MONTPELIER, Vt. (Legal Newsline) - Georgia-Pacific’s bankrupt Bestwall unit likely won’t be able to cash in on a $10 million insurance policy that was only in effect for 44 days in the early 1980s after the Vermont Supreme Court ruled state law sharply limits the insurer’s exposure to asbestos liability.
Bestwall, which once made drywall joint compound containing asbestos, sought to tap a policy it purchased from Ambassador Insurance Co. in 1983 providing $10 million in excess coverage after Bestwall exhausted $100 million in coverage by other insurers. The policy was in effect for less than two months before Ambassador cancelled it, however, having received only $605 in premiums. Vermont insurers declared Ambassador insolvent shortly thereafter and the company was liquidated in 1987 under an agreement to resolve any future claims in Vermont court.
Georgia-Pacific owner Koch Industries put Bestwall into bankruptcy in 2017 to reorganize more than $2.6 billion in asbestos liabilities. The company has since moved aggressively to try to limit asbestos claims, including calling for investigations into “double-dipping” by plaintiff lawyers who tailor their clients’ claims to tap multiple trusts established by companies to settle asbestos lawsuits.
Bestwall argued Vermont law shouldn’t apply to its claim for coverage under the old Ambassador policy, in part because it conflicted with Georgia law on the question of how much exposure the insurer had. Decades-old commercial insurance policies frequently cover asbestos claims under the “continuous-trigger” theory, which assumes the plaintiff was exposed to asbestos while the policy was in effect even though the disease didn’t manifest until years later.
Under “all-sums allocation,” once a policy is triggered it must pay up to the policy limits. The pro-rata or “time-on-the-risk” allocation has coverage calculated based on the time the insurance policy was in effect.
Vermont courts use the pro-rata theory, the Vermont Supreme Court said, and Bestwall failed to prove Georgia courts have adopted a different theory. While Georgia appellate courts haven’t established precedent in this area yet, at least two lower courts have adopted the pro-rata approach as well as two federal courts interpreting Georgia law, the state high court said, in an opinion by Chief Justice Paul Reiber.