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Keep those Old Insurance Policies Forever

A substantial portion of my practice consists of helping business owners get their insurance carriers to pay for cleanup of environmental contamination on business property. Under Indiana law, which is very favorable to insureds, it is possible to trigger coverage from old comprehensive general liability (“CGL”) insurance policies that were in effect at any time the pollution event could conceivably have been occurring. Here is an example:
Assume your dealership is located in a former corner service station. Assume that the service station pumped gas from 1950 to 1985. Assume that the tanks were left in the ground when the station closed. Assume you bought the station in 1986 but never pumped gas. Assume you always had CGL coverage on your business. Assume that your property is contaminated with gas that leaked from the underground storage tanks, and will cost $500,000 to clean up. What do you do?
 
The good news is that in Indiana, if you can find your old CGL policies, it is quite likely that we can “trigger each of those policies that were in effect from 1986 (when you bought the place) until about 1997 (when the insurance carriers added some language to the policies that has not yet been construed favorably by the Indiana Supreme Court). Still, if you had liability coverage from 1986 through 1996, with a limit of, say, $300,000 per year, we can trigger all 10 of those policies, “stack” the limits, and have available up to $3 million in insurance coverage to pay for a cleanup — more than enough in this case.

In order to pull off this feat, we must be able to identify the policies. Although sometimes it is possible to do this through “insurance archeology” making use of canceled checks and other secondary sources, the best, easiest, fastest, and cheapest way to get the job done is to keep the old policies. The insurance company does not have any wiggle room if you can send it a photocopy of its old policy.

There is another reason you should keep old insurance policies forever. If you are ever named in a “Superfund” cost contribution action for disposing of hazardous waste, old insurance policies can be called upon to pay your share of cleanup damages. Here’s another example:

Assume that from 1978 to 1990, a company picked up your used oil, paid you a few cents a gallon for it and took it for recycling. Assume that the recycling company did not maintain its facility in a Martha Stewart-approved fashion, and slopped some of the used oil around, making a mess. Assume that, because the seepage of the used oil spilled on the ground was contaminating a local water source, the EPA ordered that the site be cleaned up, and that the cost of doing so was $5 million. Assume that you are named as a “Potentially Responsible Party” (“PRP”) to pay your share of the cleanup, and that the EPA has pegged your share, based upon your years of shipping used oil to the site, at one-half of one percent. That doesn’t sound like much, but it is $25,000. If you can find your old CGL policies from the years in question, you can get insurance to cover that type of loss in Indiana. If you can’t find the policies or information leading to their discovery, you can’t get to first base and will have to pay out of pocket.

Like unto Dragnet, the foregoing examples are true stories where the names have been omitted to protect the unlucky. You can improve your luck immeasurably if you don’t throw those old policies away.

For practical purposes, there is no statute of limitations on environmental liability. It’s like a diamond — forever. The CGL policies we are discussing are “occurrence” policies, meaning that if an “occurrence” happened during the policy’s term, it is covered, no matter when the claim is made. Because environmental claims can be brought years or decades after the “occurrence” happened, the applicable CGL policy must pay the claim. Those old policies are frequently literally worth far more than their weight in gold.

In this context, packrats rule!

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