The P.I.P.E. Business Strategy: Preserve Insurance Policies Eternally
Updated: Aug 20, 2020
With the impact of COVID-19, it has become very apparent to businesses that ensuring the business has insurance coverage when needed is critical. A 2015 case from the Georgia Court of Appeals highlights the importance of policyholders properly preserving insurance policies and notifying insurers of claims in a timely manner. Although in that case the court held that a policyholder's late notice of a claim did not preclude insurance coverage, preserving insurance policies and timely notification to insurers of claims can prevent or reduce legal expenses associated with getting insurance coverage for insured events.
The Occurrence: Contamination from a Leaking Pipeline
In Plantation Pipe Line Company v. Stonewall Insurance Company, the policyholder discovered contaminated soil around one of its pipelines in 2007. After investigating, the policyholder determined that the contamination was related to a pipeline leak in 1976. At the time the contamination was discovered, the policyholder was unable to locate one of its excess insurance policies. In 2010, near the conclusion of the contamination investigation and after a remediation plan was approved by the government, the policyholder's attorneys from 20 years earlier located the excess insurance policy. At that point, the policyholder notified its excess insurer of the claim and requested coverage. The insurer, nevertheless, denied coverage asserting the policyholder's notice was not "prompt" as required under the policy.
The Policyholder’s Litigation
To combat the insurer's denial of coverage, the policyholder filed suit and explained that it did not reasonably believe that its losses would reach the triggering level of the excess coverage until the remediation plan was approved in 2010. Additionally, the policy did not expressly make prompt notice a requirement of coverage and the insurer was not harmed by the delayed notice.
The Court rejected the policyholder's first argument finding that the facts of the case show the policyholder did not provide timely notice because it could not find the policy. The Court indicated the policyholder should have maintained the potentially applicable insurance policies in a manner that allowed it to identify potential coverage and provide timely notice.
The Court, however, accepted the policyholder's second argument stating the policy did not make compliance with the notice provision a condition precedent to coverage. As a result, the insurer was required to show that it was prejudiced by the policyholder's late notice, which the insurer failed to do.
The Importance of Preserving Policy Documents
Even though the policyholder prevailed, this case provided practical instruction for policyholders. As the Court pointed out, occurrence policies should never be destroyed because such policies could continue to provide coverage for damages resulting from a covered occurrence during the policy period, regardless of when the occurrence is discovered or the third-party claim is asserted against the policyholder. Also, multiple documents may constitute "the policy," so it is prudent to consult with an attorney or properly qualified consultant for guidance on ensuring that all necessary policy documents are preserved.
If the policyholder in this case had properly preserved the excess insurance policy, it could have provided more timely notice and possibly prevented litigation.
The case discussed above is Plantation Pipe Line Company v. Stonewall Insurance Company, 780 S.E.2d 501 (November 20, 2015).
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Disclaimer: This post is for general information purposes only and is not intended to be and should not be taken as legal advice.