Environmental contamination lawsuits frequently involve polluting activities which took place decades ago – long before the advent of computers and before it was possible for businesses to store information in an electronic format. When these lawsuits arise and a claim is tendered to an insurance carrier for defense and indemnity, the parties often struggle to verify the existence and terms of any applicable insurance policies in light of the ease with which paper documents can be misplaced over the years. The inability of the parties to locate complete copies of all potentially applicable policies often results in litigation, requiring the courts to determine if sufficient evidence exists to prove the existence and terms of the missing policies.
The Illinois Appellate Court, First District, recently addressed what evidence is legally sufficient to establish the existence and terms of missing insurance policies in its recent opinion in The Travelers Indemnity Co., et al. v. Rogers Cartage Co., 2017 IL App (1st) 160780. Rogers Cartage was a declaratory judgment action concerning insurance coverage for a pair of environmental contamination lawsuits arising from the insured’s activities at two truck cleaning facilities. The lawsuits concerned the insured’s activities from 1960 through 1966; however, the parties could only locate the policies in effect for the policy periods of 1960-1961 and 1965-1966.
The Court of Appeals affirmed that in cases involving missing policies, it is the insured’s burden to establish by a preponderance of the evidence both the existence of the policies and their material terms and conditions. As to the existence of CGL policies from 1961 to 1965, the Court of Appeals held that the insured met its burden of proof by presenting a Certificate of Insurance from 1962 for an excess policy which referenced a primary policy issued by Travelers during that policy period. The insured also presented a letter written by a claims adjuster which referenced “secondary evidence” of the policies’ existence, including a “renewal policy number” on the 1965-1966 policy, which indicated the existence of prior policies. Finally, there was no evidence that the insured had any other primary CGL policies during the relevant periods. The Court of Appeals found this evidence sufficient to determine that it was more likely than not that Travelers issued consecutive CGL policies from 1960 to 1966.
With regard to the terms of the policies, the Court of Appeals held that the 1961-1962 and 1965-1966 “bookend” policies, coupled with specimen policies from the missing policy periods that contained substantially the same terms as the bookend policies, supplied sufficient proof of the terms and conditions of the missing policies. In the absence of evidence of material differences between the policies, “it is reasonable to infer that a renewal policy is renewed on the same terms and conditions as the previous policy unless otherwise stated.” This is so even if there is evidence of different coverage endorsements among the known policies so long as the endorsements do not reflect “material differences affecting coverage.”
Opinions addressing the sufficiency of evidence in missing policy cases are obviously highly fact-specific. The Rogers Carthage opinion is notable in that it appears to be the first time Illinois courts have permitted the insured to prove the terms of missing policies by pointing to specimen coverage forms for the missing policy periods, even when the known policies contain different coverage endorsements. While the burden of proof remains with the insured, the Rogers Carthage opinion may signal a sea change with regard to the scope of acceptable evidence to prove the terms of missing policies.