Court Rules Insurers Must Pay Asbestos Illness Costs

Ruling in the largest trial in California history, a Superior Court judge on Friday gave asbestos manufacturers a major victory in their high-stakes battle with insurance companies, declaring that insurers would be responsible for paying what could be more than $1 billion in current and future claims by victims of asbestos-related diseases.

Judge Ira Brown Jr., reading his 107-page opinion for nearly three hours before dozens of attorneys, said that insurers must pay on policies in effect from the time victims are first exposed to asbestos until they file claims or die--a period that can cover decades.

The decision appeared to assure that insurers, with greater financial resources, would end up paying almost all the costs of valid asbestos-related claims, with such liability spread widely among insurance companies.

But Brown ruled also that while insurance companies would have to pay the costs of defending manufacturers against claims, they must do so only to the financial limits of the policy involved.

Although the dispute does not directly involve the rights of victims to bring claims, some attorneys said the decision could result in more money being available to successful claimants.

“This ruling can only be beneficial to victims in that it tends to maximize the amount of insurance available to manufacturers,” said William Irwin, an attorney for Fibreboard Corp., one of five asbestos-makers who brought suit against a group of insurers who had provided them coverage over the last 50 years. “It means there will be that much more money to pay claims.”

Lawyers predicted that at least some of the parties involved in the complex and costly case would appeal the ruling.

“You can count on it--100%,” said Seth M. Hufstedler, attorney for Travelers Insurance Co., who said later in the day that his company probably would not appeal.

60,000 Claims Filed

The decision, if upheld, could have far-reaching effects. An estimated 60,000 claims have been filed in the United States--about 12,000 of them in California--on behalf of victims of cancer, lung ailments and other diseases related to asbestos.

The case before Brown consolidated scores of suits between the manufacturers and insurers over liability for settlements and judgments for thousands of present and future claims.

The trial has been called the biggest ever held in the state in terms of combatants, complexities and costs. Five asbestos-makers, 70 insurance companies and lawyers from nearly 100 law firms have been involved in the proceedings.

More than 2,000 documents have been filed, 80 witnesses have testified in the current phase of the trial alone and the official transcript has exceeded 29,000 pages.

Legal fees have already exceeded $20 million, a $200,000 computer system has been set up to speed the trial, and the money at stake--in potential costs of insurance coverage for asbestos claims--has been estimated at $1 billion to $2 billion.

Attorneys predicted that Friday’s ruling would serve as a precedent for rulings in other asbestos cases and could encourage out-of-court settlements.

Meanwhile, the trial itself, which began more than two years ago, is expected to last into next year as other issues in the complicated case are resolved.

Held in Former School

The proceedings have been held an ornate one-time high school auditorium that was remodeled into an oversized courtroom--complete with carpets, brass reading lamps and new oak tables.

The trial has been divided into phases--the third and most important, resulting in Friday’s ruling, consuming 183 trial days.

Asbestos enjoyed wide use until the 1970s as insulation in ships and buildings because of its fire-retardant properties. The precise onset of asbestos-related disease is difficult to establish because of a long latent period between exposure and manifestation of disease. Government studies indicate there may be up to 200,000 asbestos-related deaths in the United States by the end of the century.

Tens of thousands of suits have been filed over the years on behalf of victims or their families against manufacturers. Three of them, including Manville Corp., have initiated bankruptcy proceedings as a shield against further legal action.

Meanwhile, insurers for the asbestos-makers had begun to resist manufacturers’ claims on their policies--giving rise to lawsuits like the one before Judge Brown.

Question of ‘Trigger’

One of the primary issues centered on when an insurance company’s liability begins--or when coverage is “triggered.”

A manufacturer might have had policies with several companies during the years that could transpire between the time an industrial worker first inhaled asbestos particles to the time a disease became evident.

The question of whether coverage was triggered at exposure or upon diagnosis or throughout the entire period a worker suffered from disease had divided other courts. Brown, siding with manufacturers, held they were entitled to broad liability coverage by insurers.

“This court finds that all policies in effect from first exposure until date of death or date of claim, whichever occurs first, are triggered with respect to an asbestos-related bodily injury claim,” he said.

The judge said that medical evidence indicated that the harmful effects from asbestos occur progressively from exposure, through the latency period, and until death.

Effects of Decision

Brown found also that during this period of liability an insurer would be responsible for the costs of asbestos-related claims, even if the manufacturer was not covered by insurance during a portion of the time. The judge left it up to the insurers to apportion their liability when more than one insurance company was involved.

But, in a defeat for the asbestos-makers, Brown held that insurers could not be held responsible for the costs of defending against claims that exceed the limits of the policy.

Attorneys on hand for the ruling registered little outward reaction as Brown carefully read his decision. Later, however, attorneys for the manufacturers were jubilant over the ruling.

“This is a major victory for manufacturers,” said David Steuber, an attorney for GAF Corp. “I would assume that, having lost, the insurance companies will regroup and come up with a responsible way of apportioning liability.”

Hufstedler, representing one of the insurance companies, said that the impact on insurers would be difficult to assess. Larger firms may well have sufficient reserves to absorb the costs of the decision, he noted, but smaller companies conceivably could face bankruptcy proceedings.

Gary Schlessinger, an attorney for Reliance Insurance Co., expressed dismay that the ruling gave asbestos-makers “more coverage than might otherwise be the case,” but added that the “silver-lining” in the decision was the financial limits the judge placed on the insurers’ responsibility for defending against claims.