Hot liability: recent pro-plaintiff developments in welding fume litigation have put welding companies and insurers on the alert.

Key Points

* An appellate court's 2005 ruling in Elam vs. Lincoln Electric Co. et al. and other developments favoring plaintiffs could portend more proplaintiff decisions and settlements, as well as an increase in future welding fume lawsuits.

* Welding fume litigation has generated and likely will continue to generate insurance coverage questions and disputes.

* Questions about pollution exclusions and "trigger of coverage" issues are potentially fertile ground for future coverage disputes.

Over the past few years, the insurance and welding industries have monitored closely the developments in welding fume litigation in light of the potential insurance coverage issues raised by this litigation. These lawsuits allege that welders' exposure to manganese-containing welding fumes caused neurological damage such as Parkinson's disease and other similar movement disorders.

With one exception, trials in welding fume lawsuits have resulted in defense verdicts. Recent developments, however, could portend more pro-plaintiff decisions and settlements, as well as an increase in future welding fume lawsuits, which likely would generate a greater volume of insurance coverage questions and disputes. How these coverage questions are resolved will have a significant impact on the financial exposure of the insurance and welding industries for potential welding fume liabilities.

Recent Developments

In most welding fume cases, the plaintiffs have failed to convince the trier of fact of a connection between the exposure to welding fumes containing manganese and Parkinson's disease or some other neurological disorder such as parkinsonism or manganism. On Dec. 20, 2005, however, an Illinois intermediate appellate court in Elam vs. Lincoln Electric Co. et al. affirmed a $1 million jury verdict in favor of a welder who contended that he had contracted Parkinson's disease as the result of his employment-related exposure to welding flames over a number of years. The Elam verdict in the trial court, which was handed down in October 2003, represented the first decision in favor of a plaintiff in a lawsuit based solely on exposure to welding fumes.

Other recent developments in welding flame lawsuits have favored plaintiffs as well, such as In re Welding Fume Products Liability Litigation. In this federal multi-district welding fume litigation case, a consolidated proceeding of more than 6,000 welding fume claims, the defendants filed motions to exclude scientific studies and expert testimony purporting to establish that exposure to welding flames causes certain neurological disorders. The defendants argued that this evidence, which is the heart of the plaintiffs' cases, was unreliable from both a scientific and an evidentiary standpoint.

The court denied most of the defendants' motions, finding that the plaintiff had established that, with some minor limitations, the studies and testimony were sufficiently reliable to pass the threshold test of admissibility. While the court preserved the defendants' right to argue in pre-trial motions that this evidence failed to prove that welding fumes caused an individual plaintiff's symptoms, the court's decision still means that in many cases the jury will determine whether the evidence proves the plaintiff's case.

Another development that could favor plaintiffs in welding fume cases is the reported $1.5 million settlement of the Ruth lawsuit, the first trial scheduled in the Ohio multi-district litigation Ruth vs. Hobart Bros. Co. et al. The settlement of Ruth, which took place on the eve of trial in September 2005, represents the largest monetary settlement of a welding fume lawsuit.

Shortly after the settlement, the parties' counsel engaged in a public war of words over its meaning. Defense counsel said defendants settled the Ruth case because procedural issues bad emerged that might have limited their ability to fully present their case to the jury, and that trying the case would have served little purpose in the overall adjudication of the pending welding fume lawsuits because of Mr. Ruth's unique medical profile. Defense counsel, however, did not elaborate on these procedural issues or Mr. Ruth's unique medical profile. The plaintiff's counsel countered that, no matter how the defendants may try to posture it, their decision to settle showed that the defendants were acknowledging that the plaintiff's claims had merit and that the defendants were facing potentially enormous legal exposure.

There was some speculation that the Ruth case was settled because the court was about to issue an order sanctioning the defendants for discovery abuses, although it was not clear what sanction the court intended to impose. The plaintiffs' motion for sanctions in Ruth, which was withdrawn as a condition of the settlement, accused one settling defendant of abusing the discovery process and prejudicing the plaintiff by producing thousands of documents on the eve of trial. The motion argued that this conduct was an attempt to "obstruct the fair administration of justice" and delay the trial.

The defendants responded that both parties had been untimely in their discovery responses, and that the defendants produced the documents in good faith in order to ensure that all potentially relevant documents were produced. According to the transcript of a hearing before the judge in Ruth, the court stated that the question was not whether a sanction was appropriate but what sanction was appropriate.

On the heels of the Ruth settlement was the decision by a Texas trial court in September 2005 to grant the plaintiff a new trial in Presler vs. Lincoln Electric Co. et al. The first Presler trial ended in a deadlocked jury, and the retrial resulted in a defense verdict. The plaintiff moved for a new trial based primarily on the developments in the Ruth litigation. According to the plaintiff's motion, the defendants withheld more than 190,000 documents produced on the eve of the trial in Ruth to "obstruct justice" and deny the plaintiffs in Presler a fair trial. According to the plaintiffs, these documents were "newly-discovered evidence" that warranted a new trial. The plaintiffs further contended that, because the defendants in Ruth abandoned their argument that welding fumes did not cause neurological damage, the defendants put on a "fraudulent defense" in Presler by relying on this causation argument at trial. The trial court granted the plaintiff a new trial, and the Texas appellate court denied the defendants' request to overturn the trial court's decision.

