Clear and Present Danger: The Known Loss Doctrine KNOWN LOSS DOCTRINE A POTENTIAL MONSTER arguments CONCLUSION

With unexpected costs from the recent terrorist incidents and investment losses from the two-year bear market, insurance companies will soon look to improve profits, which may well extend to their claims handling. With the recent decision in Rohm and Haas Company v. Continental Casualty Company, the Pennsylvania Supreme Court has given insurance companies a dangerous additional coverage exclusion — namely, the known loss doctrine.

The Pennsylvania Supreme Court’s adoption of the known loss doctrine, together with its unprecedented and expansive interpretation thereof, has catapulted the doctrine into a clear and present danger, the threat of which should not be taken lightly by policyholders that own policies the interpretation of which could be governed by Pennsylvania law. This article will discuss what the known loss doctrine is, why it is now a serious threat in Pennsylvania, and what steps a policyholder can take now to best position itself to deal with the threat.