was provided can be reconstructed based upon forms and other documents maintained by the insurance industry. For example, general ledgers are a useful place to look for policy numbers. In any event, it is important to develop as much secondary evidence as possible.
Once company records have been thoroughly reviewed, outside sources of information may still be available. The first place to look is in the files of brokers, risk management consultants, and others who assisted in the procurement of insurance, although it may be also be the case that brokers have the same difficulties as their clients in locating old information. Another area to consider is old legal files. It may be that law firms have maintained records of old claims which implicated insurance coverage. Government contractors may be able to find evidence of insurance coverage in old contract records maintained in government archives. Finally, outside auditors, banks and other financial institutions may have required insurance information with applications for loans.
New Hampshire law is favorable to insureds attempting to prove historical coverage through secondary evidence. Although the burden is always on the insured to establish that coverage was purchased from a given insurer during a particular time frame and for a specific amount, the burden then shifts to the insurer to prove that there is no defense or indemnity obligation. If after a dispute the insured prevails, it is entitled to the attorneys’ fees from the insurer incurred in obtaining coverage under RSA 491:22-a.
Ultimately, the first priority upon receiving notice of potential responsibility of environmental liability from a governmental agency is to respond to that notice promptly and adequately. At the same time, every effort should be made to identify insurance companies that potentially provided coverage during the time period at issue in the government’s notice and notify the insurers of the claim from the government. Premiums paid for coverage purchased long ago may pay substantial dividends today, as long as the policy information can be found.