Interview with Stephen Henshaw & David O'Neill

USILR: Please provide short career bios, including how you became insurance archaeologists.
O'Neill: I am a 1986 graduate of Case Western Reserve University School of Law. I have worked as an insurance archaeologist since 1993 providing policyholders with documentation of historical insurance policies. I entered the field of insurance archaeology with a risk management company after several years as an environmental property damage claims investigator for an independent insurance adjustor. As an insurance archaeologist, I have specialized in the discovery of historical insurance documents for one of the largest waste haulers in the United States and for a variety of small business owners including dry cleaners. Typically, I work with policyholders and their counsel to produce evidence in support of long-tail insurance claims.
Henshaw: I have a degree in geology, and have done postgraduate work at the Oregon Graduate Institute. I then went into environmental consulting. My experience with historical insurance archaeology started in 1990, when I pieced together insurance for a large solvent recycling firm in the San Francisco Bay Area. Not having any records available, I worked with an insurance archaeology group who assisted me. I followed them around to see how their investigative work was done. Re-creating the history through old checks, through the review of attorneys' files, and finding slip and fall accidents and product damage claims, we were able to establish a good base for our underlying coverage. We also went to the London market, and found a fair amount of secondary evidence of coverage.
      I started EnviroForensics® in 1996, and a large percentage of our environmental work has involved projects where insurance coverage pays for some percentage of the work. We have represented policyholders, and pursue the coverage to obtain a defense which often covers the cost of site investigative work and remediation, in addition to legal fees.

USILR: What does EnviroForensics® do in addition to insurance archaeology work?
Henshaw: We are a full-service environmental engineering firm. We perform ground water investigation, develop the work plan, and implement that workplan. We also perform litigation support, providing technical expertise in environmental litigations. The insurance archaeology is a component of our litigation support service area. In addition, we have a private investigative group that finds witnesses and conducts interviews in toxic tort investigations, both for defendants and plaintiffs. We identify responsible parties, causation events, occurrences. Thus, we are full service in the litigation support area as well as the environmental consulting. Of interest recently, we have a group of engineers that works on water supply issues, for bottling companies, municipalities, and water companies. Another group is currently involved in permitting waste-to-energy facilities, and in designing those type of facilities in some of the Caribbean islands.

USILR: What is insurance archaeology?
O'Neill: Insurance Archaeology is the practice of locating, retrieving, assembling, and evaluating historical insurance documents. Typically this is done on behalf of the policyholder who has lost or mislaid his/her insurance policies and wishes to assemble his historical insurance program. The term “archaeology” refers to the assembly of the various parts of an insurance contract. Since insurance policies are "contracts of adhesion" they are comprised of various parts, which often must be located and reassembled. Just as an archaeologist reassembles the skeleton of a prehistoric animal, the insurance archaeologist reassembles the parts of a historical insurance policy and portfolio.

USILR: How old is the field of insurance archaeology, and what circumstances created the need for insurance archaeology. Am I correct in assuming that it stemmed from asbestos and pollution litigation?
O'Neill: The field of insurance archaeology had its beginnings in England during the 1970's and 80's. Individuals working for the underwriters found that there was a market for the retrieval of policy information from the major London brokers primarily for American manufacturers responding to asbestos personal injury and pollution property damage claims.
      The need for reconstructing and finding a company's or an individual's insurance coverage came about when companies were being required to address third party liabilities. Because environmental claims and personal injury claims are considered retroactive to the party causing or contributing to the damages, and because the costs of the damages were so large, companies looked for alternative funding approaches.
Henshaw: That's really where it started. It's a relatively new field, and the late '80s is when it really started coming on. It did result from these large environmental liabilities that were coming about, and the associated retroactive liability. People got rid of their properties and assets, but the long-tail liability followed them around. There are about three major periods when insurance was written and crafted in very different ways as the industry changed and as claims were brought. These were roughly 1972/73, when there was a change in the coverage and how it was written then roughly, 1985/86. The early insurance was written up to 1972/73, and did not, typically, have pollution exclusion language in it. That meant that environmental damages were covered by insurance.
      So, before 1972/73, the courts have generally interpreted it to mean that those environmental conditions are covered under insurance policies, typically CGL policies. After 1972/73, most carriers still covered environmental damages, but only to the extent that those were sudden and accidental. From 1972 to roughly 1985, only sudden and accidental events, unexpected, unintended releases were covered - overfills of tanks, ruptures of lines, inadvertent spills and releases, valves that stayed open - things of this nature.
      After about 1985/86, the insurance industry really tightened up their policy language so that it did not cover any environmental conditions; if you wanted those covered, you had to buy a separate policy. Your CGL policy would no longer cover even sudden and accidental events. As these claims started coming with Superfund and environmental enforcement of RCRA, and various state regulations, suddenly, the liabilities blossomed, and the need to find alternate funding for major industrial companies was heightened. These costs were in the tens of millions of dollars, in many cases, and the legal fees were exorbitant in the real heyday of Superfund. Many lawyers would sit around tables and discuss allocation, so the need to find some solution to this problem focused on how historical insurance might cover some of these costs, particularly defense costs.

