Keep Your Insurance Policies — Just In Case

The client was shocked. "What do you mean I may not have any insurance? I pay my premiums. I don't keep the policies — isn't that the insurance company's job?"

This is a common scenario. We have recently seen several lawsuits originate out of acts that occurred ten or more years ago. At one time, there were records that proved those events were covered by insurance. Those documents have long been lost, however. The insurance carrier has no records and denies it is responsible. Now, the client faces the prospect of paying for damages and legal fees that should have been covered by an insurance policy.

Clients count on insurance coverage to protect them from events that may have occurred years before a lawsuit ever materializes. They don't actually keep their insurance policies, figuring that their agent or the insurance company itself will keep those records. They are often surprised to learn that neither the insurance company nor their agent may have copies of the policies. In those circumstances, the insured — not the insurance company — is responsible for proving it is entitled to insurance coverage.

It may seem remarkable, but Oregon law puts the burden on the insured to establish the existence of insurance. It doesn't matter that the insurance company didn't keep records. Often, the insurance company that issued the original policy has been purchased so many times that the records are simply lost in the transfer of assets. Even electronic records have been lost to old technologies that can no longer be accessed. Additionally, many insurance companies throw out policies once they turn seven years old. Once that happens, you may not have any records to establish your entitlement to insurance coverage.

When that occurs, the client is left in the difficult position of attempting to cobble together an insurance policy out of what documents do exist and the memories of the agent and the people who bought the coverage. In these situations, the insured must prove:

• What is covered by the insurance — is it automobile coverage, professional liability coverage, homeowner's insurance or what?
• What risks are being insured against?
• What are the policy limits and deductible?
• How long was the policy in effect?
• How much in premiums were paid and when?

Establishing these elements can be nearly impossible without at least some documentation. We have created insurance coverage out of cancelled premium checks, pieces of the policy and miscellaneous documents retained by the insurance agent. It is not an easy task, however.

Where the policy limits are large, some insurance records can be reconstructed by obtaining documents from a re-insurer, who effectively insures the insurance company. These re-insurance agreements will often reference the original policy. If you are lucky, the re-insurance documents may even contain the original policy. However, re-insurers rarely keep records of underlying policies unless the policies exceed $1 million.

If you cannot come up with a policy, you will bear the burden and legal expense of proving that the insurance carrier owes you coverage. You may be forced to sue your insurance carrier in order to obtain insurance coverage. If you prevail, you may be able to recover your attorney's fees. However, it may take a year or longer to obtain a judicial decision.

Of course, the safest course of action is never to be put into this situation. Never throw away your insurance policies. It is likely that your insurance carrier will. If need be, you want conclusive proof that you have insurance coverage. Otherwise, you will be left at the mercy of people's memories and fragments of documents. That may not be enough to create insurance coverage.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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