Most liability coverage (e.g. General Liability Commercial Umbrella, Personal Umbrella) is written on an occurrence basis – resulting in open ended liability up to the policy limits reaching out into the future. Keep in mind that some 17 jurisdictions currently allow limits stacking over policy years. This leaves underwriters in the difficult position of trying to assess risks with what’s known today, when the aforementioned advances – impacting so many classes of business – made five, ten or twenty years down the road could present a very different liability scenario than the one originally expected.
Appellate court decisions ruling on the efficacy of the absolute pollution exclusion provide a great example of the importance of monitoring coverage actions. Appellate level courts in some 16 jurisdictions have not upheld the intent of the language under various fact patterns. That said, how many insurers provide GL and/or CU coverage in those jurisdictions without giving pollution exposures a second thought because, after all, the policy contains an absolute pollution exclusion?
When considering potential latent exposures, generally, the more peer-reviewed studies concluding that exposure causes harm, the more likely the litigation – although, admittedly, determining the tipping point can be quite daunting. When should an insurer take action (which could be anything from creating a new product, to amending underwriting guidelines and risk appetite, to adding a new exclusion)? This should vary by size of the insurer, risk appetite, estimated exposure to any given emerging issue, etc.