USILR: You mentioned the salad days of CERCLA. It is perceived by environmental lawyers, and certainly by insurance coverage lawyers who deal with pollution, that things have slowed down considerably. Many insurance coverage attorneys no longer specialize in pollution coverage disputes because, in many states, there is now a discrete body of case law, so that there is not that much to argue about. Also, many of the Fortune 500 companies have already had their pollution liabilities resolved, in one way or the other. Have you noticed a slowdown in this particular area?
Henshaw: That is a two-part question. The heyday of Superfund is behind us. That is a good thing for everybody, because while Superfund was designed to address big sites, such as the "Valley of the Drums" sites, and large environmental problems, it also crept into every business's life. That was not necessarily its intention. But what happened is that anyone who contributed to a site (whether it was giving them an empty drum, or sometimes even being a supplier or a transporter) was brought into this. Many of these Superfund situations have been resolved, and the large run of claims by larger companies has been settled.
      In addition, I would say that most Fortune 500 companies have addressed their historical insurance. That is not a blanket statement, but our experience is that most Fortune 500 companies with environmental concerns have done global runoff's of their historical insurance. What that means is they negotiated a settlement with their various historical carriers and had a cash buyout of these policies. They received money, and the carriers obtained a release from any future liabilities. So then, if a particular company is identified as a responsible party for some future site, there will be no coverage to defend them. In general, that is what has happened.
      However, I would say that that is not the case with most mid-size companies, certainly from a dollar standpoint. From an impact to our nation's economy, and to our businesses in general, it is these smaller companies that now have the most to lose in environmental damages. The cost of a $100,000 to a $1 million cleanup - let alone something higher than that - can ruin a company, not just for their annual bottom line, but for good. Fortunately, most of the mid-size companies haven't exhausted their policies. I would say that most of them haven't even looked for them, so from that standpoint, there is still much work to be done. Although, many claims will be filed, they will not be of the magnitude that we saw in the past.

USILR: I think your company is probably the only one that combines both environmental consulting and insurance archaeology. To your knowledge, is that true?
Henshaw: Yes, to my knowledge. The reason is, we want to be a full service litigation support company, and our design was to employ talented engineers and geologists who understood hydrogeology, chemical engineering, and waste handling, but to assist counsel in developing a case, we added components that we thought were missing, and one of them was insurance archaeology. Another is private investigative work. Bringing those into a coordinated effort, we can provide a seamless package for law firms where we are all on the same page. We understand the objective of finding out the facts and building the case with the legal counsel.

USILR: Are law firms surprised when they learn that you offer all of these features?
Henshaw: I don't know if they are surprised, or not. We get a fair amount of response from our web page on insurance archaeology. With the name of EnviroForensics® , maybe it goes the other way around, when people might be looking for insurance archaeology, they don't expect to find a full service environmental engineering firm.

