A federal appeals court on Tuesday ordered Travelers Cos. Inc. to pay more than $500 million to satisfy asbestos-related claims stemming from the insurer’s coverage of insulation maker Johns-Manville Corp., a policyholder that spent six years in bankruptcy during the 1980s.
The 2nd U.S. Circuit Court of Appeals in New York reversed a February 2012 ruling in which U.S. District Judge John Koeltl said conditions under three settlement agreements in 2004 that required Travelers to make the payment had not been satisfied.
Writing for a three-judge appeals court panel, Circuit Judge Ralph Winter said Koeltl’s interpretation “could not reasonably have been intended by the parties, whatever Travelers’ private hopes and dreams, and is not supported by the language of the agreements.”
The 2nd Circuit directed the reinstatement of an order by U.S. Bankruptcy Judge Burton Lifland, who oversaw Johns-Manville’s bankruptcy, that Travelers make the payment, which includes $65 million of interest. Koeltl’s ruling had reversed that judgment. Lifland died in January.
Patrick Linehan, a Travelers spokesman, said the insurer is reviewing Tuesday’s decision, and has set aside reserves to cover the entire payout, apart from interest payments.
Many companies stopped using asbestos for fireproofing and insulation by the mid-1970s after it was linked to cancer and other diseases. Litigation persists because the effects of exposure can take decades to surface.
Now owned by Warren Buffett’s Berkshire Hathaway Inc., Johns-Manville had from the 1920s to 1970s been the largest U.S. maker of products containing asbestos.
It filed for bankruptcy protection in 1982 under the weight of asbestos litigation, and settled various claims in 1986. Johns-Manville emerged from Chapter 11 in 1988.