Insurers gain some limits in asbestos claims.

Insurers came away with a victory late last year in an asbestos-exposure case that has been before courts for about a decade.

The case in question, In Re: The Wallace & Gale Co., involved an installer of asbestos material and its insurers. On Oct. 6, the United States Court of Appeals for the 4th District upheld a decision by the District Court for the District of Maryland that policies bought by Wallace & Gale after installations were complete do not subject the insurers to unlimited amounts of liability, but rather to the aggregate insurance limits defined by the contracts. The appellate court denied a rehearing on Nov. 15.

"Given the scope of asbestos-related litigation, this ruling is very significant," said Laura Foggan, an attorney with Washington, D.C.-based Wiley Rein & Fielding LLP and counsel for the Complex Insurance Claims Litigation Association, an insurance industry group that was an amicus curiae in the Wallace case. "Asbestos claims are projected to top 2.5 million. At least 41 major asbestos defendants have declared bankruptcy, and asbestos-related litigation has spread to more than haft of the industries in the economy," she said.

"There has been a lot of talk by the rating agencies and saber rattling by policyholders that 'operations' claims can lead to uncapped exposures for insurers on account of the lack of an 'aggregate' limit, such as normally exists for 'products' claims," said Randy J. Maniloff, an attorney with Philadelphia-based White and Williams LLP who has followed the case closely for two years." Wallace & Gale demonstrates that 'operations' claims can also be 'completed operations,' which, in fact, typically have an 'aggregate" limit."

Wallace & Gale was an insulation contractor that installed asbestos-containing products. It halted use of such products in the early 1970s due to safety and health concerns. The company filed for bankruptcy in 1984. From 1962 to 1985, it purchased comprehensive general liability policies and excess liability policies from well-known insurers.

The district court decision, filed on Feb. 20, 2002, found that insurers who issued general liability policies after Wallace & Gale completed its asbestos installation work would only be liable for amounts up to the aggregate limits in the policies. Policies issued while installation work was taking place would be subject to general liability premises claims.

"Increasingly, policyholders and claimants have sought to shift the costs of asbestos liability onto insurers, sometimes without regard to insurance policy limitations such as the aggregate limit provisions applicable to injury that takes place after a policyholder's operations are complete," said Foggan. "This decision makes clear that the aggregate insurance limits to claims under policies issued after a policyholder's operations are complete cannot be overridden simply because bodily injury began years earlier, when installation of asbestos was under way."

The appellate court also ruled that the costs of asbestos-related bodily injuries must be spread across all of the years and that policyholders have to pick up their fair share of allocations, Foggan said. "In doing so, the court stated that 'it is neither equitable nor fair to require an insurance company to pay for coverage during a period for which no effective coverage is in force,'" according to a release issued by Foggan's association.

In other cases, a Cuyahoga County Common Pleas Court in Ohio issued an administrative order in September requiring asbestos cases filed by people showing symptoms of illness to be heard ahead of those showing no symptoms. The county court, which covers Cleveland, is among the most congested in the United States.

According to the Property Casualty Insurers Association of America, 61 companies have filed for bankruptcy due to asbestos litigation. "These companies are spread across the nation with 47 states having at least one asbestos-related bankruptcy," said Rita Nowak, assistant vice president, commercial lines. "The costs of these bankruptcies impact the workers and the economy." Since 1998, 35 companies have filed for bankruptcy due to asbestos-related claims, compared to only 26 in the previous 20 years, she said.