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Standard Policy Forms May Serve as Secondary Evidence of a Lost Policy’s Terms

On February 26, 2018, United States Magistrate Judge H. Kenneth Schroeder of the WDNY issued a decision in American Precision Indus., Inc. v. Federal Ins. Co., Case No. 14-CV-1050-RJA-HKS, holding that an insured could obtain discovery of standard forms used by the insurer as “secondary evidence” of a lost insurance policy’s terms.

An insurance policy is a contract, and the determination whether the insured is entitled to coverage depends on the policy’s terms.  But what if the policy itself goes missing?  This is not as far-fetched as it may sound, particularly with regard to occurrence-based policies, where a covered claim could be made years after the policy period.  In American Precision, the plaintiff sought coverage for asbestos-related claims under a CGL Policy issued in the 1970s.  Neither the insured nor the insurance company could find a copy of the 40 year-old policy, but there was “secondary evidence” of its existence, including “contemporaneous certificates of insurance, correspondence, and premium audits referencing or describing the Policy.” Showing that the policy exists, however, only gets the insured part way — to grant relief, the court still needs to determine what the policy did (and did not) cover.  Insurers do not prepare insurance policies from scratch, but rather rely on standard forms. 

The plaintiff in American Precision brought a motion to compel production of all versions of the forms the insurer used during the relevant time period for the type of liability policy at issue.  Magistrate Judge Schroeder granted the motion, explaining:

An insured seeking coverage under a lost or "missing" policy may rely on secondary evidence (i.e., evidence other than the policy itself) to prove the existence and terms of an insurance policy, provided the insured demonstrates that it has made a diligent but unsuccessful search and inquiry for the missing policy. District courts within the Second Circuit have relied on "specimen" or standard policy forms as secondary evidence of a lost or destroyed policy's terms.  Witness testimony connecting vital components of coverage can provide reliable and competent secondary evidence of a lost policy's terms. Given that neither party has been able to locate the Policy, and North River's affirmative defense that API must prove the terms of the Policy's coverage, the policy forms sought by API are indisputably relevant to its case and must be produced.

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