Special Focus: Insurance Law Litigating Coverage of Lost Insurance Policies
By Alex Ackel and Richard Dykstra
This article was reposted from the November 2024 issue of Trial News, the monthly newspaper of the Washington State Association for Justice.
Typically, commercial general liability policies are occurrence based, meaning coverage is triggered by an occurrence of “bodily injury” or “property damage” within the policy’s term. Insurance claims are therefore necessarily tendered within the applicable statutes of limitation, which usually avoids having to deal with insurance policies older than a few years. However, due to the discovery rule, there are some instances in which liability coverage is provided under much older insurance policies.
This is particularly true in the context of environmental and toxic tort cases,1 where long periods of time can transpire between the initiating injury and discovery of plaintiff’s damages. But when an insured receives a claim alleging injury first occurring 30 or 40 years ago, the odds that an insurance policy from the ’80s or ’90s was retained or digitally archived can be slim to none. This task is further complicated if the insured had switched brokers and carriers over the years, which is not uncommon.
The aim of this article is to share our experience with lost policy cases and identify common issues that arise, as well as discuss the relative duties and burdens of the insured and insurer in attempting to prove or disprove the existence of coverage.
Locating lost policies
The first step in any lost policy case depends on whether the insured knows who their insurer was at the time of the alleged occurrence of injury to persons or property. If this is known, the first step is to contact this insurance company and tender the claim. However, there is no guarantee that the insurer will be able to find a copy of the original policy. In one past case, we had an insurer-defendant claim it was unable to find policies from the ’70s and ’80s despite being provided the certificate of insurance, which contained specific policy information including the policy number and effective dates of coverage.
Typically, when faced with a claim for coverage under a lost policy, the adjuster will have to submit a special request to the archive department to search the insurer’s databases. Every company organizes its archives differently, so the more information you provide regarding the policy, the more likely it is that evidence of it will be found. This would include information such as: policy number; effective dates; name of original insurer (in the instance that the original insurer was bought or merged with another company); city of insured at the time of issuance; and type of coverage (general liability, property liability, etc.). Because the insurer’s failure to retain an insurance policy is generally not held against them in the context of coverage litigation, it might not be surprising to find that carriers are not particularly motivated to search for evidence of old policies.
If the identity of the original insurer is unknown, the insured should conduct a thorough search of their own records. Archived board meeting minutes, correspondences to insurance brokers, and invoice materials are all potential sources for relevant information. In certain industries, companies, such as construction contractors, are required to file certificates of insurance with the Department of Licensing which can be obtained through a records request.2 There are even “insurance archeologists” who can assist in conducting such searches.
Proving the terms of coverage without the actual policy
In reality, finding a decades-old insurance policy in the back of some dusty bankers box is the exception, not the general rule. In most cases, you’ll be left trying to prove the terms of coverage through secondary evidence. “The burden of proof is on the insured to show that a loss falls within the terms of the policy. Once the insured has sustained that burden, then the burden shifts to the insurer to prove that the loss is not covered because of exclusionary provisions within the policy.”3 As is the case with various other lost documents, the common law requires that this burden be met with clear and convincing evidence of the terms of the insurance contract.
