WILMINGTON, Del., July 3 Six insurance companies are suing an asbestos personal injury trust set up by a U.S. unit of Philips that the insurers suspect has been making millions of dollars in fraudulent payments to parties that cannot prove they were harmed by the company's asbestos products.
In the lawsuit, the insurers are seeking access to trust records.
The insurers said the asbestos personal injury or PI trust set up during the 2008 bankruptcy of T H Agriculture & Nutrition LLC, a unit of Philips Electronics North America Corp, had been paying substantially more claims than originally forecast.
"Plaintiffs have a reasonable suspicion that fraudulent claims have been submitted to and paid by the asbestos PI trust," said the lawsuit, which was filed on Wednesday in Delaware's Court of Chancery.
The lawsuit is the latest in a string of legal and legislative actions aimed at shedding light on the trusts, which have been used for decades to compensate people injured by exposure to cancer-causing asbestos.
Dozens of companies have filed for bankruptcy in the wake of thousands of lawsuits and then set up trusts that collectively control tens of billions of dollars.
The six insurers were seeking to conduct an audit of trust records as part of a bankruptcy agreement with T H Agriculture & Nutrition, or THAN, Philips Electronics North America and the asbestos trust.
An attorney who represented THAN as well as the asbestos trust said the lawsuit had no merit because the insurers were offered the opportunity to audit the trust's claims in compliance with the bankruptcy plan.
"They want to conduct a different audit than the one contemplated by the agreement," said Sander Esserman of Stutzman, Bromberg, Esserman & Plifka in Dallas. "I suspect the lawsuit will not receive any traction in the courts."
Philips Electronics did not immediately respond to a request for comment.
THAN filed for bankruptcy in 2008 in the wake of thousands of lawsuits by people alleging they were made sick by the asbestos the company distributed until 1980.
In exchange for setting up the $900 million trust, all future asbestos-related claims against THAN were directed to the trust.
The six insurers agreed to make installment payments to Philips Electronics North America based on the distributions by the asbestos trust. They said in their lawsuit they may have paid $25 million more than they should have due to the suspected fraud.
The insurers are AIU Insurance Co, American Home Assurance Co, Birmingham Fire Insurance Co of Pennsylvania, Granite State Insurance Co, Lexington Insurance Co and National Union Fire Insurance Co of Pittsburgh.
In January, a judge found in the bankruptcy of Garlock Sealing Technologies that personal injury lawyers had repeatedly sought claims from asbestos trusts after their clients told courts they had no exposure to the products the trusts were compensating for.
Federal and state lawmakers have also proposed bills that would increase disclosure from the asbestos trusts.
The case is AIU Insurance Co et al v Philips Electronics North America Corp et al, Delaware Court of Chancery, No. 9852. (Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)