(Article from Insurance Law Alert, October 2016)
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A New York federal district court ruled that the proper standard for determining the existence and terms of a lost policy is preponderance of the evidence and that a plaintiff failed under this standard to raise an issue of fact regarding the terms of a lost policy. Pacific Employers Ins. Co. v. Troy Belting & Supply Co., 2016 WL 5477758 (N.D.N.Y. Sept. 29, 2016).
Troy Belting, a manufacturer of asbestos-containing products, sought coverage from Unigard under policies allegedly issued by Unigard or its predecessor, Jamestown Insurance Company, during the period 1949 to 1974. Neither Troy Belting nor Unigard had copies of the alleged policies at issue. Unigard argued that Troy Belting failed to present sufficient evidence to establish the existence and scope of coverage for asbestos claims. The court agreed and granted Unigard’s summary judgment motion.
The court noted that the Second Circuit has not directly addressed the standard of proof for establishing the existence and terms of lost policies by secondary evidence and that New York district courts have issued mixed decisions on this issue. Some have applied a “preponderance of the evidence” standard, while others have required proof by “clear and convincing evidence.” The court concluded that “the usual civil standard” of preponderance of evidence was proper, reasoning that nothing in statutory or case law supported a heightened evidentiary standard.
The court held that Troy Belting failed to meet the preponderance of the evidence standard despite its reliance on expert testimony, data relating to the company’s coverage history (e.g., evidence relating to prior coverage limits), correspondence, Board of Directors meeting minutes relating to liability and finances, ledgers with entries labeled as “insurance,” copies of endorsements issued by Jamestown, and evidence relating to Unigard’s conduct in connection with a 1977 asbestos lawsuit. The court concluded that while the evidence established that some type of policy was issued during the period in question, there was insufficient evidence by which a jury could determine the terms and conditions of the policy by a preponderance of the evidence. The court noted that “speculation is insufficient when evidence of terms and conditions is lacking.”
The court also rejected Troy Belting’s sanctions motion based on Unigard’s alleged destruction of the policies. The court ruled that spoliation sanctions were unjustified because any destruction occurred before the present litigation commenced. The court dismissed the argument that Unigard was affirmatively obligated to preserve policies based on its knowledge that Troy Belting was named in several asbestos suits, noting that courts “lay responsibility for preserving copies of policies with the insured more than the insurer.”