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The following article helps adjusters learn how State Courts evaluate coverage, based upon prior case law as well as interpreting coverage under General Liability policies. I hope you enjoy this well written article.
Brian S. Single, Sr. Claim Examiner/General Adjuster
The known loss doctrine is a common-law concept deriving from the fundamental requirement in insurance law that the loss be fortuitous. General Housewares Corp. v. National Surety Corp., 741 N.E.2d 408, 416 (Ind. Ct. App. 2000) (citing Pittston Co., Ultramar America Ltd. v. Allianz Ins. Co., 124 F.3d 508, 516 (3rd Cir. 1997)). Under the known loss doctrine, an insured may not obtain coverage for a loss that has already taken place. Thus, if the insured has actual knowledge that a loss has occurred, or is occurring, or is substantially certain to occur on or before the effective date of the policy, the common-law known loss doctrine typically will bar coverage. However, some courts have concluded that where the insurer also knows of the loss, the insurer will not be able to assert the known loss doctrine to defeat coverage. See, e.g., General Housewares Corp., Id. at 414.
In the aftermath of Montrose Chemical Corp. of California v. Admiral Ins. Co., 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878 (1995), insurance companies began including language in their insurance policies excluding coverage for losses that occurred at least partially before the policy began. In Montrose, the Court held that the insurer’s CGL policy, which covered bodily injury or property damage “which occurs during the policy period” with no further elaboration, covered property damage that had begun before, but continued into the policy period. The Montrose Court reasoned that “the weight of authority, consistent with our own interpretation of [the] express policy language, is that bodily injury and property damage that is continuous or progressively deteriorating throughout successive CGL policy periods, is potentially covered by all policies in effect during those periods.” As a consequence, following Montrose, insurance companies began to incorporate in their standard CGL policies language expressly excluding coverage for injury or damage that occurred in part before the policy period began. This language has become commonly described as a “known loss exclusion.” Quanta Indem. Co. v. Davis Homes, LLC, 606 F.Supp.2d 941, 947 (S.D. Ind. 2009). Read More