Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A Southern District of New York bankruptcy judge Tuesday issued orders that effectively bar tens of thousands of asbestos claims nationwide and provide a fund of about $500 million to pay claims against Travelers Indemnity Co. that relate to the bankruptcy of the Johns-Manville Corp. Judge Burton Lifland affirmed his determinations in the bankruptcy case, In re Johns-Manville Corp., including a 1986 indemnification agreement between Travelers and Johns-Manville and held that the agreement bars direct lawsuits against Travelers. Johns-Manville collapsed under the weight of asbestos-related litigation and filed for bankruptcy in the 1980s. Judge Lifland presided over the bankruptcy, the first and most prominent asbestos case in the country, including the creation of the Manville Trust. It was intended to resolve outstanding claims against the bankrupt company. The Manville Trust is still open, and paying an estimated 5 cents on each dollar of approved claims. Travelers was Manville’s primary insurer. Since Lifland’s 1988 confirmation order in Manville’s bankruptcy, Travelers has been sued directly by claimants nationwide, who have argued that its 1988 agreement with Manville only defined its obligations to indemnify the company for claims, not direct actions against the insurer. Claimants have argued that Travelers engaged in unfair settlement practices and committed a tort by settling some claims for too little when it knew of the harmful effects of asbestos. In 2002, Lifland granted Travelers a preliminary injunction against Manville-related claims filed directly against the insurance company and ordered the parties to mediation. His action Tuesday reaffirmed the injunction. Former Governor Mario Cuomo of Wilkie Farr & Gallagher served as the court-appointed mediator. During the past two years, Travelers reached three settlement agreements on direct action statutory claims, primarily in West Virginia; on direct action common law claims, primarily in Texas and Ohio; and in tangentially related cases in Hawaii. Travelers agreed to provide some funds for resolution of the cases if a court ruled that the cases had been precluded by previous court orders. All three settlements were affirmed by Tuesday’s orders. The statutory cases were brought on behalf of people who had previously settled cases against Travelers. They argued that the insurer should have paid them higher amounts. The common law claims were brought by individuals with personal injuries who had no previous settlements. Most of their lawsuits had been rejected by the state courts, which held that making insurance companies liable to third parties would create a conflict of interest with their responsibility to the insured. Travelers, represented by Simpson Thacher & Bartlett, argued that all the statutory and common law claims were barred by its 1988 settlement with Manville. Lifland held an evidentiary hearing and heard expert testimony on July 6, before concluding that the settlement precludes direct actions against the insurance company. An attorney for Travelers complimented Lifland’s enjoining of individuals from suing the insurer. “It’s a watershed development in bankruptcy law, because only the bankruptcy court has power to issue a nationwide injunction arising out of the reorganization of a company,” said Barry R. Ostrager, a partner at Simpson Thacher who represented Travelers with partner Andrew Frankel. “Federal bankruptcy courts are the only forum that provide global nationwide closure of these asbestos-related issues. Judge Lifland is in the vanguard of fashioning effective resolutions that are permanent resolutions of intractable problems.” OBJECTIONS FILED Three other insurance companies that have filed for relief against asbestos-related direct actions filed objections to Tuesday’s settlement order. One Beacon Co., Century and the Continental Insurance Co. have objected that as co-defendants in asbestos suits they had rights to contribution or indemnity or both from Travelers. This argument was addressed by a stipulation that any judgment against them will be reduced by the amount of their approved claims against Travelers. Attorneys for the other insurance companies could not be reached for comment by press time. Century has since accepted the resolution that was approved yesterday. Attorneys for the individual plaintiffs have also objected to the outcome. They could not be reached for comment by press time. The parties have 10 days to file notices of appeal of the orders. Continental has asked the court to give it the same terms reached for Travelers. Mediation for the other three insurers goes forward starting today, with Cuomo again serving as court-appointed mediator. “I think the biggest development in asbestos litigation has been the effort by the federal government to once and for all end the need for litigation,” Cuomo said. The amount of money involved in Tuesday’s action is a drop in the bucket viewed in the perspective of asbestos litigation nationwide. The total amount of industry liability for asbestos-related injuries is a topic of heated debate, with congressional Democrats saying $124 billion is not enough. Republican Senators Orrin Hatch of Utah and Bill Frist of Tennessee have spearheaded an effort to create a compensation fund that would end asbestos litigation. Democrats blocked their proposed $124 billion fund as inadequate. Edward Becker, a former judge of the 3rd U.S. Circuit Court of Appeals, mediated talks this past spring between labor unions, business, insurers and trial lawyers aimed at settling on an amount for the fund. The talks collapsed with no result. Republicans view the Hatch-Frist Bill as part of a broader platform aimed at curbing the plaintiff’s bar and they have vowed to renew the effort at a later date. Anthony Lin contributed to this story.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.