USILR: What is the specialized set of tools that insurance archaeologists use?
O'Neill: First and foremost, the insurance archaeologist is a researcher. He or she must pay attention to detail and must have strong perseverance. The insurance archaeologist needs awareness of the history of the insurance market; i.e. Lloyd's development of the first broad form third party excess liability coverage forms; the emergence of the comprehensive general liability (CGL) policy in the American market, and the revision of the policy forms by the Insurance Rating Bureau (IRB) and later the Insurance Services Office, Inc. (ISO).
      One also needs a working knowledge of how to access the various archives in which historical insurance documents are kept. These archives include not only the files of certain London and New York brokers, but certain government and institutional archives in which insurance records are kept. The archaeologist needs excellent interviewing skills and some knowledge of accounting methods. Most insurance documents do not materialize from broker's archives. They come from various "dead files" both in and out of the policyholder's possession. Usually these files are of the kind that the records' custodian does not even know he has. The archaeologist needs excellent interviewing skills to develop the details of the client's corporate history that will lead him to those files in which records may be housed. He needs to be resourceful in locating knowledgeable parties, perhaps now retired, who can point him in the right direction and he has to be persuasive enough to encourage those in possession of records to look for them, or at least to allow someone to look for them.
      The insurance archaeologist collects insurance documents from sources that, for the most part, consider them expired and canceled records. Changes in American law have revived these documents in many cases, however, this is not widely known by the custodians of the records. So often, valuable insurance documents can be located in those places where discarded, forgotten business records remain warehoused, unnoticed. Persons who can lead you to such records are usually old timers - retired persons or former employees who placed the records in storage years ago. More recent insurance documents can be found in the possession of risk managers, controllers, finance directors, etc.
      Essentially, you are trying to find dead files. Historical insurance information became valuable by operation of law. As the law changed, then suddenly, the papers in all those cardboard boxes suddenly became very important. Before, they were considered canceled policies, and old business records, which were obsolete. Oftentimes, I am contacting records custodians who are not aware of anything valuable that they might have in their records, and may even have earmarked things for destruction. I have to work through these folks to get access to records, which they believe are not valuable. Usually, I am dealing with people, maybe even janitors, who are in control of records, who have little access to management, and do not understand the value of the contents of old boxes.
      The insurance archaeologist needs to thoroughly understand the language and crafting of insurance policies, as well as the industry changes and modifications that have affected insurance policy language. He or she needs to be able to determine what it is he has found and determine the relationships between the various policies or policy parts he finds. Furthermore, he must be able to present the findings verbally and visually, through the use of insurance coverage charts.
      Lastly, the insurance archaeologist needs to keep abreast of state and federal court decisions about the ambiguity of pollution exclusions which impact coverage provided under general liability policies.
Henshaw: There are basically two types of insurance archaeology firms, and, with due respect, too many of them are getting it from 30,000 feet. In other words, they are not really in the trenches looking for policies, on what Dave calls a "grass roots level". To be honest, there was a long time when insurance archaeology, because it was hitting companies that were Fortune 500 companies, or a special segment of the industry, like chemical manufacturers, went through some of your files, but at the end of the day, the real records were over in London, and the reinsurers had copies of what they were reinsuring. So, you paid this money, and they'd bring in someone to go through files. They would make phone calls to London, and all of a sudden, they would have a coverage chart for you.
      Dave approaches it differently; and part of that is because, as we talked about, much of the business is gone from those Fortune 500 companies, so going to London, while it still has value, that value has changed. Dave starts at the grass roots level. He goes through boxes and boxes of files. He knows what he is looking for. He knows that one piece of paper can lead to something else, and before you know it, he has been able to reconstruct some evidence of coverage.
      It is much more than, as David says, a piecing together of a skeleton, and rarely is everything intact. Rarely are you lucky enough to just pull up an insurance document, although it certainly happens; but more often than not, you are going to find secondary evidence of coverage, which leads you somewhere else where those documents might be. So, in addition to talking with the owners of companies, their controllers, and old attorneys who are no longer being used, we look everywhere that records might be stored. For example, when dealing with municipalities, they usually just point us to a warehouse full of boxes. Dave also has follow up interviews with people who contracted with the client. There are a number of avenues that you attack, but it is really a stepping process, where we get our hands around some evidence, and then pursue it. It obviously includes calling old brokers and old insurance carriers. So, we combine the obvious with some of the less obvious approaches.

USILR: When you mentioned contacting former contractors, that is because the contractors usually had to name the insured as an additional insured under their insurance program, is that correct?
Henshaw: That's correct. Depending on the sophistication of the client, that is not always successful. Many times, contracts get written without that certificate of insurance, but that is certainly an avenue.

USILR: If you fail to recover the actual policy, which is probably common, what types of secondary evidence are frequently available to prove that there was a policy in a certain year, many years ago?
O'Neill: Premium notices, certificates of insurance, binders, slips, correspondence, underwriter's notes, endorsements, policy declarations pages, etc. Since we begin with the policyholder's records, we often find invoices (premium notices) with policy numbers on them, which identify the carriers, also identify the insurance agent. That gives us a few more directions to go in, a few more contacts to make. We also find historical ledgers, where we find, occasionally, policy numbers written in, or some identification of the type of insurance purchased at a certain date. We then find canceled checks that correspond to those ledgers and invoices, and putting these three elements together shows that there was an insurance contract in place, and the premium was paid.
      Then, we also find certificates of insurance that might have been sent, or copies of these that might have been kept in the policyholder's files. In addition, we look through correspondence to and from carriers and insurance agents and insurance adjusters regarding claims; we find endorsements occasionally, that were sent afterward, with a change in the policy; we find binders that bound the policy before the policy's issuance. We may find underwriter's notes, and policy slips that you can get from the London brokers and from the major brokers, and these slips themselves are reinsurance contracts. These are all types of evidence we look for.

