Full House for Supreme Court Arguments on Asbestos

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Two arguments which came before the Supreme Court on Monday morning, Travelers Indemnity Company v. Bailey and the consolidated case Common Law Settlement Counsel v. Bailey, reportedly congregated a full house. Among the crowds of bankruptcy and insurance law professionals was former New York State Governor Mario Cuomo, who is now of counsel at Wilkie Farr & Gallagher.

Asbestos litigation began a long run in 1986, with a settlement against Johns-Mannville Corporation. It has continued to grant awards to those who have suffered various diseases stemming from asbestos exposure.

The cases against Bailey have been accepted as a model of success for compensation, since 660,000 claimants have received more than $2.8 billion in payouts. Insurers did contribute to the fund. In return, the bankruptcy court offered immunity to them, guaranteeing that they would not be charged with claims in the future related to their policies with asbestos makers.

Plaintiffs’ lawyers, however, later found other grounds on which to sue major insurers, including Travelers Indemnity. The company retaliated, asserting that the new claims were barred by the bankruptcy court’s immunity order. Cuomo conducted mediation, with the result that Travelers agreed to fund a $500 million trust for the new plaintiffs, in return for clarification that it would then be immune from even further claims.

Some plaintiffs who were not part of the new settlement objected, and last year the 2nd U.S. Circuit Court of Appeals ruled in their favor, saying that bankruptcy court lacked the power to immunize Travelers from the other claims. Monday’s hearing was in direct response to this ruling.

Justice Ruth Bader Ginsburg was the most aggressive questioner in the lively Court, asking the lawyer for Travelers, Simpson Thacher & Bartlett partner Barry Ostrager, over 20 questions in his 30 minutes on the stand. Bader called it a “most mysterious case.”

She even scolded Ostrager mildly for beginning to answer one of her questions before she finished asking it.

More than once, Justice Stephen Breyer expressed concerned that if new claims are allowed against Travelers, other insurers would be reluctant to contribute to similar settlement funds in the future. Most Other justices seemed sympathetic toward Travelers, as well.

Travelers agreed to the settlement, not knowing if it would receive protection from future claims.

 

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