Back to the Future: Insurance Coverage Law from Asbestos to Cyber Risks

This is a very fun – if you can use that word for insurance disputes – discussion of the United Kingdom’s Supreme Court determining what trigger applies under insurance policies issued to insureds sued for asbestos related injuries. Its partly fun because it replays a highly contentious and, for all involved, expensive chapter in American legal history, namely the decade or so long battle in the United States courts to decide which insurance policies were triggered by – and thus had to cover – injuries caused by asbestos exposure. The courts here struggled for many years to decide which of many possible triggers apply, including: a continuous or multiple trigger which found coverage under all policies in effect from the time the worker was exposed to asbestos through the incubation period in the worker to the time the worker’s illness actually came to exist; an exposure trigger, making policies in effect when the worker was exposed to asbestos applicable; a manifestation trigger, under which policies in effect when the asbestos related disease manifested itself apply; and an injury-in- fact trigger, under which the policies apply that were in effect when a worker, previously exposed to asbestos years before, actually suffered injury from the exposure. Because of the diverse American legal system, with its numerous federal circuits and 50 state court systems, no one, single rule was ever settled upon as universally applicable. It appears in the UK, though, they are settling on one single rule, at least according to the article.

Some of you, particularly those of you who have heard me speak over the years, are familiar with my view that modern American insurance law, for all intents and purposes, springs out of the trigger of coverage and other disputes from the early 1980s concerning coverage for asbestos related losses, and in particular out of the D.C. federal court’s adoption of the multiple trigger standard for applying general liability policies to asbestos losses; in part, these events became the touchstone for coverage disputes to come because of the ease with which court decisions on these issues could, by analogy, be extended to other types of long tail exposures, such as environmental losses and other types of toxic torts, in which - as with asbestos - the event that would eventually cause injury (whether to person or property) happens years before either injury occurs or is learned of. In my view, before then, insurance law had changed little (speaking broadly) for generations. After the explosion in coverage litigation over asbestos, close textual analysis of key terms in insuring agreements, policy definitions and exclusions became crucially important and widespread, far more than it was before these watershed events; indeed, some of the methodology applied by courts at that time and the decisions they made in interpreting policy terms still reverberate in coverage decisions today. Many issues and developments in the insurance industry and the law of insurance coverage can be traced back to these events, from the expansion in use of the claims made policy form to the existence of significant, always on-call insurance coverage practice groups representing policyholders.

A few months ago, I spoke on the subject of cyberinsurance before a large insurance industry group, and the organizing principle of my talk was the idea that the evolution of coverage forms and coverage litigation involving insurance for cyber exposures was mimicking, and would continue to mimic, the industry’s past experience with both asbestos and – in terms both of temporal proximity and legal analysis – its close cousin, environmental exposures. The reality is that, while past performance may not guarantee future results, the development of new insurance coverage exposures as well as of policy forms to deal with them always harken back at this point to the legal and industry developments of 30 years ago that arose out of asbestos and environmental exposures, but almost never, interestingly enough, to legal and industry developments that predate that.