"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
Upton Sinclair
Travelers Insurance has won a $262 million judgment against
a group of reinsurers that refused to pay a portion of a nearly $1 billion settlement in asbestos claims the insurer paid in 2002.
The award by a New York Supreme Court means American Re-Insurance
Co., part of Munich Reinsurance Co., will pay $202.5 million, plus interest. The remaining $59.8 million will come from a
second group of reinsurers — ACE, Century Indemnity and OneBeacon — that are part of a reinsurance coalition known
as the Excess Casualty Reinsurance Association.
Since the reinsurance lawsuits began seven years ago, Travelers
has previously reached settlements with nine other reinsurers that were part of the litigation.
One legal trade magazine
has estimated that interest on the judgment will bring it to more than $420 million.
The long-fought decision
stems from liability insurance policies written just after World War II by United States Fidelity & Guaranty Co. (USF&G)
for California-based Western Asbestos Co. That company, a distributor of asbestos-containing materials and products, was acquired
in 1967 by MacArthur Co. and renamed Western MacArthur.
In 1993, following a decades-long explosion of asbestos-related
lawsuits, Western MacArthur sued USF&G, arguing that it was obligated to provide product coverage. In 2002, USF&G,
then owned by the St. Paul Cos., settled with Western MacArthur for $987 million. Following the settlement, USF&G —
which became part of Travelers following its merger with St. Paul in 2004 — sued its reinsurers after the companies
balked at paying part of the claims.
Travelers spokesman Shane K. Boyd said the company is "very pleased
with the New York Supreme Court's ruling that reinsurers must pay the full amount of their obligation to Travelers, plus
interest."
At least one of the reinsurance companies hinted an appeal is coming.
"We are
currently evaluating the ruling to assess all of the issues, which will form the substance of an appeal," said Munich
Re spokeswoman Therese Rosenthal.
