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Liberty must cover entire asbestos settlement with defunct company

3 minute read

Chrysotile, or white asbestos, are pictured ready for shipping to customers. REUTERS/Ueslei Marcelino

  • Pro rata payment not available when policyholder no longer exists
  • First-impression ruling could have wide-ranging effects

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(Reuters) - Liberty Mutual must pay the entire amount of an asbestos settlement it negotiated on behalf of a defunct New Jersey valve manufacturer it once insured, a New York judge has ruled, rejecting its bid to reduce its liability on the grounds that it did not provide coverage for the whole time period at issue.

Justice Arthur Engoron of New York Supreme Court in Manhattan ruled that so-called pro rata allocation of liability only applies between insurers and policyholders. Since the policyholder, Jenkins Bros, had been dissolved in 2004 and there were no other insurers to share liability, he found, Liberty could not rely on pro rata allocation to reduce its payment to the asbestos victims.

"I think it's a fantastic result," said Kenneth Frenchman of Cohen Ziffer Frenchman & McKenna, a lawyer for the asbestos victims. "Liberty Mutual was attempting to apply the doctrine of pro rate allocation in a situation where it frankly has no place. You shouldn't be permitted to allocate liability to the tort victim himself, and I was very pleased that (Justice) Engoron recognized that inequity and ruled in favor of justice."

While the case involved only a handful of victims and less than $400,000, Frenchman said, it could affect the outcome of many more asbestos cases against Jenkins that Liberty is defending, as well as asbestos cases against other defunct companies.

Liberty Mutual and one of its attorneys, Eileen McCabe of Mendes & Mount, did not immediately respond to requests for comment.

Liberty Mutual has appeared as the real party in interest in asbestos lawsuits against Jenkins, and negotiated settlements on its behalf. In 2018, it filed an action seeking a declaratory judgment that its liability under those settlements should be reduced to reflect the fact that it did not insure Jenkins from 1980 to 1987.

Both sides moved for summary judgment.

Engoron ruled Thursday that the precedents for pro rata liability cited by Liberty Mutual all involved disputes between insurers and policyholders, and so represented "reasoned determinations that the policyholder should not be relieved of the consequences of its decision to underinsure or not insure, and that such failure to manage risk adequately should not become the obligation of the insurance company."

"However, no such considerations are at play here, where the individual defendants are the asbestos victims who were not involved whatsoever in Jenkins Bros' decisions as to when and how to purchase insurance," the judge wrote.

The case is Liberty Mutual Insurance Co v. Jenkins Bros et al, New York Supreme Court, New York County, No. 651980/2018.

For Liberty Mutual: Eileen McCabe, Stephen Roberts and Alejandro Hidalgo of Mendes & Mount

For the asbestos plaintiffs: Kenneth Frenchman, Robin Cohen and Alexander Sugzda of Cohen Ziffer Frenchman & McKenna

Brendan Pierson reports on product liability litigation and on all areas of health care law. He can be reached at brendan.pierson@thomsonreuters.com.

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