In California, Some Insurance Policies Age Like Fine Wine by Michael Fehner It is the rare city official, attorney, or administrator who finds insurance law vibrant and exciting. California courts agree: “It is hard to imagine another set of legal terms with more soporific effect than indemnity, subrogation, contribution, co-obligation, and joint tortfeasorship. … Even lawyers find words like ‘indemnity’ and ‘subrogation’ ring of an obscure Martian dialect.” It is rarer still to combine a thirst for insurance law with the willingness to take the trip to the archives or the back recesses of the records department to find decades-old insurance policies that might have been issued to a city, county, or department. But recent decisions from the California Supreme Court have made some older insurance policies very interesting indeed, especially in situations where local governments are seeking coverage for claims
that take a long time to manifest, such as environmental contamination and asbestos exposure claims. Under the court’s recent decisions, policies issued in the 1970s and earlier can be especially valuable right now. It is a common misconception that old insurance policies are good only for museums or archival research. Some of these policies are capable of providing substantial coverage even today.
About Legal Notes This column is provided as general information and not as legal advice. The law is constantly evolving, and attorneys can and do disagree about what the law requires. Local agencies interested in determining how the law applies in a particular situation should consult their local agency attorneys.
“Occurrence-Based” Policies Can Be the Most Valuable To understand how old policies can provide coverage, some explanation of different types of insurance policies is necessary. Logically, a 50-year-old auto policy probably will not provide current coverage — the insured must generally make a claim within the term of the policy. Many policies covering cars,
directors and officers liability, employment practices liability, and professional malpractice liability are “claims-made” policies; the claim against the insured must be made (and most often reported to the insurer) within the policy term or there is no coverage. continued
Michael Fehner is an attorney with the law firm of Irell & Manella LLP and can be reached at mfehner@irell.com.
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Western City, August 2020
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