Bankruptcy Court Approves $2 Billion in Settlements for Mac Arthur Entities
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date:
01/29/2004 -
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Litigation with insurance carriers nets $1.15 billion from Hartford in December 2003 added to $987 million obtained from USF&G 18 months earlier.
LOS ANGELES, January 29, 2004 – Morgan Lewis, one of the 10 largest U.S. law firms, announced today that the Bankruptcy Court in Oakland, CA issued a Confirmation Order approving settlements with Hartford Insurance Company for just over $1.15 billion, and with United States Fidelity & Guaranty Co. (“USF&G”) for $987 million, as part of the plan of reorganization of Mac Arthur Company and Western Mac Arthur Company. The Mac Arthur
settlement with Hartford, reached in mid-December of 2003, follows the settlement reached with USF&G in June 2002. The combined settlement amount from the two insurers of over $2.1
billion is believed to be one of the largest all cash settlements reached in the asbestos coverage arena.
The dispute with both insurers centered around coverage for thousands of asbestos-related bodily injury claims filed against the Mac Arthur entities. Claimants sued Western Mac Arthur as the successor-in-interest to Western Asbestos Company, a company that operated as an asbestos insulation contractor, installer and seller of Johns-Manville products from 1908 to 1967 in the San Francisco Bay Area. Mac Arthur purchased the assets of Western Asbestos in 1967, forming Western Mac Arthur and dissolving Western Asbestos.
In the early 1980s, efforts to find evidence of Western Asbestos’s insurance coverage from its insurers – including USF&G – were unsuccessful. In 1985, the California Court of Appeal held that Western Mac Arthur was the successor-in-interest of Western Asbestos. Hartford, which had insured the Mac Arthur entities from 1967 through 1976, accepted the defense of the cases brought against its insureds. But in 1987, Hartford advised the Mac Arthur entities that the limits on its primary policies were exhausted.
In 1991, Mac Arthur located certificates of insurance that listed USF&G as an insurer of Western Asbestos in the late 1940s. USF&G steadfastly denied there was sufficient evidence to prove that it issued any coverage to Western Asbestos (neither party had copies of any Western Asbestos policies and, after ten years of litigation, none were produced), and that the terms of any such coverage could not be reconstructed. In 1993, the Mac Arthur entities sued USF&G. In 2000, Western Mac Arthur filed suit in New York against Hartford seeking a determination that certain limits of Hartford's policies were not exhausted and that Hartford had a continuing obligation to defend and indemnify the Mac Arthur entities with respect to their asbestos liabilities. Subsequently, the Mac Arthur entities and several injured plaintiffs filed a second, more comprehensive action in California.
After almost ten years of litigation, including a four month jury trial, the Mac Arthur entities reached a $987 million settlement with USF&G. As part of the settlement, the Mac Arthur entities and Western Asbestos (revived for purposes of further winding up its business) filed for bankruptcy under section 524(g) of the Bankruptcy Code. Hartford, along with several other insurers, objected to the bankruptcy plan. The $1.15 billion settlement was reached following the closing arguments in the bankruptcy case and on the eve of a motion for trial preference against Hartford in the California coverage action.
Together with the USF&G settlement, the total recoveries amounted to over $2.1 billion. While the bankruptcy court has approved the USF&G and Hartford settlements, and confirmed the bankruptcy plan, the insurance companies that objected to the plan may appeal this decision to the District Court.
About Morgan Lewis
Morgan Lewis, with a team of nearly 1,200 lawyers in 17 offices, is a fully-integrated, fullservice law firm that caters to global clients. For more than a century, Morgan Lewis has represented Fortune 500 companies, multinational financial services and investment banking organizations, as well as leaders in the life sciences, technology, energy, securities, real estate and media sectors. For more information about Morgan Lewis, please visit www.morganlewis.com.