I was very pleased to speak a few weeks ago at HB Litigation Conferences’ Emerging and Complex Insurance Claims Forum. It was exciting to facilitate a discussion on issues related to proving exhaustion of underlying policies with two attorneys who are very experienced on this topic: David Cox of Morgan Lewis & Bockius and Ilya Kosten of Selman Breitman. This is a very relevant conversation that can pertain to many different types of claims, such as long-tail asbestos claims or premises claims. The type of coverage affected is not just historic general liability, but also current general liability, directors and officers, and premises coverage, just to name a few.

For policyholders engaging with their insurance carriers through this process, proving underlying exhaustion can be quite burdensome and costly, since the onus for proof often falls on the policyholder’s shoulders. Our panel covered the various ways in which policy exhaustion can be shown through the use of loss runs, claims data, and various types of allocations. We also discussed policy language, settlement agreements, and other court stipulations that can affect the proof of exhaustion. As anyone who has gone through the process of gathering this proof knows, it is rarely straightforward and hurdles often arise, costing a great deal of time and money.

Our panel hoped to shine light on the various ways one can prepare for and try to get ahead of the situation. The strategies we shared are helpful even to those already battling in the middle between layers in a coverage block — where neither insurer is admitting the need to provide coverage; they can still find ways to show proof of exhaustion as long as they have a plan and are aware of their options.

KCIC is often able to help our clients and their coverage counsel put together and implement this plan. We can assist with gathering and maintaining the needed information to document indemnity and defense eroding policies. Keep an eye out for a future paper by KCIC on this topic.