USILR: You have already indirectly described, in response to other questions, what an insurance audit is. Can you just answer that flat out - what constitutes a historic insurance audit?
O'Neill: An “historical insurance audit” is the process of searching the policyholders' internal business records in search of primary and secondary insurance evidence. Typically, the organization's insurance files will not contain everything they need, and we may have to go back through a variety of other files and through other departments. We may have to go back through two or three different accounting schemes in order to figure out where else in the stored business records of this company, we might find insurance information. That process is called an insurance audit.

USILR: The first step is asking for any and all records, and then you ask for more and more records?
O'Neill: The audit begins with a review of the policyholder's insurance documents. These documents provide information concerning brokers, carriers, etc. from which a more detailed insurance archaeology project can be launched. However, we know that the client himself has not found everything that we need, and we know for sure that, if we don't find policies, we will find evidence that will lead to policies. We are looking for secondary evidence that he missed, when he made the first grab.

USILR: In other words, there can be no competent historic audit if you merely accept the policyholder's word that a search has already been made. You have to physically search, no matter what the client tells you, is that correct?
O'Neill: Yes. It is foolhardy to solely accept the first offerings, and also, any client who comes to us and does not want us to review his records is not doing himself any favors. This is something that absolutely is fruitful, and for his own benefit, he must agree to that.

USILR: Let's focus in on evidence that you have already recovered of a missing or incomplete policy. Let's say, for example, you have found a returned check for a premium, and it might have a notation of a company's name, or perhaps other evidence. What is the next step to try to close the circle, to absolutely give yourself confidence that you have exhausted all avenues? That this is the best that you have, and you are never going to get the complete policy, but this is the best secondary evidence that you have?
O'Neill: We can start at any point in the circle, but there is a check register somewhere in the organization's files, and that will indicate a check number and a date, as well as to whom the check was written. Some checks are written to insurance brokers, some to insurance carriers. Certainly, an interviewer must know who the insurance agents were at the time. We take the old check register, we find the old checks, we match the checks up to the check register, we take that information from those two sources and try to match it up to the invoices we might have, and sometimes, some of these are lacking, but we take these elements, and essentially, we have the fact that an insurance policy was purchased, we have the policy number, we have the date it was purchased on, the policy period, maybe reflected in the invoice, as well as the insurance agent and as well as the type of insurance. Then, we have the canceled check that shows that the premium was paid, so we have all the elements indicating there was a contract; and in lieu of the actual policy, we would like to produce these, and cause the insurance company to search its files to find that policy.
      Because insurance policies are contracts of adhesion, an endorsement or other policy part may be missing from the policy retrieved from the field by the insurance archaeologist. The archaeologist can tell from the policy in chief which forms and which endorsements may be missing. Because endorsements can and often do alter the terms of the policy, it is important to find the missing endorsement. These may typically be found in a broker's archives, a policyholder' files, and ,of course, in the archives of the insurer.
Henshaw: David also has an extensive file of specimen policies that were generated for the insurance industry; and there are a number of coverage attorneys and perhaps other people involved with insurance, who are also going to have historical forms. It is very valuable to know what the contracts during that period stated.
      They were not generated for specific individuals, rather they were forms that were pulled together to create a specimen policy, so they had different sections. By and large, that is what the industry relied on. However, each company might have had something different, so it is important to know which company was issuing the policy. That is another way that we actually prove up our evidence of insurance -what the language of the coverage at that time stated, and what the coverage was. We know when the check was written is the date of issuance of the coverage, and so Dave can reconstruct what the policy would have been, even though we don't have the actual insurance policy.
      There is some pretty good case law. For example, in California, there is a recent case that supports secondary evidence of insurance to a much greater degree, so it is becoming fairly well accepted. However, carriers do not necessarily agree, and they may want to fight, but the laws are changing and the interpretation is changing, as more investigative work and more discovery is conducted.

