Property owners or operators faced with an environmental cleanup often incur significant expenses to cleanup their property. Before starting the actual cleanup, property owners/operators should take the time to explore all possible avenues to obtain reimbursement for cleanup costs. The first step should be to look at existing insurance coverage, particularly old comprehensive general liability (“CGL”) insurance policies.
Prior to 1986, most CGL policies contained a “sudden and accidental” exclusion. This exclusion barred coverage for contamination unless it was caused by a “sudden and accidental” event (i.e., a spill). Several states interpret this exclusion to preclude gradual pollution such as leaks from underground storage tanks. But New Jersey does not and, regardless of whether the discharge was sudden or gradual, the “sudden and accidental” pollution exclusion does not preclude coverage in New Jersey. Subsequent to 1986, insurers inserted the “Absolute Pollution Exclusion” into liability policies, which generally bars coverage for pollution regardless of whether it is gradual or sudden.
It is not uncommon for an insured to no longer have old policies. The burden is on the insured to show that the policy existed and the terms and conditions of the policy. Even if you are unable to find the policy, secondary information such as canceled checks, accountants’ ledger sheets, coverage charts prepared by insurance brokers or agents, corporate records, and loan documents can be used to establish that a policy existed. Optimally, the property owner/operator needs to determine the name of the insurer, the policy number, the policy period and the limit of liability. As to the specific terms and conditions of a policy, an insurance expert can assist with this task.
The bottom line is that old business records that take up space and clutter your storage area may in fact be a treasure trove in the event you need to locate/identify early insurance policies. Before disposing of your old business records, you should review them carefully to determine if they contain information about early insurance coverage. Although it is a time consuming and tedious task, it could save your company a great deal of money if you are required to cleanup contamination at your property.