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An insurance specialty born of the pollution exclusion is increasingly being put to new uses as risk managers struggle to find coverage for other exposures.
The specialty is called insurance archaeology. It involves the reconstruction of a company's liability program, including the discovery of forgotten policies that might respond to a current exposure.
Despite its name, insurance archaeology is less Indiana Jones than painstaking research, often under less than ideal conditions. For the insurance archaeologist, the equivalent of Indy's Lost Ark is a dust-covered box filled with general liability and excess liability policies from the 1950s.
"We do the research, and the scope of that research has expanded quite a bit" over the years, said Sheila Mulrennan, president of New York-based Insurance Archaeology Group.
Typically, records are kept only back to the early 1970s, said Ms. Mulrennan. A usual starting point is going through corporate records for references to insurance and leads to outside sources. These include legal and engineering records. Then the trail leads to brokers, law firms, auditors and outside sources, including former employees and brokers.
The archaeologists organize all of the records, identify key terms and provide illustrations of how coverage is layered, she said. Then IAG develops a database so clients can have access to the coverage information.
The discipline was begun in the 1980s with the advent of the absolute pollution exclusion. Risk managers found themselves without coverage at a time when environmental liabilities exploded, in large part because of the enactment of Superfund, which hit companies with retroactive liability for cleaning up dump sites. Concurrent with the environmental liability explosion was a general trend of mergers and acquisitions throughout U.S. business. Acquiring companies all too often found that they had acquired significant new uninsured liabilities as well as new operating units.
The need for coverage to respond to these exposures helped create a specialist within the property/casualty industry: the insurance archaeologist.
"As far as we're concerned, insurance archaeology is the research and interpretation of a company's historic usually general liability and excess or umbrella liability program," said Henry Booth, managing director of R.M. Fields & Co. Ltd. in Philadelphia. Insurance archaeology is one of the firm's services.
Virtually every type of endeavor may need the services of an insurance archaeologist sometime.
IAG's Ms. Mulrennan said clients include "anybody who owns any property or is in any type of business": manufacturers, utilities, banks, public entities and religious institutions. She said middle-market companies now are seeking the services of insurance archaeologists as they discover exposures for which old policies might respond.
Mr. Booth said R.M. Fields has been approached by companies that have been involved in the manufacture and supply of asbestos and those with environmental exposures. Clients include Fortune 100 companies as well as companies that have a small exposure but limited resources to cope with that if the "worst scenario should come true," he said.
Not surprisingly, those worst scenarios for any company often center on environmental impairment.
For example, in the mid-1980s, Champion International Corp. acquired St. Regis Corp., said Stephen B. Brown, Champion International's vp and senior counsel. Stamford, Conn.-based Champion International found itself facing millions of dollars in pollution-related liability from the acquisition.
"Some of our more troublesome environmental sites were inherited as a result of a 1985 acquisition" of St. Regis, he said. Some of the major sites were Superfund sites; in terms of dollars, probably primarily Superfund sites were involved, he said.
"The process began in the late 1980s, and as lawyers, we were aware of coverage litigation for environmental coverage. We started to think as a large public company it was something that we ought to start looking into," said Mr. Brown.
Champion first looked internally for proof of policies that would respond to the exposures, he said. Then Champion turned to IAG to reconstruct some of the insurance programs of acquired companies.
Mr. Brown said the company ultimately found policies underwritten by 63 insurers that could respond to the pollution exposure. He said IAG's work was particularly helpful with the London market, where the insurance archaeologists identified more than $100 million in excess coverage.
Houston-based Browning-Ferris Industries is another company that found acquisition meant new and potentially uninsured exposures.
"BFI has acquired hundreds of small companies over the years. Our corporate insurance will not protect us for the acts that occurred before the date of acquisition," said Robert C. Card, BFI's corporate risk manager. BFI is a client of Akron, Ohio-based Risk International Services Inc., a risk management consultant that provides insurance archaeology services.
"We found that there were policies in a lot of different places," said Mr. Card. The archaeologists also found a "lot of secondary evidence, like certificates of insurance, correspondence between the brokers and the insured" that allowed them to research and find policies or parts of policies. "Our focus has been to find any policies that would respond to any kind of long-tail exposures," said Mr. Card.
