Asbestos Litigation and the Importance of Maintaining Policy Records

Asbestos litigation affects many employers each year and can cost a company thousands of dollars in legal fees. When asbestos claims, complaints, and suits are filed, it is common for the alleged exposure period to date back many years or decades and name multiple employers.

Even when a company has never worked with or used products with asbestos, it can find itself in need of defense counsel after being named in an asbestos suit by a former employee. Plaintiff’s attorneys often name all previous employers of an affected employee and the businesses that supplied products in the hope that coverage may trigger somewhere.

What happens if an employer is named in a lawsuit alleging an exposure period dating back maybe 30 years ago, but it failed to keep their policy records from back then? Simply put, they may be looking at costly litigation. Maintaining old insurance policies – which often provide asbestos coverage terms that are more favorable and less restrictive than modern ones – is crucial.

Asbestos claims are continuous trigger exposure claims, meaning coverage ends on whichever comes first – the date of death, date of filing, or date of diagnosis. And, although asbestos litigation can be several years behind, new claims are filed every year.

A Case Study

An insured was named as a co-defendant in an asbestos lawsuit alleging that the products they supplied to the plaintiff’s employer contained asbestos. In this case, the plaintiff was diagnosed with lung cancer in 2022, the same year the complaint was filed. The complaint alleged an overall exposure period dating back more than a half-century to 1970.

After the carrier completed a thorough policy search, it issued a full Reservation of Rights letter. Their search resulted in gaps of coverage; the insured was not able to provide the missing historic policies. This put the insured at risk for partial responsibility of legal expenses and a potential negative verdict. The insured checked with its prior agents and learned that all previous policies (paper records) had been destroyed. In a case like this, what should an insured do?

Locating Older Policies

Courts place the burden on the policyholder to prove a policy’s existence. Obviously, the policy itself is best, but several secondary forms of evidence can be used to meet that proof of coverage burden, including certificates of insurance, premium invoices, loss control surveys from a prior carrier, and minutes from board meetings.

However, there is no substitute for the actual policy, and it is always better to maintain any liability policy indefinitely.

Here’s why old policies are valuable in asbestos-related claims:

1. Broader Coverage Terms – Older policies typically cover liabilities on an “occurrence basis,” meaning they cover incidents that happened during the policy period, regardless of when a claim is made. So a delayed diagnosis doesn’t compromise coverage.
2. Higher or non-existent Aggregate Limits – Many older policies, especially those written before the 1980s, may have higher limits or lack the strict annual aggregate limits we see today. Since asbestos claims can be extensive and expensive, this can mean significant additional coverage.
3. Lack of Asbestos Exclusions – Starting in the late 1980s and early ‘90s, many insurers began adding asbestos exclusions to their policies. Older policies lack these exclusions, allowing for coverage of asbestos-related claims that newer policies may not cover.
4. Defense Costs – Many older liability policies included defense costs within policy limits or as a separate coverage element. These policies can help absorb the high cost of asbestos litigation.
5. Policy Stacking – In some jurisdictions, policyholders can “stack” policies, which means they can combine coverage limits from multiple policies in different years for a single asbestos claim. Older policies can contribute to a greater pool of funds if policy stacking is allowed.

According to an article published by Cancer.gov, “Generally, those who develop asbestos-related diseases show no signs of illness for a long time after exposure. It can take from 10-40 years or more for symptoms of an asbestos-related condition to appear.”

Insureds are at risk if they do not currently have procedures in place for retaining historic policies. This should be a part of a business continuity plan.

Asbestos verdicts and settlement amounts vary, but there are many cases out there with awards in the millions. And most often these types of cases don’t make it to trial. Even if they have switched insurers, companies should carefully retain and organize old policies. It could be a significant asset in asbestos litigation, both for defense and claim settlements.

DISCLAIMER: All McGriff risk services are advisory in nature and are designed to assist the client in the establishment and maintenance of a safe workplace. The responsibility to provide safe and healthful work conditions and operations free from known risk and harm to employees, third parties, and the environment is, and shall remain, that of the client. This proposal, and any subsequent reports, is not a warranty that reliance upon them will prevent accidents and losses or satisfy local, state or federal regulations.