In Rohm & Haas v. Continental Casualty, 781 A.2d 1172 (Pa. 2001), the Pennsylvania Supreme Court gifted the insurance industry an equitable defense to a claim for coverage: the "known loss doctrine," pursuant to which an insurer may avoid coverage for a claim if it can show that— before the policy under which the policyholder seeks coverage was issued—the policyholder knew or should have known of a likely exposure to the loss that gave rise to the policyholder's claim (which loss otherwise would be covered), i.e., a "known loss." The industry, in turn, has shown its deep and abiding appreciation for this doctrine by repeatedly invoking it as a defense to both first- and third-party claims. The industry reveres, and policyholders revile, the doctrine for essentially the same reason: unlike a claim for fraud in the inducement (which, if proven, would lead to rescission of the policy and the return of the policyholder's premium), the known loss doctrine (if proven) allows the insurer to deny the claim without rescission of the policy and, hence, without returning the policyholder's premium. To be sure, in the case of a proven known loss defense, the policyholder still has its policy in place for the period covered thereby. But, at least in the case of occurrence-based policies, assertion of that doctrine can (and often does) occur years (and even decades) after the policy's coverage period has expired, and no other claim has been paid in the interim. In those circumstances (not uncommon in the context of long-tail liability claims, for example), the known loss doctrine presents an opportunity for complete victory to the insurer: no coverage responsibility for an otherwise covered claim plus retention of the policyholder's premium.  

So, as long as that doctrine exists, what is a policyholder to do when faced with a known loss defense at trial? Specifically, what is an appropriate jury charge for a known loss defense, especially vis-à-vis a "sophisticated policyholder"? And how should a jury be charged when the policies involved comprise multiple layers of insurance (i.e., a primary, umbrella and an excess policy or policies covering the same period, often referred to as a "tower" of insurance)?