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NEW YORKA New York trial court decision last week ultimately could lead to greatly expanded asbestos liability losses for insurers--including some cases in which insurers already have hammered out coverage settlements, policyholder attorneys say.
The trial court ruled on May 8 that a class of 20,000 third-party asbestosis claimants could recover under the premises/operations provision of the general liability insurance policies of a now-defunct insulation contractor.
With little case law and mounting coverage disputes over whether premises/operations provisions can be tapped for coverage, the decision could be costly to insurers if other courts look to this decision for guidance and rule similarly, policyholder attorneys say. That's because liability insurers historically did not include aggregate limits in their premises/operations policy provisions, the attorneys said.
Many earlier insurer settlements over asbestos claims focused on policies' products hazard and completed operations provisions, which generally contained aggregate limits.
Insurer attorneys, however, predict that the New York State Supreme Court decision will have limited impact on asbestos liability cases.
In the case, four primary and excess insurers for contractor Robert A. Keasbey Co. argued that the aggregate limits of the products hazard and completed operations provisions in the general liability coverage they wrote for Keasbey for 17 years limited their liability to around $100 million. The asbestosis claimants recovered those damages from the insurers between 1992 and 2001, according to court papers.
But in 2001, the asbestosis claimants' attorneys contended that many of the claimants were harmed at the time that Keasbey installed insulation that contained asbestos.
Because the insulation product--regardless of whether it was Keasbey's own brand or another manufacturer's--was still under the contractor's control at that time, the policy provisions covering third-party bodily injuries caused by product hazards and completed operations do not cover those claims, the attorneys argued. Instead, those claims triggered the policy's premises/operations provision, which covers bodily injuries that Keasbey caused during the time it provided services, the attorneys argued.
The trial court agreed.
In its decision, Continental Casualty Co. et al. vs. Employers Insurance Co. of Wausau et al., the trial court relied on a 1997 state appellate court ruling involving identical coverage principles but a different insurance policy.
In the earlier case, Frontier Insulation Contrs. vs. Merchants Mutual Insurance Co., the policy at issue contained a products hazard exclusion, rather than a products hazard coverage provision.
The trial court was influenced by the appellate court's reasoning that "a court should not merely look at whether the product caused the loss, 'but rather (should) focus on the location of the accident and the possession of the product"' at the time harm was caused.
In the current case, the court said, "the evidence has shown that the injuries happened while the installation operations of defendant Keasbey were ongoing, which were covered under the operations coverage provisions" of Keasbey's primary and excess policies.
Because the premises/operations provisions did not contain any aggregate limits, Keasbey's insurers are exposed to as much as $250 million of additional claims, the asbestosis claimants' attorneys said in court papers.
"Our case was a great affirmation that this was the law in New York," said asbestosis claimants' attorney August J. Matteis Jr., a partner with Kelley Drye & Warren L.L.P. in Washington.
Policyholder attorney Robert M. Horkovich, a partner with Anderson Kill & Olick P.C. in New York, characterized the decision as "very important."
"It addresses some of the cutting edge issues in disputes between policyholders and insurers," he said.
For asbestos defendants like Keasbey that were more than insulation manufactures, the ruling is a "powerful decision," said policyholder attorney Lawrence A. Hobel, a partner at Heller Ehrman L.L.P. in San Francisco.
Of course, the decision is beneficial to policyholders with unresolved asbestos liability coverage claims, policyholder attorneys said.
In addition, some policyholders that thought they had resolved their asbestos claims may now be able to recover additional damages from their insurers, attorney said.
While attorneys for policyholders and insurers said that many of those settlements resulted in policy buybacks, they also said that some settlements may not have provided insurers a full release from their coverage obligations.
"Every policyholder should go back--even if they already settled their asbestos disputes--to check for whether their settlements provided for full release of the full policy or only of the products and completed operations provisions," Mr. Horkovich said.
Attorneys said insurers could be expected to argue that those claims are time-barred.
But Messrs. Hobel and Horkovich noted that in some jurisdictions, insurance regulations or case law bar insurers from misrepresenting coverage that is available to policyholders and prohibit them from putting their interests ahead of their policyholders.
"Obviously, there are standards for insurer conduct," said Laura Foggan, counsel for the Complex Insurance Claims Litigation Assn. in Washington.
But suggesting that insurers acted in bad faith when they negotiated those earlier settlements "seems a little far-fetched," said Ms. Foggan, a Washington-based insurer attorney with Wiley, Rein & Fielding L.L.P.
Insurer attorney Cheryl P. Vollweiler, a partner with Wilson Elser Moskowitz Edelman & Dicker L.L.P. in New York, said the case was "highly fact-sensitive." How influential the case ultimately will be will depend on the outcome of any appeal, Ms. Vollweiler said.
Insurer attorney Gary Elden of Grippo & Elden L.L.C. in Chicago said he could not comment about an appeal.
Continental Casualty Co. et al. vs. Employers Insurance Co. of Wausau et al. New York Supreme Court for the State of New York, May 8; Index No. 601037/03.