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The asbestos litigation that consumed much policyholder-insurer litigation for decades—and still continues—has resulted in net losses to insurers that are expected eventually to total $65 billion, according to the New York-based Insurance Information Institute Inc.
This reflects, at least in part, policyholder success in litigating the issue of insurer coverage.
There have been dozens of rulings on the issue during the past 30 years or so. One illustrative decision is the 1996 ruling by a three-judge panel of the California state appeals court in San Francisco in Armstrong World Industries Inc. vs. Aetna Casualty & Surety Co., which denied review of a lower court's ruling in policyholders' favor.
The opening paragraph illustrates the intricacy of the issue: “This appeal raises a number of complex questions concerning insurance coverage for claims of asbestos-related bodily injuries and property damage,” wrote Justice Robert L. Dossee.
“In the proceedings below, separate declaratory relief actions and related cross-actions involving three asbestos manufacturers—Armstrong World Industries Inc., Fibreboard Corp. and GAF Corp.—and their various insurance carriers were coordinated and tried in six separate phases over a five-year period.”
A footnote explains that Phase 1 involved the existence and terms of missing insurance policies; Phase 2 concerned the application of exclusions for asbestosis; Phase 3 involved the trigger and scope of coverage for bodily injury claims, the meaning of the “neither expected nor intended language” contained in some of the policies, and the defense obligations of various insurers under their policies; Phase 4 involved various coverage issues not resolved in Phase 2; Phase 5 concerned coverage for property damage claims; and Phase 6 involved issues of damages, bad faith and contribution claims.
In ruling in the policyholders' favor, the court said, “In summary, we affirm the trial court's decision that all claims in the underlying building cases, whether for releases of asbestos fibers or for the mere presence of (asbestos-containing building material), qualify as claims for "physical injury to...tangible property' and are covered by the insurance policies.”
The appellate court upheld the lower court's ruling in favor of policyholders on several other issues as well, while it remanded one issue related to an excess policy.
When policyholders and underwriters find themselves at odds over an insurance matter, attorneys and insurance experts agree that alternative forms of dispute resolution can yield better results for all involved parties than traditional litigation.