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Facing the past.

Many insurers caught in the web of asbestos losses have been forced to increase reserves in recent months, including an unlikely candidate: Metropolitan Life Insurance Co.

MetLife, the largest life insurer in the United States according to admitted assets for 2002, did not insure producers or miners of asbestos, but rather, has been named in thousands of lawsuits because it did research on asbestos in the 1930s to 1950s. Plaintiffs argue that the company had a duty to publicize its findings. While MetLife said it believes it shouldn't be held liable, the company said in February that it would take a $169 million asbestos charge to increase reserves, according to a filing with the U.S. Securities and Exchange Commission. The company also reviewed its actuarial calculations and the increase in claims, and raised its recorded liability for asbestos-related claims to $1.23 billion from $820 million at year-end 2002. This total recorded asbestos liability, after a self-insured retention, is within the coverage of excess insurance policies for which MetLife paid $878 million in premiums in 1998. The excess insurance purchased in 1998 covers losses up to $1.5 billion, which is in excess of a $400 million self-insured retention, according to the filing.

MetLife has been dealing with asbestos claims for many years. Most recently, MetLife lost a multi-year legal battle in 2001 with its previous excess liability insurers when Connecticut's highest court denied MetLife's appeal. MetLife had sought to get its prior excess liability insurers, including Travelers Casualty and Surety Co., to pay for the 200,000 asbestos claimants that had filed suit against MetLife since the 1970s. Travelers was brought into the suit because it had purchased MetLife's original insurer, Aetna Casualty and Surety Co., which provided excess insurance for the life company. At that time, MetLife had settled or was in the process of settling those claims for a "nuisance value" of $2,500 per claim.

MetLife unsuccessfully argued that the claims should be counted as a single occurrence of a value greater than $25 million, which would have triggered the excess liability coverage. MetLife declined to comment beyond its public filings.

The claims against MetLife have included negligence, intentional tort claims and conspiracy claims. In 2002 and 2003, MetLife successfully fought cases that were dismissed in California, Utah and Georgia, but estimates 66,000 claims were filed in 2002 and 48,000 claims for the first six months of 2003. The company also has been named in several silica-related or "mixed dust" claims.

The cases include Cyr v. Metropolitan Life Insurance Co., in which Robert Cyr, a former pipe fitter and machinist, filed suit in federal court in Maine. Cyr said he has asbestos-related injuries, and claimed MetLife conspired to hide information about the effects of asbestos exposure. He also named defendants including General Insulation Co. and Owens-Illinois Inc.

At year-end 2002, MetLife estimated it had a total of 106,500 asbestos claims, and had made $95.1 million in settlement payments for the year, according to its annual report on file with the SEC.

"The suits against MetLife represented one of the more outrageous reaches by the plaintiffs bar in the three-ring circus that is asbestos litigation today," said Robert Hartwig, chief economist for the Insurance Information Institute. "It's very hard to believe that companies that simply researched this decades ago could be held liable. But like most manufacturers and insurers, the writing was on the wall. These cases can be tried in the nation's legal hell holes, and there's no hope for any insurers or defendants in any of them. The odds of prevailing in most asbestos cases are slim to none, hence this issue before Congress today."

A bill to reform the asbestos litigation system is currently pending in Congress.

So far, MetLife stands alone as the only life insurer being sued for asbestos research. Prudential and New York Life said they haven't been sued. Companies are required to disclose material events in their federal SEC filings, and no other life insurer has mentioned asbestos claims in its filings.

"If there were other companies out there, we'd have probably heard about it by now," Hartwig said.

Victoria Fimea, senior counsel for the American Council of Life Insurers, said MetLife is the only life insurer that she's aware of facing asbestos claims.

"It's pretty creative for plaintiffs to go after a company based on that sort of tangential link," Fimea said. "It shows you can never underestimate the creativity of the plaintiffs bar."

Even if MetLife successfully fights the cases, the company will have to spent time and money defending itself in the cases, she said. "It's harassing and the reason why business is fed up with a lot of this process ill abusive litigation," she said.

She said the cases illustrate the need for tort reform, and cautioned that these types of lawsuits can discourage research in both the private and public sector.

"The engine of our economy is driven by creativity and innovation. If you stifle that creativity and curiosity, then how do we maintain the dynamics of our markets?" Fimea said.
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Title Annotation:Metropolitan Life Insurance Co is named in thousands of lawsuits because it did research on asbestos in the 1930s to 1950s; Litigation
Publication:Best's Review
Geographic Code:1USA
Date:Nov 1, 2003
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