Travelers Cos. Inc. and American International Group Inc.’s units that have offered excess coverage to a now-insolvent asbestos manufacturer were declared to be not obligated to provide coverage, a U.S. bankruptcy court ruled.
The manufacturer in question, Rapid-American Corp., had settled numerous personal injury claims related to its toxic product since it started being the target for lawsuits in 1974. By the time the manufacturer filed for Chapter 11 bankruptcy in March 2013, it still had roughly 275,000 asbestos-related personal injury claims pending against it.
Rapid-American reached settlements with nearly all of its insurers by 1998, but several of them had also filed for bankruptcy, rendering them unable to pay the full limits of their policies, according to the ruling issued by the U.S. Bankruptcy Court for the Southern District of New York on Tuesday in
Rapid-American Corp. et al. v. Travelers Casualty & Surety Co. et al.
The ruling also noted that an amount sufficient to reach the level of excess coverage provided under the policies at issue has not been paid.
Plaintiffs representing Rapid-American argued that the excess policies at issue provide total limits of $64 million. In their perspective, it is unnecessary for the primary policies' underlying limits to be exhausted by actual payment before the insurance companies’ excess liability coverage attaches.
U.S. Bankruptcy Court Judge Stuart M. Bernstein, however, ruled against the plaintiffs based on the insurers' policy language. Judge Bernstein said that the policies “unambiguously require actual payment before liability attaches.”
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