Segal McCambridge Legal Blog

Two articles concerning asbestos insurance losses.

BestWeek: A.M. Best Special Report Notes US Asbestos and Environmental Losses Up 50%

OLDWICK, N.J.–(BUSINESS WIRE)– Asbestos and environmental incurred losses increased 50% in 2009 after dropping 47% in 2008, according to a new A.M. Special Report, U.S. Asbestos & Environmental Liabilities, in this week’s issue of BestWeek U.S./Canada.

A.M. Best said it is maintaining its revised view of ultimate industry A&E losses, which were adjusted downward in 2009 by $4 billion to a combined total of $117 billion, with asbestos losses estimated to ultimately cost the industry $75 billion and environmental losses, $42 billion.

In addition, the issue features an A.M. Best Special Report on life/annuity insurers regaining ground as the economy strengthens. Although quantitative improvement in the industry’s capital position is clear, qualitative improvement is not, the report said.

In BestWeekEurope, the announcement by Lloyd’s insurer Canopius Group Ltd. that it will establish a reinsurance operation in Zurich is further recognition of the Swiss city’s emergence as a reinsurance center.

Also, in BestWeek U.S./Canada, competition among U.S. captive domiciles continues to heat up, with Utah and Delaware growing faster than many other states. Vermont, the long-time leader of U.S. captive domiciles, added 33 new captives and continued to hold on to its top position with 572 captives at year-end 2010. Utah edged its way up to second place, with 188 captives. Utah also saw the strongest growth, with 54 new captives forming in the “Beehive� state. “We had a big year,� said Ross C. Elliott, captive insurance director for Utah. “There was a lot of pent up demand.�

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Asbestos Losses Seen as “Manageable�

Although nine insurer groups experienced asbestos and environmental (A&E) losses of at least $100 million during 2009, up from six groups in 2008, the increase is still “manageable,� notes A.M. Best.

In a special report, “U.S. Asbestos & Environmental Liabilities,� the rating agency notes that losses jumped approximately 50% in 2009 after a 47% decline in 2008. Aggregate industry funding for A&E liabilities increased by more than $4 billion over the past two years.

“While some insurer groups remain underfunded for A&E reserves to varying degrees, the potential impact to their overall level of capitalization appears to be modest,� notes the report.

The property/casualty industry is estimated to experience approximately $75 billion in asbestos-related losses and $42 billion in environmental losses, says A.M. Best.

Best’s comprehensive report includes a market review analysis and charts the industry’s net reserves and incurred losses from 2005 through 2009, as well as normalized net paid losses from 1999 through 2009. It also includes a breakdown by company of the top 15 insurer groups impacted by these losses.

Several factors affect the agency’s analysis, including the fact that although individual insurer groups will continue to post losses for asbestos, environmental or both types of claims, the related drag on earnings is expected to be mild. Tort reform by state is seen as weakening in some areas, as well as the ongoing filing of mesothelioma claims in years to come. Pollution losses, which tend to generate large loss payouts every year, also appear to be in slow decline, says A.M.Best.

“As the vast majority of the industry’s ‘mega’ losses are settled with, in most cases, waivers signed to prevent reopening of claims for cleaned sites and/or for newly discovered sites, it appears the industry has funded most of its pollution liabilities,� notes the report.

In NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, ET AL, v. STANDARD FUSEE CORPORATION, (No. 49S04-1006-CV-318, December 29, 2010), a unanimous Indiana Supreme Court found in favor of several insurance companies in a choice of law issue involving an environmental coverage matter. Specifically, the Court held:

Insurance companies question whether they have a duty to defend an insured in environmental remediation proceedings under policies alleged to cover risks in Indiana and California. Predicate to answering that question is determining whether the law governing the policies‟ interpretation is “site-specific� (whereby Indiana law governs the policies‟ interpretation with respect to the Indiana site and California law with respect to the California site) as held by the Court of Appeals or “uniform� (whereby a single state‟s law governs) as argued by both parties. But while agreeing that the interpretation should be uniform, the insurance companies argue that Maryland law applies; the insured argues for Indiana law.

The uniform approach has long been Indiana law and we reaffirm it here. Under that approach, we find that Maryland is the state with the most intimate contacts to the facts and that its law should therefore be applied to resolve this dispute.

As of December 29, 2010, the Indiana Supreme Court opinion can be found here

From Daniel Fisher at Forbes.com

“This just in: Baron & Budd says Louisiana Gov. Bobby Jindal has hired the Dallas law firm to “provide counselâ€� to the state on how to recover damages from the BP oil spill.

As noted here this morning, Baron & Budd are an unusual choice for Jindal, a conservative Republican whose supporters tend to abhor plaintiff lawyers. Especially the ones who make millions of dollars representing asbestos claimants and share a lot of that money with Democratic candidates.”

An earlier story from Daniel Fisher at Forbes.com is here

From the Chicago Tribune

BP turns to Chicago’s Kirkland & Ellis, longtime ally to help with damage control

“At least 70 suits were filed in the two weeks following the April 20 explosion, including 59 that want to proceed as a class action, according to court documents. Plaintiffs assert similar claims: that negligence resulted in personal injuries, damage to their businesses or property damage. They seek compensation, including punitive damages.

The suits have been filed in federal and state courts in several states, including Texas, Louisiana, Alabama, Mississippi and Florida. As is often the case in big, complex liability cases, the federal suits likely will be transferred to one court for pretrial evidence gathering and rulings. Centralization helps move cases along and avoids inconsistent rulings from different judges.
…
No matter where the cases are headed, many expect the litigation surrounding the oil spill to last for years. A lot of time will be spent figuring out who was responsible for the explosion. There are also a range of issues regarding contractual limits on liability and insurance.

BP said Monday that compensation payouts to people affected by ongoing spill won’t be limited by a statutory cap on such liabilities. Oil companies are subject to a $75 million legal ceiling on their liabilities in oil spill cases.

Analysts estimate the oil spill will cost BP between $3 billion and $8 billion. It isn’t known how much of BP’s defense will be placed in Kirkland’s hands. But given its leading role so far, the firm’s lawyers could spend thousands of hours on the matter. Some of its most senior partners, including Richard Godfrey, J. Andrew Langan and John Hickey Jr., are involved in the litigation, according to court documents.

BP, in selecting Kirkland to represent its legal interests, also sent a message to plaintiffs that it will launch an aggressive defense, Becnel said. The firm is known for its hard-nosed litigation tactics, which Becnel, who has faced off against Kirkland before, described as “hold out to the last minute and give no quarter.”

The firm declined to comment on its BP representation, referring questions to a company spokesman.

BP has often trusted Kirkland to defend the oil giant in its biggest suits. Part of that faith stems from personal relationships that date back to the days of Standard Oil. Standard Oil absorbed Amoco, taking its name, and BP bought Amoco in 1998. Hammond Chaffetz, one of the firm’s most influential partners, represented Standard Oil in antitrust matters. The firm was one of the anchor tenants in Chicago’s Standard Oil building, now Aon Center, before moving last year.

Godfrey is credited for nurturing the relationship through mergers and acquisitions, especially after the 1998 purchase of Amoco. Godfrey was on a team of lawyers that represented Amoco when one of its tankers wrecked off the coast of France in 1978, spilling 220,000 tons of oil.

Litigation from that spill lasted 14 years.”