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Units of Travelers Cos. Inc. and American International Group Inc. that had provided excess coverage to a now-bankrupt asbestos manufacturer are not obligated under their policies' terms to provide coverage until primary insurers have paid in full under their policies, says a bankruptcy court.
New York-based Rapid-American Corp., which started getting sued for asbestos-related personal injury claims in 1974, settled many of the claims by the time it filed for Chapter 11 bankruptcy in March 2013, but it still had about 275,000 asbestos-related personal injury claims pending against it at the time, according to Tuesday's ruling by the U.S. Bankruptcy Court for the Southern District of New York in Rapid-American Corp. et al. v. Travelers Casualty & Surety Co. et al.
Beginning in 1998, Rapid-American reached settlements with nearly all of its insurers, but a number of them became insolvent and unable to pay the full limits of their policies, according to the ruling. An amount sufficient to reach the level of excess coverage provided under the policies at issue has not been paid, according to the ruling.
Rapid-American plaintiffs in the litigation argue the excess policies at issue provide total limits of $64 million, according to the ruling. They contend it is unnecessary for the primary policies' underlying limits to be exhausted by actual payment before the insurers' excess liability coverage attaches.
U.S. Bankruptcy Court Judge Stuart M. Bernstein, however, agreed with the insurers that this was not the case, based on the insurers' policy language. These policies “unambiguously require actual payment before liability attaches,” said Judge Bernstein in ruling in the insurers' favor on the issue.
Decades after it became a major issue, insurers' ultimate asbestos liability remains unknown, according to a report issued in October 2015 by Oldwick, New Jersey-based rating agency A.M. Best Co. Inc. on asbestos and environmental losses.
The U.S. Department of Labor has settled charges with a New York state real estate developer and management company related to exposure to lead and asbestos hazards for $700,000.