Muddying the waters on policy-stacking law

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By Robert L Wallan and Rene L Siemens

Many insured accidents take place in a single moment in time — plane and car crashes, fires, floods, and other disasters usually take place during a short timeframe and fall within a single insurance policy period. But some losses, notably pollution, landslides, asbestos exposure, and other similar losses often arise from progressive injury occurring over a period of years.

General liability and property policies are usually written on an ‘occurrence’ basis, meaning they cover the injuries when they occur, even though an injury might take place over a period of years, and even though a claim might not arise until years later. For decades, policyholders and insurers have argued over how insurance should pay for these types of ‘long-tail’ claims. Policyholders have argued that in response to a long-tail claim, each policy in force while damage took place should pay up to its limits.

Primary insurers have argued that they should only have to pay on one policy year despite taking premiums over a course of years. Excess insurers have argued that not only should underlying primary policies fully pay before excess coverage is triggered, but also primary insurers from other years (not underlying the excess coverage) should also pay first in order for the excess carrier to avoid making payments…

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