Long-Tail Liability

Until about 1980, lots of buildings were made using material that contained asbestos. Many years later, we know that was, uh...probably not the best idea.

Exposure to asbestos causes cancer. Big oof.

Unfortunately, a lot of folks didn’t start developing symptoms until years after their exposure, which made it hard to pinpoint the exact time and place they got sick. In fact, companies are still shelling out big bucks to settle asbestos-related claims today—just turn on any TV channel in the middle of a weekday and we guarantee there’ll be at least one law firm commercial urging asbestos-exposed folks to call in and get their share.

When there is a prolonged amount of time between an incident and its ill effects, as we’ve seen with asbestos exposure, it’s known as a “long-tail liability.” Long-tail liabilities can get really expensive for organizations and their insurance companies. Case in point: all those companies paying for asbestos-related medical costs forty-some-odd years later.

Of course, something doesn’t have to take years to rear its ugly head to qualify as a long-tail liability. If we’re in a car accident and think we’re fine, but then five days later we can’t move our neck, that can also be considered a long-tail liability. There’s actually no set-in-stone timeframe for what qualifies as long-tail and what qualifies as short-tail; it differs by insurance type (i.e., personal liability claims tend to have a longer long tail than property claims) as well as a number of other factors.