Court overturns $13.7M judgment against Travelers

Delaware’s Supreme Court on Monday overturned a lower court ruling against Travelers Indemnity Co. that had hit the firm with a $13.7 million asbestos exposure coverage judgment, citing an earlier case.

In Travelers Indemnity Co. v. CNH Industrial America L.L.C., Justice Collins J. Seitz Jr., writing for the three-judge panel, said the court would follow Certain Underwriters at Lloyds, London v. Chemtura Corp.

CNH Industrial America L.L.C. sought coverage from Travelers for historic asbestos-related liabilities at construction and farm equipment manufacturer J.I. Case Inc., some of whose assets were transferred to CNH during a 1994 corporate reorganization.

Houston-based Tenneco acquired J.I. Case in 1970. Before the acquisition, J.I. Case secured insurance coverage through CNA Financial. Its CNA Financial policies expired in 1972, at which time Tenneco purchased for J.I. Case a one-year insurance policy through The Travelers Indemnity Co.

In 2012, CNH filed suit against Travelers, CNA Financial and other primary insurers, seeking coverage for defense costs and losses incurred in defending asbestos-exposure suits.

The appeal is focused on whether three Travelers insurance policies issued in 1972, 1978 and 1985 were validly assigned to CNH by J.I. Case's former parent, Tenneco Inc., as part of the 1994 reorganization.

“The validity of the assignments, in turn, depends on the state law governing the dispute,” Judge Seitz wrote. “If Wisconsin law applies, where J.I. Case was headquartered, CNH can overcome the policies' anti-assignment provisions. If Texas law applies, where Travelers claims the policies were negotiated, contracted and performed, CNH concedes that the policies were not properly assigned to it by Tenneco during the reorganization, negating coverage.”

In the Chemtura case, Justice Seitz wrote, insurance policies covering environmental claims were part of a comprehensive insurance program addressing risks across corporate operations in multiple jurisdictions. The policies were silent on choice of law, he said.

“Tenneco, a Texas-based company, sought insurance coverage from Travelers through a corporate-wide insurance program covering operations across multiple jurisdictions,” Justice Seitz wrote. “Tenneco negotiated and secured insurance coverage, and managed its insurance program, out of its Texas offices. Thus…Texas has the most significant relationship to the contracting parties and the dispute, and Texas law applies.”

CNH Industrial America did not respond to a request seeking comment.