BALTIMORE (Legal Newsline) – After nearly 14 years of litigation, a bankrupt insulation company is requesting approval of a settlement agreement reached with several AIG-related insurance companies that previously issued policies for the defendant’s asbestos liability in the tort system.
Defendant Porter Hayden Company filed the motion requesting an order approving its settlement agreement with the AIG-Related insurers on Nov. 20 in the U.S. District Court for the District of Maryland.
Porter Hayden is a Maryland corporation that was formed in 1966 when H.W. Porter Company merged with Reid-Hayden, Inc. The company sold and installed insulation products, some of which contained asbestos prior to the early 1970s.
The AIG-Related insurers involved in this case issued a total of eight primary and excess liability insurance policies to Porter Hayden.
In December 2000, the defendant filed a coverage action in the Circuit Court for Baltimore City in regards to plaintiff National Union Fire Insurance of Pittsburgh’s obligation to provide Porter Hayden with a defense under two of the insurer’s primary policies.
Then Porter Hayden filed for Chapter 11 bankruptcy protection in March 2002. After more than four years of bankruptcy litigation, the court confirmed the debtor’s Third Amended Plan of Reorganization in July 2006, allowing the creation of Porter Hayden’s asbestos personal injury trust.
Over the course of nearly 14 years of litigation, Porter Hayden and the insurers disputed how the policies would apply to liabilities assumed by the trust. A trial for the insurance issues had previously been scheduled for Jan. 15.
Porter Hayden claims that it has resolved the disputes with the insurers and entered into a settlement agreement.
According to the settlement agreement, the AIG-Related Insurers will pay Porter Hayden $15 million for the insurance policies.
In exchange for the payout, Porter Hayden will sell its subject policies to the insurers free and clear of all liens, claims and interests. Therefore, Porter Hayden will forever release the AIG-Related Insurers from any claims of liability for the subject policies.
This form of settlement is common in the insurance industry, Porter Hayden claims, and is known as a “buy-back” of the insurance policies.
“Accordingly, Porter Hayden by this motion seeks approval of the insurance buy-back as a sale of Porter Hayden’s assets … free and clear of liens, claims and encumbrances,” the motion states.
The settlement agreement also contemplates an injunction to protect the insurance settlements.
“The Supplemental Injunction enjoins anyone form taking legal action for the purpose of directly or indirectly collecting, recovering or receiving payment or recovery with respect to any claim or demand that, under the plan is to be paid by the trust,” the motion states.
“Thus, in exchange for making the settlement payment as full and final satisfaction of all asserted liability for the Porter Hayden Subject Insurance Policies, the AIG-Related Insurers will be protected from any further claims or liabilities on those policies,” the defendant added.
Porter Hayden argues that while it is not possible to predict the insurers’ ability to pay their obligations in the future, the settlement agreement provides a “substantial” amount of funds more readily available for distribution to creditors under the plan.
The defendant also argues that the current and future asbestos claimants’ interests were represented in the settlement agreement, and their representatives agree that the settlement is in the best interests of the debtor and the claimants.
Porter Hayden explained that the asbestos claim will be paid by estate assets, including proceeds of the settlement amount.
“The settlement agreement is fair and reasonable and in the best interests of Porter Hayden, the trust and the trust beneficiaries,” the motion states. “The settlement agreement represents fair and reasonable consideration for the sale of the Porter Hayden Subject Policies, the release of certain claims and the other provisions as set forth in the settlement agreement.”
“The settlement agreement is also in the best interests of the asbestos claimants because the proceeds of the sale shall be available for distribution in accordance with the terms of the plan and other plan documents,” it continued.
From Legal Newsline: Reach Heather Isringhausen Gvillo at email@example.com