USILR: Again, you folks have touched on this question in previous answers, but can you sum up the types of persons whom you interview as part of your search for lost or missing policies?
O'Neill: Many of the people who come to us are smaller companies; dry cleaners are a good example of small businessmen who come to us. They may have run their own business and had their hand in every aspect of that business, and they are the best source of information for that business. So, often, in these smaller organizations, we will want to talk to the owner - and the former owner. If it is a family-owned business, the father may be still active, or will certainly be someone who will know the meaning of these old records. So, we want to talk to him to get a history of the company.
      In a larger corporation, where things have broken out, we want to talk to the accounting people, the controllers, because they are in control of records and record storage. We also want to talk to risk managers, but risk management is a more recent calling. There were not any risk managers prior to the 1970's, and if we want to go back to old 1960's and 50's records, as we often do, the corporate treasurers handled that then. We often go back to retired people who handled financial matters for the company in that era. In addition, if the firm had an outside accountant, outside legal counsel, landlords, purchasing agents, etc., we talk to them, too.
Henshaw: After we leave the insured's premises, we are looking for evidence of insurance outside his domain. We are contacting people who did business with the insured. Oftentimes, we are looking in their records, so we have to get cooperation from them. It is very important to have the insured be proactive and cooperate with us to get the cooperation of people with whom he did business, as there may be insurance records in their files that relate to his insurance program. Frequently, the contacts we make in the field are with other businesses and other business people.

USILR: How difficult is it to persuade folks who did business with your client years ago, that you are not an adversary? I imagine there may be some initial suspicion.
O'Neill: Sure. I just made a contact yesterday with a fellow regarding a 1972 franchise contract. This business is no longer in existence, and he is wondering why I am calling, from a company named EnviroForensics® . I point out to him the parameters of our search: that we are looking for insurance for the company that is our client. Once I explain that we are only looking at his records for a copy that might have been sent to him that has nothing to do with his present corporation, then he is able to cooperate, and oftentimes he will go back and talk to our client, just to make sure that everything is on the up and up. That is fine with us. It takes that kind of cooperation.
Henshaw: We have to get letters of authorization from our client, the policyholder, so that we can pursue the investigation on their behalf. One of the things about the London market is, if you wanted to find out if one of the old landowners had insurance, and you approached the London market looking for that, it is difficult, because they are only going to release information to a policyholder, not to anyone looking at someone else as being liable. You hope your client has a good relationship with his old vendors and clients. We have certainly experienced people who were not cooperative, mostly because they had a bad business dealing and/or a falling out with our clients.
      Finally, when it comes to participation from insurance brokers, that runs the gamut, also. Many brokers are very helpful, and have good personal relationships with our clients. There are others whom they are no longer servicing. Obviously, in that situation, they often don't go far out of their way to help you. Also, some of the brokers have an insurance carrier's mind-set. What I mean by that is there is an overwhelming view in the insurance industry that these old policies were never designed to handle environmental claims, or asbestos claims, or any retroactive claims. They were issued for sudden, accidental, or unknown events, but not 20 years down the road. So, the company line within the insurance industry is that those policies were never crafted to cover long-tail exposure, and there is a fair amount of brokers who take that line.
O'Neill: The insurance agent has to serve two masters. He is a fiduciary in his service to his client and in his service to the carrier. Independent agents who serve both sides have to realize that they have made an agreement to their insured to service that account, and part of the service is to help him locate his old records. Very often, the insured is terribly discouraged. They come to us because they have contacted their insurance agent, and have been told: "Well, we wouldn't still have that," even though, oftentimes, the insurance agent has yet to look for these records. We find that when we contact and work with the insurance agent specifically to find certain identified records, he is more likely to be able to cooperate with us and find them.

USILR: Non-insurance archaeologists, including most lawyers, perceive that insurance brokers are the ones who should be performing insurance archaeology. In fact, should that not be part of the insurance broker's service to his/her client?
O'Neill: Broker mergers, consolidations, etc. in general have a limiting effect on insurance archaeology. When a larger brokerage absorbs a smaller one, some records survive the move and some do not. Most state laws only require insurance brokers to keep records for five or seven years. Most brokers do not have a profit motive in keeping old records, and they are often discarded. Also as insured corporations acquire other insured corporations, often the need for retention of "expired" insurance policies is not understood, or if it is understood, it is not advantageous to the insurance carriers.
      Even where the acquired corporation has retained its' historic insurance records, the acquiring corporation may not include assembly of the acquisition's historic insurance records in its pro forma. The new corporation's record retention plan may not include historic insurance policies of newly acquired companies. So the potential sources of insurance records are constantly dwindling. Finally, many insurance agents adopt the insurance company's line "the insurance was never intended to deal with retroactive liability".

