Supreme Court to Allow Travelers to Settle Asbestos Suits

On June 19, the U.S. Supreme Court reversed an earlier ruling that would have allowed claimants to sue units of St. Paul, Minnesota-based Travelers Companies Inc. - one of the nation's largest property and casualty insurers - for asbestos-related injuries.

Travelers was on the hook as a result of its long-standing relationship with Johns Manville Corporation, which was acquired by the Berkshire Hathaway Group in January of 2001 after filing (in 1992) for a bankruptcy brought on by legacy asbestos lawsuits. The Chapter 11 status was granted in 1998. At that time, Johns Manville was the largest company in U.S. history to file bankruptcy, and also the world's largest asbestos producer.

As directed by a federal judge in 1986, Johns Manville, in 1988, formed the Manville Trust to pay these legacy asbestos costs, resulting from its former asbestos insulation and gasket manufacture. The Trust was part of the reorganization plan. By 1989, the New York Times reported that the trust was almost bankrupt. By 2002, the trust had paid out $3 billion in asbestos claims, making it the largest "toxic tort" settlement in history.

Travelers, Johns Manville's primary insurer from 1947 to 1977, paid about $80 million per that 1986 directive. When it found itself a peripheral target for asbestos lawsuits which charged the insurer with a lack of transparency regarding the detrimental health effects of asbestos, it settled with several plaintiffs' groups in 2004 for about $500 million, but insisted that future asbestos claims must be paid out of the Manville Trust, to which Travelers had contributed about $80 million. This stipulation was approved, in 2006, by both a bankruptcy court judge and a New York federal court judge.

The Second U.S. Circuit Court of Appeals overturned that ruling, saying the presiding judge had lacked the authority to bar new lawsuits, but the recent Supreme Court ruling now returns the case to a New York federal appeals court.

The decision was a 7-2 majority, only Justices John Paul Stevens and Ruth Bader Ginsburg dissenting. However, the Supreme Court did stress that their ruling applies only in this case, and did not rule on whether plaintiff's wishing to challenge the former settlement are bound by the Manville Trust agreement. That, said Justice David Souter, will be up to the appeals court, but acknowledged that the finality of the 1986 decision generally prevents challenging its enforceability.

A Travelers spokesman was not immediately available for comment, but its team of lawyers reportedly viewed the ruling in a positive light.

Asbestos is a crystalline-type mineral found in rock formations and widely used in insulative products (as well as floor tiles, tile glues and caulks) up to 1989, when the U.S. Environmental Protection Agency limited its use to one percent of product by a volume - a level considered safe. These rules do not cover imported products.

Asbestos exposure can lead to a number of illnesses, including asbestosis - a chronic, debilitating respiratory disease - and mesothelioma, a lethal cancer of the mesothelial lining of the lungs and/or abdomen. Once diagnosed, most mesothelioma patients are given about one year to live.

According to the Manville Trust website, funds at the end of 2007 stood at just over $1.8 billion, with only $355,744 paid out during the year. Operating expenses exceeded $2.6 million.

Sources: Reuters, Associated Press, New York Times, Manville Trust

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