The Time Dimension of Liability Insurance

Within and across legal systems belonging to the Western Legal Tradition, comparative law reveals that the factual elements comprising the risk of civil liability span over time. From a risk perspective, both substantive and procedural elements shall be taken into account; the length of the timespan, therefore, depends not only on the chronological distance between the act, omission or other harmful event that causes the damage and the occurrence or manifestation of the damage, but also on the rules presiding over the limitation of action - establishing time limits for bringing a claim against the tortfeasor -, as well as on the average duration of judicial proceedings in each jurisdiction. As a result, liability exposures may surface a long time after a harmful event occurred; once they have surfaced, their actual economic impact may take years or sometimes even decades to be quantified. The longer the timespan, the more challenging the management of the liability risk, both for the potentially liable party and for its liability insurer. In several jurisdictions, the emergence of long tail liabilities over the past four decades caused harsh problems to the functioning of the insurance mechanism. A keen observer of these legal phenomena appropriately compared tort liability and insurance to a binary star system, with the two bodies orbiting around their common barycentre. This essays ventures into the time dimension of liability insurance, which mirrors the chronological scope of the liability risk.