Legal Definitions - exposure theory

Exposure theory is a principle used in insurance law to determine which insurance policy is responsible for covering a claim, particularly when an injury or damage develops over an extended period.

Under this theory, an insurance policy is "triggered" (meaning it must provide coverage) if it was active and in force at any time when an individual or property was exposed to the harmful substance, condition, or product that ultimately caused the injury or loss. This holds true even if the injury or damage did not become apparent or was not diagnosed until much later, potentially when a different insurance policy was in effect.

Here are some examples to illustrate the exposure theory:

• Workplace Chemical Exposure: Imagine a factory worker who was employed from 1980 to 1990 and was regularly exposed to a specific industrial chemical during their shifts. The factory maintained an insurance policy with Company A throughout this entire decade. In 2015, years after retiring and after the factory had switched to a different insurer, the worker is diagnosed with a chronic illness directly linked to that chemical exposure.

  Under the exposure theory, Company A, the insurer from 1980 to 1990, would likely be responsible for covering the worker's medical claims. The crucial factor is that the harmful exposure occurred while Company A's policy was active, regardless of when the illness manifested or was diagnosed.

• Environmental Contamination: A chemical processing plant operated from 1995 to 2005, during which it continuously released pollutants into the local groundwater. The plant was insured by Company B from 1995 to 2000 and by Company C from 2001 to 2005. In 2018, residents living near the former plant site discover widespread contamination and suffer various health issues linked to the pollutants.

  Applying the exposure theory, both Company B and Company C could be held responsible. Since the environmental contamination (the harmful exposure) occurred throughout the entire period of the plant's operation, any insurer providing coverage during that time would be triggered. The theory focuses on the duration of the exposure, not solely on when the resulting damage was discovered.

• Defective Building Material: A commercial building was constructed in 2002 using a particular type of exterior cladding. The manufacturer of this cladding was insured by Company D at that time. Over the years, the cladding slowly degraded due to a hidden defect, allowing moisture to penetrate and cause extensive structural damage and mold growth, which was only discovered during a major renovation in 2017. By 2017, the cladding manufacturer was insured by Company E.

  The exposure theory would likely hold Company D responsible. The "exposure" to the defective building material occurred when it was installed in 2002, during the period when Company D covered the manufacturer. Even though the full extent of the damage became apparent much later, the initial harmful exposure to the defective product happened under Company D's policy.