Champion International's Mr. Brown added that the specialty's value has extended beyond environmental impairment.
"It's been a help to us in toxic tort cases, where claims generally related to an exposure to a product over a long period of time," he said.
This hardly surprises the insurance archaeologists, who point out that their specialty's impact has spread considerably since the discipline came into its own 15 or so years ago. Even environmental claims, which once centered almost exclusively on the sites on Superfund's National Priority List, expanded into new areas.
"One aspect of the environmental area is that there are some 70,000 state sites as well as the NPL," said IAG's Ms. Mulrennan. "It will always be there for us."
"There are other toxic tort claims that give rise to the need for insurance archaeology," said Douglas Talley, vp and counsel of Risk International. These include such exposures as breast implants and asbestos, said Mr. Talley and Ms. Mulrennan. In fact, non-environmental exposures account for between 30% and 40% of the claims handled by IAG, said Ms. Mulrennan.
"It's applicable to any sort of exposure, like lead, tobacco, other types of toxic tort. We've been approached in the area of electromagnetic fields," said R.M. Fields' Mr. Booth.
Michele Pierro, senior vp of IAG, said the discipline is branching beyond liability to find coverage for such matters as site contamination on the policyholder's own property.
Mr. Talley pointed out that the discipline is useful in tracking down coverage for some non-traditional claims as well.
For example, Risk International was able to find coverage to respond to sexual molestation charges brought against a Catholic diocese.
Insurance archaeologists report receiving a mixed reception from underwriters. "We are not just archaeologists; we are risk management consultants," said Mr. Talley. He said insurers generally would rather deal with Risk International than a client's lawyers.
Sometimes, insurers themselves become clients, said IAG's Ms. Mulrennan. "The insurance companies are often interested in policyholders finding additional coverage." Excess insurers may be interested in finding more primary insurers to cover the claims, she said.
"Sometimes it's adversarial, and sometimes it isn't. We get many referrals from insurance companies," said Ms. Mulrennan.
"I think there is some resentment" of the archaeologists by some underwriters, said Mr. Booth. He said resentment was probably greater in the London market than in the United States.
"I'm not really too concerned about their resentment," he said.
Although most of the archaeologists' work consists of reconstructing coverage through less-than-glamorous means, they have stories that-if not quite out of a Steven Spielberg movie-go beyond the stuff of office routine.
Mr. Talley said that during a recent case involving a Superfund site, he was asked to track down coverage for some small potentially responsible parties that could not fund their share of cleanup costs. After a visit to one of the company's offices, "we found about $60 million in insurance policies sitting in the executive washroom. Just sitting on the floor, not even in a box."
In another case, Mr. Talley went to a place "where attorneys had gone through the location a half-dozen times." He noticed a crawl space, crawled up there and found boxes of checks that proved that insurance had been purchased in the 1960s.
"A lot of times you're going to warehouses like that last scene in 'Raiders of the Lost Ark': row after row of boxes. It can be fairly painstaking and tedious work," he said.
Ms. Mulrennan said IAG once had to retrieve records from a salt mine 850 feet below ground. The company found portions of policies that proved an exposure was covered.
Salt mines are good places to store records because of their low humidity and constant temperature, she said.
In other cases, the archaeologists had to make sure there were no rattlesnakes in boxes before looking for records, and in yet other cases, researchers opened boxes and a bunch of rats ran out, she said.
Mr. Booth said sometimes evidence of coverage is very apparent, if someone knows where to look for it.
For example, a company had an area called the "pit" with no light and no heat. Important records were located in a room as far away from the door as possible. he said. Within a half-hour of entering the pit, he found the policies in a box "simply marked insurance," said Mr. Booth.
Mr. Booth said policies get thrown out or shoved aside because people did not think they would need them. "One of the admonitions on a policy is 'please read your policy,' but most people don't. If you don't read the policy, you don't realize that an old policy has the potential to respond to a modern claim," said Mr. Booth.
And that appears likely to guarantee the insurance archaeologists plenty of work for the foreseeable future.
In fact, demand seems to increase all the time, said Mr. Talley.
"There's a lot of paper out there that still hasn't been discovered."