Articles & News

Travelers to pay $500 million to asbestos victims

Tom Becker,  Bloomberg News July 8, 2004

Travelers Property Casualty Corporation's proposal to pay $500 million to victims of asbestos-related diseases passed its first test this week when a bankruptcy judge said no objections were raised over the amount of the settlement.

The pact, mediated by former New York Gov. Mario Cuomo, would be one of the largest payments ever made by an insurance company to settle asbestos-related lawsuits. Travelers insured Johns-Manville Corp., which no longer exists, for more than 30 years while it produced and sold asbestos. Asbestos causes asbestosis, a chronic, progressive lung disease.

"There have been no arguments on the adequacy of the half-a-billion dollars," U.S. Bankruptcy Judge Burton Lifland said at a hearing. "A lot of money has been put on the table for people who are deserving. There are never enough funds available for something like this, but nothing's been shown it's not fair or reasonable."

Before approving or denying the agreement, Lifland must consider other issues, such as whether the mechanism for setting up the settlement fund meets the requirements of the bankruptcy code. He asked lawyers to submit their final papers by next Thursday. He didn't say when he expects to rule.

Cuomo, who attended the hearings, declined to comment.

Under the proposal, about $445 million will go to the individuals and families who filed wrongful death and personal injury claims against Travelers for insuring Johns-Manville and not disclosing that asbestos was hazardous. Another $57 million will be used to cover legal fees.

Travelers was Johns-Manville's primary liability insurer from the 1940s to the 1970s. More than 600,000 claims have been filed against Travelers, according to court papers.

"Travelers failed to disclose information that it is alleged to have learned from its insurance relationship with Manville, including from Travelers' defense of asbestos-related lawsuits," the victims said in court papers.

Johns-Manville filed for bankruptcy protection in 1982 to deal with billions of dollars in asbestos claims. The company set up a trust in 1988 to pay the victims. Since Johns-Manville filed for bankruptcy, asbestos-related claims have driven dozens of other companies into bankruptcy, including Babcock & Wilcox Co., Armstrong World Industries Inc., ACandS Inc., MacArthur Co. and W.R. Grace & Co.

In December, Hartford Financial Services Group Inc. agreed to pay $1.15 billion to settle all asbestos claims arising from its insurance coverage of MacArthur. Hartford sold MacArthur general liability insurance between 1967 and 1976.

Travelers and the St. Paul Companies Inc. merged in April to form the St. Paul Travelers Companies Inc.