UPDATE 1-Travelers wins reversal in $500 million asbestos case

Thu Mar 1, 2012 6:45pm EST

* Conditions not met for Travelers to make payments-judge

* Johns-Manville's 1982 bankruptcy tied to asbestos

March 1 (Reuters) - Travelers Cos has won the reversal of a court order directing it to pay more than $500 million to satisfy asbestos-related claims stemming from its coverage of policyholder Johns-Manville Corp.

In the latest ruling in a case dating back to the 1980s, U.S. District Judge John Koeltl in Manhattan said a federal bankruptcy judge erred in concluding that all the conditions required for Travelers to make payment under three settlement agreements dating from 2004 had been satisfied.

Now owned by Warren Buffett's Berkshire Hathaway Inc , Johns-Manville had from the 1920s to 1970s been the largest U.S. maker of products containing asbestos.

It filed for bankruptcy protection in 1982 under the weight of litigation tied to asbestos-related health problems and settled a variety of claims in 1986. Johns-Manville emerged from Chapter 11 in 1988.

The 2004 settlements had called for Travelers to pay $445 million to asbestos claimants and the bankruptcy judge, Burton Lifland, later added $65 million in interest to this amount.

But Koeltl agreed with Travelers' contention that it need make the payments only upon obtaining a court order that a variety of potential claims were barred under the 1986 settlement and that the insurer never got this protection.

"There is nothing illegal or impermissible about reading the settlement agreements according to their plain terms," and require a ban on "'all claims, demands, actions or proceedings against Travelers of any kind or nature whatsoever,' relating to Travelers' handling of asbestos claims, including 'any claims for contribution or indemnity,'" Koeltl wrote.

Travelers is based in St. Paul, Minnesota. The insurer, its lawyers and lawyers for the asbestos claimants did not immediately respond to requests for comment.

The case is Travelers Indemnity Co v. Statutory and Hawaii Direct Action Settlement Counsel et al, U.S. District Court, Southern District of New York, Nos. 11-01312 and 11-01329.

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