DOW CORNING'S LIABILITY COVERAGE HAS A LONG, COMPLICATED HISTORY

DOW CORNING'S LIABILITY COVERAGE HAS A LONG, COMPLICATED HISTORY

The $250 million in product liability insurance coverage claimed by Dow Corning Corp. in its March 4 letter to credit agencies and others comes from a variety of sources.

Zurich American Insurance Group, based in Schaumburg, Ill., is Dow Corning's primary insurer for claims within the United States, according to John Westcott, company treasurer.Zurich issued a claims-made policy that covers the first $5 million of each occurrence. Dow Corning's Bermuda-based subsidiary, Devonshire Underwriters Ltd., reinsures the first $3 million of each occurrence.

London-based Zurich Re U.K. Ltd. and Anglo American Insurance Co. share coverage of the next $20 million in claims exceeding $5 million. Zurich Re handles 75 percent of any claims and Anglo American pays the 25 percent balance.

Bermuda-based XL Insurance Co. writes the next $75 million layer of coverage of claims in excess of $25 million, including punitive damages.

ACE Insurance Co., also located in Bermuda, covers $150 million of claims in excess of $100 million.

In 1964, Dow Corning's primary carrier for general liability and products claims was American Surety Co. of New York, which has since merged with Transamerica Insurance Co.

Since then, its primary insurers have been Transamerica from 1965 to 1967, Aetna Casualty & Surety Co. from 1968 to 1971, the Hartford Accident & Indemnity Co. from 1972 to 1988 and the Zurich American Insurance Group from 1989 to the present.

From 1964 through 1985, the insurance was issued on an occurrence basis, a broadly worded policy providing coverage for injuries that occurred during the policy period, regardless of whether the policy is still in effect when the claim is made.

Since 1985, the policies have been issued on a claims-made basis, meaning that coverage is granted if the claim is reported during the policy period.