A careful search for insurance coverage should be at or near the top of the checklist of any business that receives a claim brought by a state or federal governmental entity, or private party, relating to environmental contamination. While often overlooked, old insurance policies may provide coverage for environmental liability arising out of historic contamination. In fact, businesses have recovered millions upon millions of dollars after wiping the dust off of old insurance policies only to discover that the policies provide coverage for claims arising out of decades-old contamination.
Accordingly, those facing “long-tail” environmental claims — that is, pollution events that occurred in the past and/or over multiple policy periods — should prioritize evaluating the availability of insurance, whether under existing policies or one or more past policies. Properly assessing insurance coverage for environmental contamination that may have occurred years, or decades, earlier, while a seemingly daunting prospect, can save property owners potentially millions of dollars in direct costs relating to the investigation and cleanup of contaminated resources as well as the costs of defending claims for personal injury or property damage.
Often in environmental contamination cases, the events that caused the contami nation occurred a long time ago when waste disposal practices were less regulated than they are today. Over time, the contamination migrates through the environment in soils, groundwater or surface water. It is important, therefore, that those facing potential environmental liability work to determine the time frame in which the contamination likely occurred, and identify policies in place during the applicable time period in the search for coverage. Depending on the time period in which the contamination event, or the event “triggering” coverage under a policy, occurred, it may be more or less likely that coverage will be available. Further, if the contamination events spanned multiple years, i.e. policy periods, coverage may be sought, and be available, under multiple policies.
Most companies and organizations maintain commercial general liability (CGL) insurance policies, which typically include broadly worded insuring agreements that cover damages due to “bodily injury” or “property damage” claims. If the CGL policy is “occurrence” based, the policy provides coverage for claims that occurred during the policy period, even though the liability giving rise to a claim may not arise until years later. Modern-day CGL policies in almost all cases include extensive “pollution exclusion” provisions that insurers will likely cite to deny coverage. However, older policies, and in particular, policies issued between 1970 and 1986, are less likely to include broad pollution exclusion provisions in New Hampshire, and elsewhere. Policies issued before 1970 may not have pollution exclusion provisions and, therefore, are the most likely to provide coverage. Searching for and finding historical policies, therefore, is important even if, for various reasons, it can be difficult to locate them.
Fortunately, New Hampshire law allows, and is favorable to, insureds attempting to prove historical insurance coverage through secondary evidence if copies of insurance policies cannot be located. The burden in the first instance is on the insured to establish the existence of insurance coverage for a particular time and for a specific amount. For this reason, businesses should be careful not to discard or destroy any old business records until they have been thoroughly searched to determine whether insurance policies, or evidence of insurance coverage, is contained in them. The more evidence pointing to one or more historic insurance policies, the stronger a case can be made for coverage.
The single most valuable piece of evidence, absent a policy itself, is the policy number located on the declarations page, which can be used to reconstruct the policy using forms and other documents held by insurance companies and/or available through the New Hampshire Insurance Department. Millions of dollars in insurance coverage have been obtained by reconstructing old policies in this way.
If a coverage dispute between an insurer and insured arises, insureds may petition to the State Superior Court pursuant to RSA 491:22 to determine the coverage of a liability policy. Once an insured provides evidence of insurance and facts supporting a claim covered by the insurance, under RSA 491:22-A the burden shifts to the insurer to prove that the subject policy does not provide coverage. In New Hampshire, as in many other jurisdictions, courts must construe ambiguous policy terms in favor of the insured. If, after a claim is made, an insurer declines coverage, a policyholder should, with assistance of qualified legal counsel, carefully review the policy and the insurer’s basis for declining coverage to determine whether coverage may have been wrongfully denied. If the insured wins its case, it is entitled to recover its attorneys’ fees and costs from the insurer, in addition to the requisite insurance coverage.
Adding further urgency to the need to move swiftly in assessing coverage issues, in New Hampshire insureds must adhere to strict statutory deadlines for challenging coverage disputes. Failure to meet the statutory deadline may cause a claimant to lose the statutory benefits of burden shifting and recovery of attorneys’ fees available when challenging an insurer’s decision to deny an insurance claim.
Ultimately, securing coverage for liability arising out of historic environmental contamination can be a multifaceted process involving policy interpretation, factual investigation and development, environmental science, legal analysis and, potentially, litigation. Yet, businesses facing significant liability may be surprised to find that, with some effort, they can uncover policies or evidence of coverage that may save them millions.
Viggo Fish is a member of McLane Middleton’s Administrative Law Department, where he maintains a diverse environmental and energy regulatory and litigation practice. He can be reached at viggo.fish@mclane.com.