The process of proving the terms of coverage is extremely case-specific. For example, in City of Tacoma v. Great American Ins. Co., the Western District of Washington noted that the burden of proving coverage may be met by investigating coverage custom and practice, comparing coverage in similar policies, and looking into records of premiums paid for known coverage.4 However, no matter what secondary evidence is submitted, the terms of coverage must be proven by more than documentary evidence referencing the mere existence of coverage. For example, in Boyce Thompson,5 which involved lost CGL policies, the insured offered ledger sheets indicating periodic payments to its insurance broker for the years of the purported lost policies, as well as an affidavit of an employee of its insurance broker stating that insured had employed the broker for CGL coverage by the defendant insurer.6 The court found this evidence did not satisfy the clear and convincing standard.7 In a similar case in which the S.D.N.Y. applied Washington law, it attempted to elucidate the distinction between evidence that does and does not meet the clear and convincing standard:
Plaintiffs’ evidence with respect to the pre–1961 policies pales by comparison to their evidence in connection with the 1961 and 1967 policies. On the later policies, plaintiffs submitted documentary evidence supporting their existence and establishing their terms. The evidence included contemporaneous documentation and correspondence consistent with the previous practice of the parties. In certain instances, one piece of evidence corroborated another. Also, plaintiffs presented evidence of the policy number and the policy term, information completely lacking for the pre–1961 years.8
The general takeaway is that everything and anything related to the lost policy should be viewed as potentially valuable evidence. Internal business records, insurance ledgers, correspondence, and other documents listing policy numbers and effective dates, such as certificates of insurance, can all be used to prove the terms of coverage. Standardized forms that the company used are also important evidence, but are not dispositive unless accompanied by evidence of what the insured purchased. It is unlikely that any one piece of evidence is adequate alone to prove coverage, but various pieces of evidence, especially if they corroborate each other, can be used to concretely define the terms of coverage. For example, in a case we successfully litigated involving 40-year-old policies and an underlying asbestos claim, we produced testimony from an expert policy archeologist who drew inferences from certificates of insurance, extracts from the insurers’ internal database containing details on policy transactions, specimen policy forms, and handwritten notes on the policy documents.9
Discovery in lost policy cases
As outlined above, searching for secondary evidence can be crucial in proving the terms of a lost policy. Your client and its insurance broker may be able to track down valuable evidence, but you will also need to conduct discovery of the insurer. To compose intelligent discovery requests for this information, it often makes sense to first serve discovery directed towards learning how the insurer’s archives are maintained. This can be complicated, especially if the original insurer was acquired by another company in the time since the policy was issued and the original insurer’s archive was merged or transitioned into the new insurer’s system.
In most cases, there will be several different databases with potentially relevant information. To start, we recommend composing discovery requesting information such as the names of the insurer’s various databases and the types of information and documents contained in those databases. Some of this information may be gleaned from reviewing the claims file materials, but there is still no guarantee that the insurer searched all the relevant databases in investigating the claim. Sometimes, the best way to get this information is through requesting the insurer’s claims manuals specifically used in lost policies investigations, which often contain detailed descriptions of the insured’s databases:
REQUEST FOR PRODUCTION NO. 1: Please produce your claims manual, guidelines and/or procedures concerning the handling of claims arising out of lost policies, including any amendments, revisions, additions or deletions thereto in effect from 2015 through 2024.
Once you have a general lay of the land, you can start asking specific questions regarding the insurer’s databases. Due to the technical nature of these information systems, a 30(b)(6) deposition is almost inevitable. Although every case is unique, the following are some examples of topics to consider in drafting the notice:
Topics
- All efforts to train Your employees to investigate [DATABASE NAME] for hard copies and electronically stored claims data or claim files that might include information about [NAME OF INSURER]’s Liability Policies.
- All efforts You made to train Your claims handlers and supervisors on when and how to conduct a lost policy investigation.
- The approximate average number of lost policy searches requested to be conducted for each year between 2015 thru 2024.
- When and how was any data obtained from any search of [NAME OF DATABASE] was used to reconstruct any of the admitted policies [only use in case where some policies have been admitted].
There is also a chance that the insurer has litigated lost policy cases in the past. Although the issue has become more common in recent years, it is still not so common that an interrogatory inquiring into prior litigation would be overly burdensome. We have used the following:
INTERROGATORY NO. 1: Identify any civil action filed in any court within the United States in which [NAME OF INSURER] is or was a party, within the last 15 years, related to its investigation of allegedly lost (or unavailable or not sufficiently documented) general liability policies allegedly issued by [NAME OF INSURER].
