The road to asset recovery in a mass tort claim can be full of twists and turns, bumps and potholes—especially if you don’t have a roadmap! That’s not to say that you can avoid all obstacles, even with a roadmap, but at least you may have a little warning about what lies ahead and how to best navigate the process.
Before pulling out the map, let’s cover a few basics about mass tort claims. First, a mass tort claim is not just a class action suit:
Mass Tort [definition] – civil lawsuits involving multiple individuals who have been injured against one or few defendants; each plaintiff seeks its own settlement.
Class Action Suit [definition] – multiple individuals who have been injured against one or few defendants brought into one consolidated case; all parties in the lawsuit are treated as one plaintiff and thus may divide the settlement equally, though there may be several classes within a class action.
Mass tort claims generally fall into one of four categories. You will recognize these along the road in the infographic below:
Although no two cases are exactly the same, we have identified 7 stops along the road to mass tort claims asset recovery that you may encounter before recovering your assets—
By Maria Magalona | Consultant, Complex Claims
As a Complex Claims Consultant with Arcina Risk Group and nearly 40 years of claims experience, I’ve witnessed many defendant organizations with mass tort claims making mistakes in their approach to recovering insurance funds. It’s understandable. Many are experiencing their first mass tort situation, and the claims management process is both complex and unique within the insurance industry.
While the list of claims management mistakes is long, there are four that I see most frequently. Spotlighting these ‘Big 4’ mistakes will help you avoid the most frequent problems in managing your next mass tort claim and recover the maximum reimbursement from insurance carriers.
Mistake #1: Neglecting to, or being late in, noticing insurance carriers
As a mass tort claim defendant, you must notice all carriers who issued policies responsive to the claim brought against you. This may include your current insurance carrier as well as any known prior carriers. Do not ignore expired policies and the carriers that once provided them. Mass tort claims often span several years or decades, and there exists a reasonable probability that an expired policy will provide coverage for at least a portion of the claim. Let the carrier tell you that the policy they issued is not responsive and why.
To notify your current and prior carriers, you need to know the years of the alleged years of incident. Identify any and all carriers that provided coverage within those years. Aso, identify the timeframe of the event or ‘Date of First Exposure’ (DOFE) when noticing the carriers. You must provide the DOFE, as carriers will deny coverage whenever the date of first exposure or the timeframe cannot be proven to have happened within the coverage period.
In cases where the exposure stretches beyond the coverage period, you may still be able to recover funds from that policy. The insurer will simply prorate the claim(s) according to the coverage period. For example, a public school district may have had one insurance carrier providing coverage from 1960 to 1970 and a different carrier from 1971 to 1980. If a mass tort claim involved dates of exposure spanning 1968 to 1972, both insurance carriers would have coverage responsibility and allocate costs amongst themselves.
At Arcina, we execute this step both thoroughly and swiftly, ensuring that we notice all past and present carriers upon discovery of coverage.
Mistake #2: Not recognizing the differences between policy types
There are two major policy types that respond to mass tort claims – an occurrence policy and a claims-made policy. An occurrence policy is the most common and most flexible of the two, because it provides lifetime coverage for the incidents that occur during a policy period, no matter when you learn about the claim. Under the more restrictive claims-made policy, incidents are only covered when they both happen and are reported during the coverage period. Make sure you know which type of policy you have, as you will need to act much faster when seeking funds from a claims-made policy. Nonetheless, once you learn about the claim, report it to the carrier so you avoid any Failure to Timely Notice denials.
You should also perform a thorough search to discover if you have any excess coverage and/or coverage for punitive damages. An excess coverage policy is an additional policy layered onto the primary policy. Excess coverage serves a critical role in many mass tort claims, as defendants often find themselves on the line for damages that can reach into the tens of millions or hundreds of millions of dollars. Strangely, while U.S. courts often order payment of punitive damages on top of ordinary damages, U.S. carriers do not offer coverage for punitive damages. These are made available through the Bermuda marketplace, and you will want to check for any Bermuda-based carrier policies which your organization may have.
Through our depth and years of expertise, Arcina recognizes the differences between the various mass tort claim types and the inherent problems therein. This enables us to advise clients on proper claims management for optimum results and options when problems arise.
Mistake #3: Not reading policies and their fine print
Recognizing the terms of the policies you purchased seems like a no-brainer. Yet, a surprising number of defendants in mass tort claims cases fail to read their policies in full, particularly the fine print. Knowing all the details is the only way to avoid the unpleasant surprise of a prompt claim denial based on policy exclusions or failure to comply with its terms.
You must identify what is covered under the policy and promptly comply with the terms of the policy. If you do not comply, the carrier has a basis to deny your claim. While the standards for prejudicial effect vary by jurisdiction, most states will require you have reported under the policy in good faith to subdue a carrier’s assertion of prejudicial effect.
Clearly, it is paramount that nothing is missed when reviewing policy terms. We frequently manage complex claims that involve multiple parties across multiple jurisdictions. In these cases, there are often multiple carriers, which in turn, requires the management of multiple filing requirements and terms.
Mistake #4: Not engaging an insurance archaeologist for legacy tort claims
Legacy mass tort claims occurred many years ago. Insurance archaeologists can more effectively and cost efficiently locate historic coverage than an organization’s internal resources or a law firm. These practitioners are highly skilled in the policy discovery process and have the contacts and expertise necessary for optimizing the search results. The research can result in locating policies that could provide indemnity and reimbursement of defense fees, the latter of which can be substantial. These services are normally a fraction of the cost of a law firm.