USILR: How do you obtain London brokers' records?
O'Neill: London insurance market records are accessed by request made to certain London brokers. Knowing which London brokers historically provided umbrella liability coverage to the American market for which policy periods helps to know whom to contact. Certain brokers profit from providing access to their records and publish tariffs, which indicate the costs of accessing them. Tariffs are the prices charged for searching for these records and providing them to you. These are very important, because the London market's reinsurance records list all the insurance policies in that period for that particular insured. You want the files, because that will give you all the information for that period for that insured.
Henshaw: Lloyd's records can be an excellent source of finding underlying policies. In general, Lloyd's role in the market was that of a reinsurer, writing excess coverage. As such, they were required to have the policies for which they were providing excess coverage. Therefore, these policies were often goldmines for finding the underlying coverage. Unfortunately, the Lloyd's policies were typically written for larger companies or specific industries. Many of the small to mid-sized companies did not have excess coverage, or the insurance was not placed by Lloyd's. Generally speaking, as time moves on, the opportunity to find underlying coverage as part of the Lloyd's program is diminishing.

USILR: You mentioned finding out from the start whether London may have issued umbrella policies to your client. Does that mean London did not issue primary policies?
Henshaw: That is our experience, that they were excess insurers. And you have large houses over there that, as Dave said, have small consulting companies within a large insurance house. Maybe it will have two or three people in the environmental program, and while you would think that because they have an enormous amount of records - they have warehouses of historical records - depending on who your client is, it would well be worth your time to look over there. Our experience is, that mid-size companies oftentimes just did not have these multiple levels of insurance. Now, if they were a chemical company, or someone that had potentially large exposure from fires, explosions, things of this nature, then it would be prudent business practice to obtain excess umbrella coverage, but for many companies, that is just not going to be the case. $1 million was plenty for an occurrence.
O'Neill: Let me just add that the London market would provide the insurance the American market would not provide, so in the 50's, 60's, American corporations looked to the London market for broad access liability coverage that the American market was not providing. That is why you find it there. New York brokers accessed the London market through Canadian houses with connections to London.

USILR: On your website, you talk about amassing the information necessary to approach your clients' insurers, so my question is, how do you assemble your database, getting everything ready to show the insurer?
O'Neill: It is a matter of organizing the policies that you have found for the insured. You organize them by type of insurance, policy period and insurer.
Henshaw: Typically, the way we do that is just like any other technical report. We discuss the procedures that were conducted, and the results of those procedures. Just like in a soil and groundwater investigation, anything that is conducted is transcribed that way. We have an actual document that states what we did, what the findings were, and has as an appendix, all the actual evidence of insurance, including secondary or actual certificates or policies themselves. We put together a coverage chart, which is a visual of years going along the x coordinates, and $ going along the y coordinates, and each year would have a different color that would represent a carrier. We show what carrier was operating or insuring for what period, and what the limits of coverage were. Oftentimes, on top of those limits, you have the excess coverage, and that would come across as a different color for a different insurance carrier.
O'Neill: These insurance charts also indicate where there are gaps. We do not always find every year of coverage, and we need to know where the gaps are. If additional work is required under a separate extension of the contract with that particular client, this tells him where we need to look further. Also, the client may have had a self-insured retention, and there may not be any underlying insurance. For a certain level of coverage, there may not be any insurance, and he needs to know that, too.
Henshaw: That is particularly true with large companies and municipalities that were self-insuring.

USILR: Let me ask you, in your experiences, how often do the insurers actually collaborate with you, almost as partners in this search process, or do they usually try to stymie you, or treat you with indifference while you are trying to find these policies, or absent the policies, secondary evidence of the policies?
Henshaw: That is an interesting question. As you would expect, different companies behave differently, and have their own culture. Certain companies are on one extreme, and others are very cooperative. Interestingly enough, once an action starts and a claim is filed, one of our biggest clients is the insurance companies themselves, because they are interested in finding other people who would be responsible for the contamination. In many states, one year of coverage is enough to trigger coverage. In other words, you don't have to get the whole portfolio together before you could file a claim against one carrier. Once you file that claim against the carrier and it has agreed to defend, it is very interested in having us assist them in finding other carriers that have liability.

USILR: So, initially, you may have an adversarial relationship with a carrier, insofar as you are trying to prove the existence of a policy in which it has responsibility to pay your client, and then down the road, in the same case, that very same carrier may hire you?
O'Neill: Yes, this has happened repeatedly. Typically, a carrier's claim representatives hire us to find records indicating that there was coverage offered by other carriers, so it will help them to spread the risk. That is a service we will do, of course.