Victories for the Industry

Despite these developments favoring welding fume plaintiffs, the welding industry has not been without its victories in recent months. For example, on Dec. 1, 2005, a jury in Boron vs. A. 0. Smith Corp., et al. reached a verdict in favor of the defendants, rejecting the plaintiff's argument that exposure to welding fumes caused Parkinson's disease. The Boren decision is especially significant because it was decided in the same Illinois state court that decided Elam.

In another positive development for welding flame defendants, a plaintiff in one of the Ohio multidistrict litigation cases recently dismissed his lawsuit, reportedly because he was not as disabled as he had first testified and because his attorneys allegedly refused to continuing representing him. Defendants argued that the plaintiff had lied about the extent of his injuries all along, and that he was caught on a surveillance tape engaged in activities he previously testified he was unable to perform because of his welding-related disorder.

Although it may be too soon to draw any definitive conclusions, recent developments favoring plaintiffs in the underlying welding fume litigation could result in further pro-plaintiff decisions and settlements. At the very least, these recent developments represent a noteworthy departure from the stronghold that the welding industry previously had over this litigation.

Insurance Coverage Issues

Similar to other toxic tort lawsuits involving long-term exposure to allegedly harmful substances, the welding fume litigation has generated and likely will continue to generate insurance coverage questions and disputes. The underlying lawsuits allege continuous exposure to welding fumes over the course of many years. Welding defendants seeking coverage under their commercial liability insurance policies contend that all policies on the risk during the period of exposure to the fumes must respond.

While many insurers have agreed to defend these lawsuits under a reservation of rights, questions remain in some cases over the scope and extent of the insurers' alleged defense obligation. Other insurers have denied coverage on a number of grounds, including pollution exclusions in the policies and the failure of the underlying welding suits to trigger the insurer's policies, giving rise to coverage disputes and litigation.

Despite these insurance coverage questions and disputes, there are only a few coverage decisions in the welding fume context. On Jan. 6, 2006, Maryland's highest court in Clendenin Brothers Inc. vs. United States Fire Ins. Co. held that a total pollution exclusion in a general liability policy did not apply to welding fumes, even though the exclusion defined the term "pollutant" to include "fumes." The court held that the term "pollutant" was ambiguous, and that the exclusion was intended to apply only to traditional environmental claims.

This decision is directly at odds with the federal appellate court decision in National Electric Manufacturers Ass'n vs. Gulf Underwriters Insurance Co., holding that an absolute pollution exclusion applied to claims arising from exposure to welding fumes. In NEMA, the court said that it need look no further than the pollution exclusion's definition of "pollutant" to conclude that it explicitly applies to the underlying actions.

The question of whether pollution exclusions apply to welding fume claims is one potentially fertile ground for future coverage disputes. Even apart from the conflict between Clendenin Brothers and NEMA, the case law on the pollution exclusion in contexts involving indoor pollution claims conflicts, is suggesting that insurers and insureds may continue to litigate the pollution exclusion issue in the welding fume context. For example, courts are split over whether absolute and total pollution exclusions apply to claims arising out of indoor exposure to carbon monoxide. As the Clendenin Brothers court observed, "We expect that, our decision notwithstanding, interpretation of the scope of pollution exclusion clauses likely will continue to be ardently litigated throughout state and federal courts. We are aware also that courts may arrive at divergent decisions from our own within the specific context of manganese welding fumes."

'Trigger of Coverage' Issue

The only other coverage cases in the welding fume context have addressed the question of which policies are implicated by welding fume lawsuits, which is commonly referred to as the "trigger of coverage" issue. The two cases deciding this question were issued in 1989 and 1998. Each found, in general, that policies in effect from the first date of exposure to welding fumes through the diagnosis of the injury at issue must respond to the claim. These cases analogized welding fumes claims to asbestos claims in addressing the trigger issue, although one of the decisions acknowledged the lack of scientific studies addressing neurological injuries allegedly resulting from exposure to welding fumes containing manganese. There has been no decision since 1998 on the trigger of coverage approach to welding fume claims.

The trigger issue is another area ripe for coverage disputes in the welding fume context. Although states have adopted a number of approaches to the trigger issue with respect to asbestos claims, most of these approaches result in the implication of policies in effect during the plaintiff's period of exposure to asbestos. These courts based their conclusions on the myriad studies of the progression of asbestos-related injuries and diseases. It is arguable, however, that the existing studies examining the alleged neurological conditions resulting from exposure to welding fumes establish that the nature of the etiology and progression of these conditions differ from the nature of diseases resulting from asbestos exposures. Applying the findings of these studies to the various trigger approaches applied in the asbestos context shows that welding fumes claims and asbestos claims are not necessarily analogous for purposes of determining the proper trigger of coverage.

The greater the potential liability for welding fume claims, the greater the impact the resolution of these coverage issues will have on both the insurance and welding industries. As one welding industry trade association stated in a recent friend-of-the-court brief in the Clendenin Brothers case, "[T]he decision by the court strikes to the core of the day-to-day use of [the association's] members' product and the continued viability of their industry." It therefore would serve both the insurance industry and the welding industry to continue monitoring developments in the underlying welding fume cases to evaluate the impact of these developments on the insurance coverage issues and questions they may raise.

Contributor Robert R. Lawrence is a counsel in the insurance coverage litigation group of Hunton & Williams LLP.