There are a variety of situations when a lost policy might need to be located, according to Sheila Mulrennan, president of the New York-based Insurance Archaeology Group. Searches are typically associated with long tail liability claims, the most common claim she sees are those involving asbestos. She also sees the need for policy location in environmental claims, sexual abuse claims, and workers’ compensation claims involving cumulative trauma.
She said primary and secondary evidence are used to locate lost policies. Policies and endorsements are considered primary evidence. Anything that is not a policy, such as premium payment history and court case information, is considered secondary evidence.
“The common theme is that the carrier has a huge financial exposure involved with these claims and then they need to find other insurers to share the defense and indemnification costs,” the former claims adjuster said.
Listen to the podcast: Digging Up Lost Policies
Examples of insurers who have used Mulrennan’s services include:
A carrier was sued in a declaratory judgment action by another carrier that was paying defense costs. Because there were hundreds of policies involved in this insured’s program, the carrier retained Mulrennan’s company to locate the records, in order to respond to the litigation.
“We located over 300 policies and organized that information, so that they would understand what locations were covered,” Mulrennan said. “We identified dozens of other insurers and got them all the information that they needed ‑ in total, 15 boxes of records. That’s an example of the advantage of being able to go in and look at the client’s records onsite.”
Another assignment involved a carrier that acquired another insurer decades earlier which was named in hundreds of asbestos lawsuits. There were no records, no employees with institutional memory, and millions of dollars in claims. Mulrennan’s firm had to work solely with outside sources.
“We located policies going back to the 1950’s. The cumulative policy limits for all of the coverage that we documented in that research was over a billion dollars,” she said.
Listen to the podcast: The Value in Digging Up Lost Policies
She said that the carrier was willing to pay the claim ‑ they just wanted to know what they wrote.
“We were able to look in court records and workers’ compensation bureau records and identify the coverage for every year that was missing. They did write the coverage, but they were satisfied because they needed to know that. They didn’t want to keep wasting time if they were going to have to pay the claims anyway,” she said.
Mulrennan described another example where a carrier issued general liability policies without asbestos exclusions for a few years in the 1990’s.
“We went to the workers’ compensation bureau in that state. They identified the workers’ compensation carriers going back for at least 40 years,” Mulrennan said. “We contacted those carriers to see if they issued general liability coverage. We located 40 primary policies and 14 excess policies from the carriers that issued those policies.”
“This is pretty common with smaller companies where carriers wrote general liability policies without asbestos exclusions in the ’90s, and then the client and their policyholder cannot find any of the prior policies,” Mulrennan said. “They are left being the only insurer.”
As companies join through mergers and acquisitions, the records for the legacy companies tend to get lost or misplaced.
She said the process of finding lost policies requires extensive expertise in developing information from outside sources, especially in cases where the policyholders are no longer in business.
Another example where her company may be brought in is when an excess insurer is in a situation where there were large blocks of insolvent coverage as well as exhausted limits on the primary policy.
“The claims are penetrating through to the excess layer, so they want to find more primary,” said Mulrennan.
For the most part, she finds that policyholders cooperate with the policy search.
“They do cooperate because the carrier and the policyholder agree on the terms. Whatever terms they agree to, we then follow those rules and protocols in conducting the research. We can go onsite as a neutral party and look in their records ‑ if that’s what they’ve agreed to ahead of time,” she said.
The value in retaining a firm like Mulrennan’s is that it can recognize secondary evidence and leads to other sources and follow through with contacts it has developed with brokers, carriers and government agencies. In addition, the firm is experienced in organizing the information, presenting it and submitting it in a manner that can be integrated with a carrier’s computer systems.
“They don’t get boxes of records they then have to spend exorbitant staff time going through,” Mulrennan said.
In some instances, her firm finds that the lost policies were written by insurers that retained her firm.
“That’s a risk that they know going in, it’s always a possibility,” said Mulrennan. “Sometimes we find information, but it’s beyond the scope of the years that they would like to find information. It’s a risk for every project that we research. You can’t really predict what you’re going to find ahead of time.”