GE loses in asbestos-related ruling
By Tim McLaughlin, Reuters, April 28, 2003
BOSTON – General Electric Co. on Monday said it would appeal a New York judge’s ruling that severely limits the conglomerate’s access to secondary insurers to pay settlements on thousands of asbestos claims.
GE spokesman Gary Sheffer dismissed as “speculative” reports that said at least $800 million in secondary insurance coverage for future and current claims could be lost as a result of the judge’s ruling in Manhattan.
But GE argued in court that a ruling in favor of secondary, or excess insurers, would negate the coverage that it purchased, according to court papers.
Since the 1960s, GE’s primary liability insurer offered full coverage of up to $5 million for each occurrence of asbestos sickness. If the claim exceeded that limit, the excess insurers picked up coverage where the primary insurance ended.
Earlier this month, New York Supreme Court Justice Ira Gammerman rejected GE’s bid to lump together thousands of claims in a move that would have exposed excess insurers to more liability.
As of April 30, 2002, more than 400,000 turbine-related asbestos claims have been filed against Fairfield, Connecticut-based GE, according to Gammerman.
Of that total amount, 70,000 have been dismissed, and another 280,000 cases have been settled, GE spokesman Gary Sheffer said.
The settlements have ranged between $1,500 and $2,000 per case, Sheffer said. That comes to between $420 million and $560 million.
Sheffer said all payments have been covered by insurance.
There are 55,000 open cases. In the vast majority of those, the plaintiffs are not sick, Sheffer said.
In addition, there are another 35,000 cases that have been placed on deferred dockets because the plaintiffs are not sick. A case can be restarted, however, if a plaintiff shows symptoms of asbestos-related sickness.
GE said it is “appropriately reserved” for any future claims. Regardless of the outcome, the claims will not have a materially adverse impact on the company, Sheffer said.
Until the mid-1990s, Electric Mutual Liability Insurance Co. was GE’s primary liability insurer for asbestos and environmental-related claims.
The plaintiff in the case, Appalachian Insurance Co., was among a group of excess insurers that provided coverage on claims that exceeded $5 million.
The dispute stems from a 1992 agreement between GE and EMILCO in which it was determined that asbestos claims would be grouped together based on the product type, and each product line would constitute a single “occurrence.”
This meant that all the turbine-related claims — even though there were thousands — would be treated as one occurrence, according to Gammerman’s history of the case.
EMILCO became insolvent in the mid-1990s after moving offshore to Bermuda from Massachusetts.
Nevertheless, GE’s excess insurers obviously did not like how GE defined occurrence, saying it was not rational or reasonable to treat all of the turbine-related asbestos claims as one occurrence.
Gammerman sided with the excess insurers.
“GE is not entitled to the declaration that it seeks, because there is not a single occurrence,” Gammerman wrote in his decision. “…To the extent that claims have been settled for less than $5 million, the underlying coverage has not been exhausted, and the excess insurers’ policies may not be reached.”
Update (Feb 2005): W.R. Grace Charged in Asbestos Case
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