Insurers to feel brunt of New Jersey asbestos ruling, while Delaware hits employers on same day

By Daniel Fisher | Jun 28, 2018

A decision by the New Jersey Supreme Court forces Honeywell’s insurers to pay for thousands of asbestos claims even though the company, through its Bendix unit, continued to make asbestos-containing brake products for more than a decade after it could no longer obtain insurance coverage for such products.

A decision by the New Jersey Supreme Court forces Honeywell’s insurers to pay for thousands of asbestos claims even though the company, through its Bendix unit, continued to make asbestos-containing brake products for more than a decade after it could no longer obtain insurance coverage for such products.

The Delaware Supreme Court, meanwhile, reversed longstanding precedent and ruled that employers and manufacturers can be liable to the spouses of employees who brought asbestos dust home on their clothes in certain circumstances.

The New Jersey high court’s decision means insurers who have already spent more than $1 billion resolving lawsuits over Bendix brake products may be on the hook for a lot more. In the 88-page ruling issued June 27, the New Jersey Supreme Court said Honeywell has resolved 71,000 cases but has at least that many still outstanding.

“It’s a significant decision,” said Jacob (Jack) Cohn, a partner with Gordon & Rees in Philadelphia who represents insurers in asbestos and bankruptcy cases. “This is something that can come up over and over again.”


Cohn  

Asbestos litigation long has been a battlefield on which insurance companies fight each other and the companies they insured over who will pay for claims that emerge decades after they wrote coverage. Because asbestos-related disease, primarily the fatal cancer of the chest wall lining known as mesothelioma, arises 20 to 30 years after exposure, deciding who pays has proven a complicated task.

Most states have adopted a “continuous-trigger” approach under which insurers must pay not just if they covered the company when the alleged exposure occurred, but for the entire time the disease was developing until the claimant was diagnosed. States have a variety of methods for allocating payments among insurers over that period, but New Jersey makes each insurer pay a proportional share based upon the amount of time it insured the defendant.

Honeywell’s case was complicated by another doctrine in place in New Jersey and certain other states that requires earlier insurers to pay shares for time periods after commercial insurance became unavailable, based upon considerations of public policy and fairness. In most cases, this just means companies don’t have to pay for a risk they couldn’t insure, after they stopped producing asbestos-containing products. But even though insurance coverage for asbestos became unavailable in 1987, Bendix kept making asbestos-containing brake products until 2001.

In its ruling, the New Jersey Supreme Court said that didn’t matter; the goals of “maximizing insurance resources,” spreading risk across the insurance industry and “simple justice,” supported letting Honeywell off the hook for the years after it could no longer obtain insurance. 

In a dissent, Justice Barry Albin said the decision “gives a corporation a free pass if it continues to expose workers to extremely dangerous products after insurance coverage becomes unavailable.”

“This court compels insurance carriers that previously insured the corporation – but later refuse to do so – to remain guarantors for claims arising during the years the corporation continues to manufacture its dangerous products,” Albin wrote.

“We reject that this holding will disincentivize manufacturers from responsible behavior regarding products for which insurance becomes unavailable,” Chief Justice Stuart Rabner said in the majority opinion.  “This manufacturer ceased its production.”

If other states follow New Jersey’s reasoning, the decision could help companies that kept manufacturing asbestos-containing products even after the federal government banned most industrial and construction use of asbestos in the 1970s. 

The ruling will have a significant effect on who pays for “back-end” claims dating to the years after most types of asbestos were banned, but as a practical matter it won’t have much impact on the underlying lawsuits. Plaintiff lawyers typically file shotgun-style complaints in asbestos cases, claiming exposure to multiple products over many years. 

“The plaintiffs will always structure their claims to cast the broadest net possible, to capture as much as insurance as possible,” said Cohn. “And as always, to target the solvent defendant with insurance.”

The Delaware Supreme Court ruling, Ramsey v. Georgia Southern University Advanced Development Center, also handed down on June 27, resolved what that court said was an unfair quirk in the law. Under existing doctrine, the manufacturers of asbestos products could be held liable for selling them without adequate warnings to anyone who might foreseeably use them. 

But employers were held to have a duty only to inform their employees of the risks of asbestos, not family members who might come in contact with the dust on their clothes. So a spouse who washed a worker’s asbestos-coated clothes might not have anyone to sue, since neither the manufacturer nor the employer owed her a duty to warn.

In this case, a woman sued the manufacturers of products she claimed her husband brought home on his clothes, but her case was dismissed under prevailing doctrine. The Delaware Supreme Court reversed, but went a step farther, saying it would be unfair to leave employers protected against the same liability the court now imposed on manufacturers. Employers, after all, were the ones in the best position to warn workers about the risks of inhaling dust and bringing it home on their clothes.

Under the new doctrine, manufacturers are protected if they warned the companies that bought their products about risks including the risks of washing work clothes improperly. Employers are protected if they passed those warnings on to their employees. If either one fails to fulfill those duties, family members may have a case. 

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