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Insurance Coverage Law
It is well established in insurance law that the party alleging coverage of a particular claim has the
initial burden of proving: (1) the existence of the policy (i.e., they were insured under an active policy of insurance at the time of the alleged abuse); and (2) the material terms of the policy. The majority rule is that this must be proven by a preponderance of the evidence, but some jurisdictions impose a clear and convincing standard. Once an insured meets this initial burden, the burden shifts to the insurer to prove that the applicable policy included an exclusion or other provision that might preclude coverage.
Although Federal Evidence Rule 1002 requires an “original writing” to prove the contents of the writing, the rules allow introduction of secondary evidence to prove a writing’s contents when the introducing party can establish: (1) the original is lost and/or destroyed; (2) the proponent of the document did not act in bad faith in losing and/or destroying the document; and (3) a diligent search for the original document has proven unsuccessful. Courts accept numerous forms of secondary evidence, including declarations pages or other portions of the policy4; premium payment records5; letters from the insurer; insured business records citing insurance6; insurance agency materials7; and testimony from witnesses8. Because insurers often issue similar policies in adjacent years or to similar entities, policies other than the one at issue can also be used as secondary evidence9. Insurers can similarly rebut the existence of coverage in a variety of methods.
Once the lost policy is recreated to the extent possible, insureds still face additional hurdles to recovery. For example, if the insured had knowledge of the abuse when it occurred but did not notify the insurer until the revival claim is brought, the insured could be excluded from coverage for failing to notify the insurer in a timely manner. In other cases, it is possible the abuse is covered by the policy, but recovery is not available because the insured has already exhausted the policy limits. Many liability policies implicated by the revival claims had limits in the low hundreds of thousands of dollars. After considering inflation, even if the limits have not already been reached, the potential recovery for the victims could be low when considered in 2022-dollars.
The heightened focus on victim’s rights following the #MeToo movement and the recently enacted Federal legislation are almost certain to continue to expand recovery options for victims of sexual abuse. As more and more claims are made based upon years-old conduct, insurers will continue to face the challenge of evaluating coverage under lost policies and the probability that Courts will allow policyholders to be prove coverage through the use of secondary evidence. We anticipate more claims involving the issue or proving coverage (or denying coverage) through secondary evidence in the coming years as these statutes grow in use.
4 See, e.g., Travelers Indemnity Co. v. Rogers Cartage Co., 2017 IL App (1st) 160780; Americhem Corp. v. St. Paul Fire and Marine Ins. Co., 942 F.Supp. 1143 (W.D. Mich. 1995).
5 MAPCO Alaska Petrol., Inc. v. Central Nat’l Ins. Co., 795 F. Supp. 941 (D. Alaska 1991).
6 See, e.g., Burroughs Wellcome Co. v. Commercial Union Ins. Co., 632 F. Supp. 1213, modified, 642 F. Supp. 1020 (S.D.N.Y.
1986); Lamorak Ins. Co. v. Kone, 2018 IL App (1st) 163398 ¶32-38; Southern Union Co. v. Liberty Mut. Ins. Co., 2008 WL
8564532 (D. Mass.)
7 See, e.g., Township of Haddon v. Royal Ins. Co. of America, No. 95-701 (JEI), 1996 WL 549301 (D. NJ. 1996).
8 Boston Gas Co. v. Century Indem. Co., 529 F.3d 8 (1st Cir. 2008), certified question answered, 454 Mass. 337, 910 N.E.2d 290
(2009).
9 Danaher Corp. v Travelers Indemnity Co., 2019 WL 5636967 *18 (S.D. N.Y.); Milligan v. Grinnell Mut. Reinsurance Co., 2013
WL 6631783 *5 (S.D. Ill.); Epperson v. Connecticut Fire Ins. Co. (10th Cir 1063), 314 F.2d 486, 489
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FDCC ANNUAL INSIGHTS 2023