USILR: That is always a good feeling. I know that when lawyers are hired by ex-opposing parties, they always feel complimented.
O'Neill: It's getting there! Maybe we are viewed as adversarial to the insurance community, and that was never the case. What we are is vigilant for our clients, and we know how to do our job. So to that extent, yes, it is coming around. In some cases, we are being hired by the carriers-- because we are the experts in finding historical insurance.

USILR: What is the impact of broker mergers, consolidations, etc. on what you do? Does that make things much more complex, or easier for you? Also, how about your clients' own history of mergers, consolidations, divestitures, acquisitions? Does that help, or make things more difficult, or sometimes both?
O'Neill: The mergers and consolidations of insurance brokers have negative impacts on record keeping. Like any other merger, the merging companies may have very different philosophies and procedures. The likelihood that policies will survive a merger is more by chance than by design. If records and policies do survive, they are stored in boxes in warehouses and they are not readily accessible to the general public or other brokers. Most policies are found by looking through files of the policyholders or their consulting firms (e.g. law firms, accountants, property managers), or by third parties that required certificates of insurance from them.
      One of my greatest experiences in this field has been to work on behalf of a waste hauler that acquired more than 2000 smaller companies. This particular waste hauler, at the time it made the acquisitions, of course, did not ask for the insurance policies. So, we went back one by one to the former owners of these smaller companies, and asked for their historical insurance documents. Oftentimes, a company's proforma in acquisitions will not include a request for copies of historical insurance policies; and they have to go back and address this at some later date. In that respect, mergers and acquisitions can be causes for losses of records. Many times, within those companies that they acquire, the former owner has vanished, or destroyed records because he thought these records were not of any interest to anybody, and not important. It takes a bit of real investigation to find these old records.
Henshaw: Often, it works both ways. These mergers and acquisitions, they sometimes are a clearing- house for all the records, and all the records get taken and put into storage. Oftentimes, they are discarded there. Sometimes, when a company is acquiring some other entity, for a specific reason, they don't have any interest in (or foresight to want to know) what a company did 15 years ago. Let's say they were buying the stock; but at the same time, they did their due diligence from an environmental standpoint, and in essence, they earmarked their reserves for those liabilities, then they really are not that interested. In some cases, they provide us with a great opportunity to find hidden treasure.
O'Neill: To address the other part of your question about the acquisitions and mergers within the insurance industry, obviously, that has a deleterious effect, because when one agency acquires another, or a larger broker acquires smaller brokers, typically, the current records will come in house, but the historic records will not make it. I have seen where the larger brokers (and today, the larger brokers are becoming larger) are shredding older brokers' records. It is a great difficulty for the broker to assemble all of these paper records, and it is not like every broker uses these as a profit center. Most brokers do not.
Henshaw: There is really no upside for them to keep them. As you can imagine, the fact that they can't find records doesn't typically affect them, as far as their bottom line. What you find is a policy that it is okay to discard records after x amount of time. There are certain carriers that have created their own protocol on record retention.
O'Neill: Insurance brokers conduct their businesses under state law, which gives them either five or seven years, and they will often tell you that they are not required to keep them beyond that time. That is why insurance agents and brokers are not often very good keepers of historic insurance records.

USILR: What other types of long-tail claims, besides pollution and asbestos, call out for insurance archaeology? I heard the other day from a coverage lawyer that we may see in the next couple or years, pretty serious coverage litigation between several Roman Catholic archdioceses in the United States against their insurers.
O'Neill: Time will tell what other long-tail liability will follow businesses and individuals around in the coming decades. It is likely that you will see engineering claims and medical claims based on the steady suits being filed in today's business climate. Of course, general liability policies respond to personal injury suits by victims of child abuse as in recent cases with the Catholic archdioceses.
Henshaw: That is the crystal ball! No one, I don't think, 30 years ago, would have looked and seen what happened to environmental liabilities, and if you can figure that one out, then you are positioning yourself well. The ones we have also included in that are medical claims. There are, undoubtedly, things that are going to show up down the road, from medicines and drugs that we don't know about today. That will be true, also, of chemicals. There will be new carcinogens found, and new chemicals that we don't recognize today that will be deleterious to people's health.
O'Neill: We had a construction company call us the other day, and we are looking for insurance records for them. Also, there are new toxic tort suits by welders alleging lung damage from inhalation of fumes. That is something on the personal injury side of things, and not necessarily environmental. Regarding asbestos, we are encountering clients who were not manufacturing asbestos, but were distributors to end-users. Toxic tort continues to be an active area for insurance archaeology.