Among insurance archaeologists, Arcina’s seasoned team is an industry leader having researched policies for decades; who understand the nuances of insurance policy construction and its evolution over the years (think Travelers’ policy numbering convention in the 1970s vs the 1990s). As a result, we manage complicated legacy claims with ease – everything from asbestos and talc to opioids across the entire healthcare supply chain, to misconduct by religious institutions and unsuitable player protection by sports organizations.
Clients specifically turn to Arcina because of our credentials, experience, policy knowledge and relationships with insurance markets. We produce results throughout the claims management process and aim to secure the greatest reimbursement for clients.
Mass tort cases are highly complex, can involve a large number of people and entities, and can drag on for several fiscal years. If your organization is a defendant in a mass tort case, you need to follow an effective process when managing the claims. Not doing so could end up costing your organization hundreds of thousands of dollars – even millions – in lost coverage.
In our experience, following are the 6 most frequent pitfalls that can adversely impact your mass tort claim management.
1. Failure to notice the insurance markets
Insurers often move slowly in response to complex and costly mass tort claims. Therefore, as soon as circumstances that might give rise to a loss or a claim come to light, you should provide notice to the insurer(s). If there is even the slightest hint of potential coverage, contact your insurance broker and request that they notice your current carriers and those known to have placed coverage previously, even if you do not have the actual policy in hand.
Be sure to submit your notice to insurers properly. Coverage policies normally provide detailed instructions regarding how to send a notice and who should receive it. Specifically following these instructions helps to avoid potential coverage disputes down the road.
If you hire a lawyer to respond to a claim, include that information in your notice to the insurer. Request from the insurer immediate acknowledgment and assistance regarding your intentions, as this will further minimize disagreements on what is or is not covered. Keep in mind that coverage often includes defense costs with the carrier potentially having a say over attorney assignment. If you do not have an attorney, the carrier can appoint one on your behalf. It is important to read your policy as some may have provisions regarding attorney appointment.
2. Failure to find responsive coverage
“Find” is the pivotal word in this potential pitfall. As a mass tort case defendant, you need to find all the insurance policies your organization owns and identify any of those that could potentially respond to the events or risks. Many defendants are actually not aware of the insurance coverage they once had. For businesses that have changed ownership or merged over the years, current owners may not know that the original owner had coverage dating back to the claim period.
Maximize your potential coverage by engaging an insurance archaeologist to locate evidence of historical insurance. Even if you do not have the actual policy, carriers have a duty to investigate your claim and determine if they have responsive coverage. To support your claim, share any located evidence, such as broker correspondence, internal records, and accounting records.
Early noticing to an insurance carrier supported by documentation found during an investigation or insurance archaeology, can translate into assumption of, or reimbursement for, hundreds of thousands of dollars in defense fees when it triggers current or historical coverage. It all works in your favor, as long as coverage exists that is responsive to the allegations of the complaint.
3. Failure to consider excess policies
If you are not considering excess policies, you are simply leaving money on the table. Yet, many defendants never notice the excess carrier that can provide another layer of coverage, because this coverage is not triggered by claims. Claims always trigger primary coverage first. In fact, excess policies will not respond until the cost threshold of the primary coverage is reached.
The damages in many mass tort cases can reach well above the primary coverage threshold and into the millions of dollars, making identification of excess policies vital. Make sure you know who the excess carriers are and include both in the noticing and updating of your claim.
4. Failure to comply with the policy
Simply put, insurers can deny coverage when you fail to comply with one or more terms of the policy. Beyond navigating certain policy exclusions such as asbestos or misconduct, etc., you should be aware when policy terms extend beyond what is covered and the coverage period. Many policies incorporate strict terms for timely reporting of a claim, and some even direct the insured to a specialty department for legacy claims. It is not uncommon for a specialty claims department to use its own unique intake method, different from standard coverage lines like general liability or workers compensation.
5. Failure to understand how to juggle multiple carriers
Mass tort claim defendants seldom anticipate the challenges of managing multiple insurance markets – a process that is rarely straightforward. For instance, excess carriers follow protocols that vary, based upon three major criteria: carrier, geography and claim type.
Geography impacts the claims process more than any other criterion. Reporting protocols change by location, with the London, Bermuda, and U.S. markets each having their own specific protocols. By far, filing a claim is easiest under U.S. protocols. With Bermuda carriers, even if the excess carrier has a U.S. counterpart, you must file your claim with the Bermuda carrier, as it is considered to be a different entity from the one operating in the United States.
London serves as the de facto epicenter of excess coverage. Lloyds of London has the major share of the excess insurance market and is the usual concerned entity. The good news is that London markets and brokers commonly retain records back to the 1950s.
6. Failure to know your own story
Many organizations, especially those with long histories or those that have undertaken mergers or acquisitions, do not understand their full corporate genealogy and applicable insurance history. This is particularly true for organizations that did not have a document retention strategy or robust means for transforming and tracking paper-based information into electronic formats during the 1980s and 1990s. As a result, mass tort claim defendants often find themselves surprised to learn that they own valuable assets in never-before-mentioned locations – even in remote storage facilities. Information assets spread far and wide can contain valuable information about ownership, broker history, insurance carriers and other data that can support a potential claim.
As noted in these 6 Pitfalls of a Mass Tort Claims Management, there are a lot of moving parts once a mass tort case arises. Most often, mistakes are made because of a lack of internal expertise and resources. Because we specialize in managing mass tort claims on behalf of defendant organizations, we not only understand the pitfalls but also know how to avoid them. For a more in-depth discussion regarding your own unique situation, please contact us directly.