We often like to follow that up with a request for any and all discovery exchanged in the prior case(s) related to the issue of lost policy searches, including deposition testimony. If this is objected to, you can always reach out to the attorneys who handled the prior case(s).
You’ll also want to make sure that you request the insurance company to identify all other claims that the insured had tendered over the years. If a claim has been tendered under the lost policy in the past, perhaps while the policy records were still available, there is a much higher likelihood that the insurer will have relevant information related to the policy in that old claim file. For example, in one lost policy case we handled, there were excerpts of the relevant policy found in the claim file of a separate claim tendered decades earlier. Again, the key is to first gain as much information about how the data is stored, before you start conducting discovery for the relevant data.
Insurer’s duty in lost policy cases
The insurer’s duty to search for lost policies is no different than its general duty to conduct a reasonable investigation into a claim. Sometimes, an insurer will be tempted to reject the claim and refuse to defend the insured if no policy documents can be produced. However, the insurer runs a risk by doing this because as shown above, coverage can be proven in the absence of the actual policy. In Ulbricht, we received a ruling that the insurer violated its duty to defend by refusing to provide a defense despite the insured providing certificates of insurance to the adjuster. There, the court held:
In this case, although the actual policies were missing at the time PM Northwest tendered the lawsuit to USF&G, PM Northwest sent certificates of insurance on July 10, 2018. (See 12/3/21 Ackel Decl., Ex. M at 1-2.) USF&G tries to diminish these certificates as showing nothing more than “the insured’s promise to establish the policy terms at some future date” (USF&G MSJ Reply at 10) but, in fact, they contained the policy number; names of the insurer and insured; the dates on which the policies expired; a description of the type of insurance; and the limits of bodily injury liability. (See 12/3/21 Ackel Decl., Ex. M at 14-18.) With that quantity of information in hand, USF&G could have certainly undertaken a defense of PM Northwest, even under a reservation of rights, without fear that it would be “impos[ing] upon itself a duty to defend a complete stranger to the contract.”
Under Ulbricht, any evidence that a policy existed between your client and the insurer would go a long way to, at a minimum, securing a defense.
Conclusion
Overall, lost policy cases pose challenges in both the initial investigation phase as well as evidentiarily. Thorough investigation is essential in obtaining the necessary information to prove the terms of coverage. Discovery can also be technically complicated, requiring detailed understanding of how the insurer composes and maintains its archives and databases. This additional effort, however, is often worth it as it can lead to securing coverage for your client that they had paid for and are owed.
Richard Dykstra and Alex Ackel are both EAGLE members whose practices include insurance coverage and bad faith claims for policyholders.
1 WAC 284-30-920 outlines the procedure for handling lost policy disputes in the context of “environmental claims.” Notably, the term “environmental claim” is defined broadly enough that one could argue that it would apply to almost any toxic tort cases as well: “Environmental claim” means a claim for defense or indemnity submitted under a general liability insurance policy by an insured facing, or allegedly facing, potential liability for bodily injury or property damage to others arising from a discharge of pollutants into land, air, or water.” WAC 284-30-910.
2 It is important to note that a Certificate of Insurance is not proof of the terms of a policy and alone would not be sufficient to establish the terms of coverage. However, they typically include invaluable information for searching for lost policies including the policy number; names of the insurer and insured; the dates on which the policies expired; a description of the type of insurance; and the limits of liability.
3 City of Tacoma v. Great American Ins. Companies, 897 F. Supp. 486, 487 (W.D. Wash. 1995).
4 Id.
5 Boyce Thompson Institute for Plant Research, Inc. v. Ins. Co. of North America, 751 F.Supp. 1137 (S.D.N.Y. 1990)
6 Id at 1140–41.
7 Id at 1141.
8 Id.
9 United States Fidelity and Guaranty Co. v. Ulbricht, No. C20-0369JLR, 2022 WL 110457, ∗9 (W.D. Wash. Jan. 12, 2022).
10 Ulbricht, 2022 WL 110457, at ∗13-14.