USILR: How would you sum up the ways your specialty, insurance archaeology, helps an insured negotiate from strength with his/her/its insurers?
O'Neill: Having insurance policies and/or evidence of insurance policies gives the policyholder a position of strength when dealing with insurance carriers. By identifying the policies and the policy numbers, the policyholder is putting the carriers on notice that sufficient evidence exists to avail coverage. Evidence that insurance coverage exists, will, more times than not, put the carriers in a position of providing a defense to claims, even though they will provide this defense under a reservation of rights. If the carriers do not agree to this position and they have been put on notice, they put themselves in a position to be sued for not honoring their contractual obligation, which can result in "bad faith" and damages. Typically, when our clients come to us, they often have taken a stab at doing these things themselves, and they have become very frustrated by the reactions they get from their insurance carriers or their insurance agents. At that point, they need some help in talking with insurance professionals.
      The process we take them through gives them evidence of insurance contracts they had, so we can speak specifically to the agent, and specifically to the carriers about specific insurance contracts. We find that when we do it that way, then files can be found, and cooperation can be had, but insurance agents and insurance brokers are not going to go fishing for unidentified coverage. You have got to work with them on the basis that they file insurance records. For instance, they cannot find a policy if you don't give them the policy number. So, we have to have information about these contracts, and we have to approach them about specific contracts, and then we find that the cooperation is much better.

USILR: How much does your company charge for its services? Is it always per hour, or is it sometimes a flat rate per job? Is there ever a contingency fee aspect to it?
Henshaw: We have done it a number of ways. Typically, when we are doing insurance archaeology (because we are a full service environmental engineering firm), we also might provide technical support. So, it somewhat depends on how we play into the bigger picture. We have charged anywhere, depending on the scope of the service, from $25,000 to as little as a few thousand dollars, depending on what we anticipate the effort would be, and how much research is going to be required. We have chosen to avoid contingency fees. While we saw a lot of the larger companies participating in that fee arrangement, it did not sit well with many of our clients. By and large, we are doing it more on a time and materials, or lump sum basis.

USILR: As insurance archaeologists, I suspect that the best part of your job is finding evidence. That must be a tremendous feeling of satisfaction. What is the most frustrating, difficult part of your job?
O'Neill: Yes, of course, the best part of insurance archaeology, for me, is the big find. It is finding a misplaced box of business records in a rusty shed in which a pre-pollution exclusion liability policy lies hidden. It is having the janitor escort me to the boiler room where rows of boxed records marked for destruction await my review. It is successfully talking the elderly insurance agent into escorting me through the stored files of his former insurance business. It is finding a microfilmed policy in the basement of the county courthouse. It is finding the insurance resources that can make the difference for a policyholder, a client, between continuing in business or moving into bankruptcy.
Henshaw: Finding insurance policies is like finding buried treasure or gold. Sometimes we strike out, but more times than not we find something that is worth our time. Finding the buried treasure or gold can be worth millions of dollars. I always say that if there is one thing a business or individual can do it is to locate their insurance policies. Find it, and if nothing else, store it in a safe place. It's not everyday that you can add so much value to your bottom line in such a short time span and for such a low capital investment on return. Henshaw: My greatest frustration is when I follow a long line of clues and get to a particular source of insurance information, to find that that party has recently destroyed the records. The guy says: "You know, we held onto that stuff for years, and we just did a house cleaning six weeks ago, and we destroyed those records." That is the most frustrating part.
O'Neill: The other one would probably be when the client really doesn't let us do our job. They don't give us enough information, and shield us from looking through their work. Maybe they don't trust us, or maybe they are very uncomfortable with people looking through their records, but if we can't do that, we have one pain in the neck, and that is frustrating, because we know that we are going to be graded on the results, but we are not allowed to do what is necessary to do our best work.

USILR: Last question. How many states do you fellows have jobs in, and in what states do you operate?
Henshaw: We are a national company. We have offices in Los Angeles, San Francisco, Portland, Oregon, Chicago, Indianapolis, and San Juan, Puerto Rico. We have worked in close to 35 states, doing both environmental investigative work, as well as insurance and litigation support work. So, we are pretty transportable.
O'Neill: Currently, we have insurance archaeology projects in North Carolina, Montana, California, Indiana, Illinois, Oregon, Washington state, Colorado, Arizona, Michigan, Ohio. Those are current projects.