PONTIAC, Mich.--A court ruling that Royal & SunAlliance USA Inc. is not on the hook for massive asbestos and environmental claims filed by General Motors Corp. has not allayed the fears of major policyholders that say the insurer's sale to a management group still would leave RSA USA inadequately reserved to pay their claims.

RSA USA's parent, London-based Royal & Sun Alliance Insurance Group P.L.C., scored a victory last Tuesday when a Michigan state court said GM waited too long to seek coverage for its asbestos and environmental liabilities.

Judge John J. McDonald of the 6th Circuit Court in Pontiac, Mich., granted RSA USA's pretrial motion for summary dismissal of the case. A coverage trial had been expected to be held within the next few months.

"The crux of Royal's motion is that there are no genuine issues of material fact that GM's claims are time-barred under the breach of contract limitations period of six years," Judge McDonald said in his ruling.

"GM had six years in which to bring this suit for a determination of coverage under its policies," the judge said. "GM failed to act within the prescribed time period, and thus its action is time-barred."

A spokeswoman said Detroit-based GM intends to appeal the decision but had no further comment.

The suit, filed by GM two years ago, does not specify the amount GM sought to recover. However, it has been estimated that GM's claim could amount to $1 billion.

GM sought payment for claims it said were covered under primary, umbrella and excess comprehensive general liability and comprehensive product liability insurance policies issued from 1954 through 1971.

Commenting on the Michigan court's decision, an RSA spokesman said the ruling "supports our view that the GM case is without foundation."

Separately, GM, along with other major policyholders of RSA's U.S. operations, are protesting efforts by RSA to sell those operations to Charlotte, N.C.-based Arrowpoint Capital Corp., a vehicle established by RSA USA's management team, for $300 million in a deferred compensation arrangement.

The policyholders have contended that RSA's U.S. operation could be left with a nearly $1 billion reserve shortfall. That estimate, though, was based on the expectation of GM's success in the Michigan litigation.

The Delaware Insurance Department held a public hearing on the proposed Arrowpoint deal Jan. 19. A hearing officer is expected to make a recommendation to Delaware Insurance Department Commissioner Matthew Denn in about three weeks. Mr. Denn will then issue his decision.

The RSA spokesman said the insurer considers the Arrowpoint deal "the right transaction for policyholders, and the GM decision (last week) doesn't change that."

However, David E. Wilks, a Wilmington, Del.-based partner with Reed Smith L.L.P. who represents RSA USA policyholders in the Delaware hearing, said that while he had not yet read the Michigan decision, "I think that its impact is really minimal, because the same defects that we see in the transaction remain even in the absence of the GM claim."

A spokesman for Silverstein Properties Inc. and its affiliates--which include RSA USA policyholder World Trade Center Properties L.L.C. in New York--said in a statement, "We think Royal USA is undercapitalized with or without the GM claim, so it does not affect our position in opposition to the proposed transaction."