USILR: What is the specialized set of tools that insurance archaeologists use
Interview with Steve Henshaw, P.G., President & CEO, EnviroForensics & PolicyFind, and David O’Neill, Director of Investigations, EnviroForensics and PolicyFind
O’Neill: First and foremost, the insurance archaeologist is a researcher. He must pay attention to detail and 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 who, 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 – as 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, [clients] paid this money, and [the archaeologists] would bring in someone to go through files. They would make phone calls to London, and all of the sudden, they would have a coverage chart for you.
Dave approaches it differently, and part of that is because 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; 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. Municipalities 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 step-by-step process, where we get our hands around some evidence and then pursue it. It obviously includes calling old brokers and 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: 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…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 that 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 that the American market would not provide, so in the 50’s and 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: How do you obtain London brokers’ records?
O’Neill: London insurance market records are accessed by requests made to certain London brokers. Knowing which London brokers historically provided umbrella liability coverage to the American market for which policy periods helps you know who 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: 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 in order to assist counsel in developing a case, we added components that we thought were missing and one of them was insurance archaeology. Another [component] is private investigative work. By 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: What does EnviroForensics do in addition to insurance archaeology work?
Henshaw: We are a full-service environmental engineering firm. We perform [soil and] ground water investigation, develop the work plan and implement that work plan. We also perform litigation support, providing technical expertise in environmental litigation. 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, causal events and 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 and geologists working with a municipality to remediate a large PCB-contaminated site in order to allow commercial development. We are also in different stages of active remediation for several sites owned by a private petroleum products distributor and we have an ongoing remediation at Bloomington Cleaners in Bloomington, Indiana that is situated right in the middle of a mixed residential and commercial district – both of those projects are being funded by historical insurance that we located.] [Updated to reflect recent projects – Ed.]
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 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.