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Insurance Premiums Going Up? This Could Add Fuel to the Fire: Insurers Ordered to Pay Future Asbestos Claims Now
$125B Asbestos Price Tag Projected
Joseph B. Treaster -- New York Times -- 5/8/03
The NY Times reported today that a jury verdict in California this week may lead to a wave of new asbestos litigation that would greatly increase costs for insurance companies. On Monday, a Los Angeles jury held that insurers must immediately pay nearly $200 million for claims already filed against bankrupt Fuller-Austin Insulation Company, as well as those expected to be filed against a trust created by the company.
When Fuller-Austin filed for bankruptcy protection in September 1998, it was the first company to use a new provision in the federal bankruptcy code designed by Congress in 1994 to help industrial companies cope with large asbestos claims without being driven out of business by creating a trust for future claimants. Companies that agreed to place a substantial amount of their assets in a trust to pay asbestos claims could be free of further asbestos liability.
In directing the insurers to pay future claims now, the California jury accepted the insured's damage claim using insurance industry methods for calculating future claims costs to determine that the insured faced a total of more than $966 million in claims..
Lawyers who specialize in suing insurance companies plan to use the case in other states.
Huge amounts of money are at issue, the Times reports. "The Rand Institute for Civil Justice, a California research organization, estimates that total claims for asbestos damages could rise to as much as $250 billion. And Matthew Carletti, an analyst at Fox-Pitt, Kelton, a brokerage firm and investment bank in Hartford, estimates that about half of those claims would be covered by insurance. Several large insurers have sharply increased their reserves to pay claims over the last year or so, creating a direct charge against earnings."