Asbestos Case Ruling Puts Insurers in ‘a Big Mess’

Superior Court Judge Ira A. Brown Jr.’s ruling that favors asbestos manufacturers over their insurance companies will leave the insurers battling among themselves over who should pick up the multibillion-dollar tab in asbestos liability cases.

“It is still a big mess,” one insurance company lawyer said after Friday’s decision.

Asbestos manufacturing has spanned decades, and most of the asbestos companies have had many different insurers over the years. In addition, it is customary for one insurance company to pass along portions of its risk to other companies, known as re-insurers.

The result is a gigantic legal tangle in which insurance company defendants have filed dozens of cross-complaints against one another.

‘No Coverage’

“The only position that each insurance carrier can agree upon,” a Pennsylvania state court noted wryly in a 1983 decision, “is that there is no coverage during its particular policy period.”

About 40 of the original 70 insurance company defendants have settled out of court with asbestos manufacturers.

Lawyers said the major remaining defendants include INA; Aetna Life & Casualty; Commercial Union Insurance; Reliance Insurance Group; American Insurance Group; Home Insurance; Travelers Insurance Co.; First State Insurance Co. and Continental Casualty. In addition, several Lloyds of London syndicates remain defendants in the case.

“It is impossible to generalize how this decision affects individual insurers,” said Seth M. Hufstedler, a Los Angeles attorney who represents Travelers.

“You cannot tell the individual impact until you look at the individual policies,” he added.

He noted, however, that most major insurers have established adequate reserves for their potential liability in the asbestos cases.

Negative Impact

Although the impact of Friday’s decision is negative for the insurance industry as a whole, some individual companies will benefit from certain aspects of Brown’s decision.

Travelers took heart, for example, that the decision relieved it of further obligations to pay for the defense of lawsuits brought by asbestos victims against Armstrong World Industries, the asbestos company that Travelers had insured.

Travelers has already paid out $11 million on its primary policy and “is prepared” to pay another $35 million to claimants, Hufstedler said.

“The defense obligation would have been an expensive item,” he added. “That can run anywhere from half the indemnity obligation to one-and-a-half times as much,” he added.