Policyholder Pulse
Companies in certain industries have years and even decades of experience in defending and resolving “long-tail” liabilities for suits, claims and other proceedings—such as for asbestos-related disease or environmental-related third-party property damage—that involve bodily injuries or property damage spanning multiple years arising out of their historical operations.
Insureds who have faced such claims also have experience in preserving insurance claims and recovering from their historic occurrence-based general liability policies, which cover damages for bodily injury or property damage caused by an occurrence which takes place, at least in part, during the policy period, and thus may cover damages for occurrences that span many years in the past. (AM Best estimates that as of 2024, insurers had paid $121 billion in asbestos and environmental-related losses under policies they have issued to policyholders.) Such a company’s legal department typically takes the lead, with the advice of coverage counsel, in preserving and pursuing insurance coverage for long-tail liabilities, as there is a thicket of legal issues that can impact recoveries. These issues include how a court may interpret a policy term, if a coverage dispute has to be litigated, and what state’s law(s) may be applied to interpret such policy terms. General liability policies usually lack choice-of-law provisions, and even though insurance policies often contain standardized terms, such terms may be construed in radically different ways under the laws of different states, leading insurers to “race to the courthouse” to bring a coverage action in a state they perceive will apply law more favorable to their position (and adverse to the policyholder’s). While legal departments of experienced corporate policyholder take a lead, risk management department and its brokers will support its insurance recovery efforts by identifying all current and historic insurance policies that may provide potential responsive coverage for such liabilities and assisting in providing timely notice and tender of underlying suits and claims.
These practices of companies experienced with long-tail risks should be adopted by companies targeted by newer long-tail risks. Over the last decade, newer long-tail liability risks—public nuisance and similar claims arising out of the manufacture, distribution, or dispensing opioids or firearms; social media addiction claims; climate change claims; PFAS-related bodily injury and environmental property damage claims; and others—have become more prevalent, impacting companies that never have confronted such liabilities before. While these companies may have experience in pursuing and recovering from insurance for lawsuits involving a sudden injury or property damage, they often have not considered how historical occurrence-based general liability policies they or their predecessors purchased may respond to a claim for damages because of bodily injury or property damage spanning years and possibly decades.
By contrast, these companies’ insurers have handled and litigated long-tail liability coverage claims for over half a century and have “go to” outside coverage counsel at the ready to get a jump on how to attempt to limit those insurers’ exposure to a long-tail coverage claim noticed by a corporate policyholder. Coverage claims involving underlying opioid-related, social-media addiction-related, ultra-processed food, climate change and firearms litigation raise overlapping coverage issues, giving insurers the opportunity to leverage their network of lawyers to develop long-tail coverage law in their favor—particularly in states they perceive as most hospitable to their arguments.
Below is a practical checklist for a corporation’s legal and risk management departments to get ahead of preserving and pursuing coverage claims for an emerging long‑tail liability risk:
- Track science and regulation—assign owners.
Before long-tail liability lawsuits actually are brought against a company, a company should designate a cross‑functional team (legal, risk, EHS) to monitor both federal/state rulemaking and non-governmental research that may impact their industry. Third-party working groups review existing studies and sometimes embargo underlying data until later publication; their hazard listings can spur suits even where other agencies reach different conclusions (e.g., EPA on glyphosate). Early awareness supports timely notice, reserve setting, and getting ahead of how best to identify insurance assets, preserve coverage claims and—when the time is ready—successfully pursue recoveries. - Involve coverage counsel early.
Long-tail liabilities are not typical liabilities routinely handled by a company’s risk management and claims departments. As the plaintiffs’ bar raises novel liability theories, training their focus on different industries (such as gun manufacturers, historic lead-paint manufacturers, and opioid-supply chain industry participants), and agencies such as the International Agency for Research on Cancer (IARC), the cancer-research agency of the World Health Organization, and regulatory changes create new potentially substantial liability risks, novel coverage issues have arisen. The insurance industry, seeking to limit its exposure to such risks, often has taken a scorched earth coverage litigation posture toward new long-tail liabilities, rather than handling coverage claims as it had for more typical claims. Corporate policyholders need to confer with coverage counsel to guide them on how to best preserve their coverage claims and pursue coverage in a manner that enhances the ability to recover for its liabilities. - Build your “coverage archaeology” file now.
