Many small business owners or drycleaners and manufacturing companies know that old general liability policies can provide a defense, even an indemnity, against environmental claims. The net effect of such a defense can translate into payment and funding of necessary site investigation, legal, and remediation costs. To put it into business terms, a dry cleaner or other manufacturing company that is saddled with the responsibility to pay to respond to expensive environmental claims can find relief, if they can find old general liability policies that were issued before the insurance industry started adding pollution exclusion language to the policies. To that end, a property that has been impacted with solvents or other hazardous constituents can be restored to its pre-contaminated condition. A property that was previously considered to be an environmental liability can be turned back into an asset.
For 20-plus years, I have worked for hundreds of drycleaners and other small business owners to find and bring to bear, old general liability policies to restore property values and to protect their personal assets, while working with regulatory agencies to investigate and cleanup environmental contamination. While our approach continues to provide a tremendous benefit to our clients, as time marches forward, finding old policies becomes harder. Drycleaners and other business owners transition into retirement and disengage from the day-to-day operations. Files and records get misplaced, discarded and along with the records, millions of dollars in assets are lost. Today, we continue to travel the globe locating evidence of these old policies and I’m pleased to say that much more often than not, we still find the hidden gold.
It goes without saying that the longer our clients wait to find their old policies, or evidence of these old policies, the more difficult it is to find the necessary records. However, today, we are faced with another issue and that is associated with the financial condition of some of these old insurance companies. In early 2011, I wrote an article that discussed how some insurance companies have become insolvent and have gone out of business. These old insurance companies, many of whom were very large in the 1970s and 1980s, are no longer around to defend their policyholders against environmental and personal injury claims. Last year, an article in Business Insurance forecast the liquidation of Kemper Insurance Company (also known as Lumberman’s Mutual Insurance or Lumbermens) within the next few months. In the late summer of 2011, the Kemper name was sold off and the entity defending the old environmental and product liability claims became officially Lumbermens. In early July 2012, it became official and Lumbermens went into a receivership to be managed by the Illinois Department of Insurance. Restated, Lumbermens is now in liquidation. There will be a small window of time in which policyholders will be allowed to file claims against them, using their old policies. Following the end of this run-off period, there will be no coverage under these policies. They will effectively have gone from valuable to valueless in a matter of months.
Lumbermens marketed its special multi-peril and general liability insurance policies to the dry cleaning industry quite successfully in the 1970’s and 1980’s. Lumbermen’s policies were sponsored by dry cleaning associations in various states, including California through the former California Drycleaners Association and California Fabricare Institute. These associations purchased a master policy from Lumbermens for its members and then issued subscriptions to individual dry cleaners. If those dry cleaners covered under these policies wait until their landlords or neighboring landowners discover groundwater contamination traceable to their former operations, it will likely be too late for them to use these historical insurance policies to obtain defense against these claims. They will be required to pay legal fees and environmental engineering costs out of their own pockets.
While no one wants to look for contamination and open themselves up for scrutiny and potential litigation, the alternative is to let the Lumbermens liquidation proceed and not take advantage of the current solvency. That being said, if you or someone you know purchased insurance policies through an association in the 1970s and early 1980s, there is a good chance that Lumbermens was your insurance company. It would behoove you to find your old general liability policies or evidence of those policies (cancelled checks, declaration pages, letters to or from the carriers, ledgers, etc.).
Over the years, EnviroForensics and PolicyFind have researched trade associations, including the California Fabricare Institute and California Drycleaner Association, to understand what insurance carriers were being sponsored from year to year, going back into the 1960s. We also have a strong understanding of the historical membership of many old associations. Together, we can assist you in identifying whether a company or individual purchased insurance from a specific carrier.
We believe that even if you have not discovered a release on your property or even if you have not been named in an environmental suit, the old policies have a monetary value. Old policies can be bundled together and sold back to the insurance carriers that issued the policies for cash. Such transactions are sometimes called policy buy-backs and they can be settled for no out of pocket costs to the policyholder.
Don’t let money in the form of old insurance policies slip away. Time is of the essence. Never is too late.