What To Do If You Can’t Find Your Policy

It has been a while since I posted on an insurance issue and a headline this morning caught my eye for a number of reasons. It seems that the Roman Catholic Diocese of Burlington, Vermont has been hit with a sizeable verdict in a clergy sexual abuse claim, but it can’t find its insurance policy to clean up the mess. The Insurance Journal reports that the claim of negligent supervision against the Diocese brought by a former altar boy sexually molested by former clergy member Rev. Edward Paquette resulted last week in an $8.7 million verdict. An appeal is pending in this case. But there are sixteen more claims waiting in the wings, with a potential for similar verdicts. This is not the first verdict involving Paquette, who testified in a 2006 deposition that he had sexual relations with boys in parishes in Massachusetts, Indiana and Vermont. And there are six other cases involving other clergy pending against the Diocese. I have been involved in similar claims on behalf of insurers throughout my career and I am all too familiar with the myriad issues these matters evoke.

What would or could you do if you were the Diocese frantically searching for your insurance information to no avail? A person seeking to rely on the terms of an insurance policy must show that he or she conducted a diligent, but unsuccessful search for the missing document and then must show its existence and terms. State of N.Y. v. Blank, 820 F. Supp. 697 (N.D. N.Y. 1993, vacated on other grounds, 27 F.3d 783 ( 2d Cir. 1994; Servants of Paraclete, Inc. v. Great American Ins. Co., 857 F. Supp. 822 (D.N.M. 1994, amended in part on other grounds, 866 F. Supp. 1560 (D.N.M. 1994); UTI Corp. v. Fireman’s Fund Ins. Co., 896 F. Supp. 362 (D. N.J. 1995(applying Pennsylvania law); Employers’ Liability Assur. Corp., Ltd. v. Hoechst Celanese Corp., 43 Mass. App. Ct. 465, 684 N.E.2d 600 (1997; Transamerica Ins. Co. v. Pennsylvania Nat. Ins. Companies, 908 S.W.2d 173 ( Mo. Ct. App. E.D. 1995; UNR Industries, Inc. v. Continental Ins. Co., 682 F. Supp. 1434 (N.D. Ill. 1988; Combined Am. Ins. Co. v. Gilmore, 428 S.W.2d 857 (Tex. Civ. App. Fort Worth 1968. The standard of proof is not clearly established across jurisdictions: some require proof that is “clear and convincing” or even “strong and conclusive” of the missing terms and available coverage, while others merely require find that the proponent show the existence of the policy and its terms by a “preponderance of the evidence.”

If you are the insurer seeking to rely on an exclusion in a lost policy, however, it is likely that the court will require you to satisfy a burden of proof that is higher than the minimum “preponderance of the evidence” standard. Burt Rigid Box Inc. v. Travelers Property Cas. Corp., 126 F. Supp. 2d 596 (W.D. N.Y. 2001 (applying New York law). Circumstantial evidence that a person may submit in support of the existence of a lost policy can include the recollections of the insured, insurance schedules and other information prepared by an agent, specimen or sample forms of the type of policy used by the insurer at the time of the loss for which coverage is sought and communications or internal memoranda pertinent to the coverage. Rubenstein v. Royal Ins. Co. of America, 44 Mass. App. Ct. 842, 694 N.E.2d 381 (1998, aff’d in part, 429 Mass. 355, 708 N.E.2d 639 (1999. Evidence of general custom and practice of the particular type of insurer may even be sufficient in some jurisdictions. City of Tacoma v. Great American Ins. Companies, 897 F. Supp. 486 (W.D. Wash. 1995

Proof of lost policies is highly fact-intensive and, therefore, highly discovery-intensive. And the information supporting the existence of the policy obviously must be admissible in court, which can be difficult with older policies and spotty record-keeping. The claims against the Diocese stem from misconduct that occurred more than 30 years ago. Undoubtedly, the old policies will be difficult to reconstruct and circumstantial evidence to aid that effort will be lean.

Moral of the story: it pays to keep copies of your policy information for at least as long as the longest statute of limitations and if you are a Church or other religious organization, you should probably keep that information for a lifetime.

UPDATE: rather than looking for lost policies after the fact, Georgia has opted to be more proactive by passing a law preventing sex offenders from volunteering in church positions. Five sex offenders have filed a suit challenging the law in the United States District Court, claiming that it essentially “criminalizes fundamental religious activity.” The Georgia sex offender statutes, which are described as some of the toughest in the nation, have been subjected to numerous challenges over the past two years on grounds of being too restrictive.

I find it fascinating that both articles show up in my box on the same day.

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