Corporate policyholders should inventory every historic primary, umbrella and excess policy (including those issued to predecessors and acquired entities) that may provide potential coverage for these emerging potential liabilities. They should create a searchable index (policy periods, limits, retentions, endorsements, insurers, broker contacts). Where copies are missing, gather secondary evidence—binders, certificates, schedules, broker ledgers, board minutes—that could be used to prove coverage terms. Older occurrence‑based general liability policies can be valuable assets, often carrying a duty to defend suits seeking potentially covered damages, even if allegations are ultimately groundless. - Audit acquisitions and prior settlements.
Consolidation means insurance rights and liabilities may have moved in M&A. Policyholders confronting a long-tail risk involving injuries or property damage taking place in part during a predecessor’s past operations should review historic transaction documents. It also should review any prior policy releases or settlements to understand what limits remain and whether earlier, limited-in-scope releases impact the ability to recover for the emerging long-tail risk. - Stand up a “notice and privilege protocol.”
Corporate policyholders should pre‑draft notice templates and a distribution matrix for primaries, excess layers, legacy carriers and run‑off programs. In preparing a notice and tender protocol, a corporate policyholder should pay particular attention to its insurance policies’ notice requirements and the potentially applicable laws’ interpretation of such notice requirements. Coverage counsel should be looped in early. And remember, involving brokers is helpful, but communications with them are not automatically privileged unless the broker’s participation is necessary to obtain legal advice. - Understand how key coverage issues may impact recoveries.
Underlying lawsuits seeking damages because of continuous or recurrent bodily injury or property damage raise “trigger of coverage” issues. Courts have adopted different “trigger” approaches—“exposure,” “continuous” or “manifestation,” sometimes turning on specific policy language and facts concerning the underlying bodily injuries or property damage—with real consequences for which years (and limits) are on the hook. Other coverage issues, such as whether the underlying long-tail liabilities constitute “damages” “because of” “bodily injury” or “property damage” or are caused by an “occurrence,” also are frequently the subject of coverage disputes.
Similarly, once a court determines that a policy or multiple policies covering different policy years are “triggered” by the underlying claims, different courts in different states have come to different conclusions on whether a policyholder can seek “all sums” for its underlying losses under one triggered policy year (up to policy limits) or must have the “losses” spread on some “pro rata” basis among years of multiple triggered policies and possibly to years of no coverage. And, as we recently noted, the number of occurrence issues and language in policies’ retention provisions can further impact how a policyholder may recover its losses.
- Anticipate the choice‑of‑law and forum fight.
Standard general liability forms often lack choice‑of‑law provisions, so governing law is determined by state conflicts rules (commonly Restatement (Second) §193’s “principal location of the insured risk” or a most‑significant‑relationship test). Although general liability policies contain many standardized terms, insurance policies are contracts, and those terms are construed by courts in accordance with applicable state law. Courts applying different states’ laws have construed such terms in radically different ways, some favorable for coverage and others limiting or precluding coverage. As the applicable law may swing or impact outcomes on trigger, allocation, late notice, pollution exclusions and more, policyholders should understand what bodies of law may apply to their policies and how that may impact the responsiveness of coverage—and have a venue plan and be ready if insurers seek to initiate a race to the courthouse.
Bottom line: Emerging torts travel fast; coverage battles are won by those who prepare early. Inventory historic policies, pre‑plan notice and privilege, and understand key coverage issues and the impact of potentially applicable law early on as you timely provide notice and tender the suits. That’s how you turn your insurance program into a real asset when a long-tail liability comes calling.
If you have any questions or would like more information and guidance on how to prepare for potential long-tail coverage claims, please contact Pillsbury’s Insurance Recovery and Advisory practice.
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