Every once in a while, I wonder where the last 30 years have gone, and I think about all the cases and clients that we’ve handled during that time. A lot has changed since I started practicing law. In the old days, for example, we actually relied upon a dictation pool! We would dictate our briefs and letters into a tape recorder, then send the tapes to a word processing pool, where typists would transcribe the tapes and return paper documents to us for markup with a red pen. Can you imagine? (That last question was for our millennial readers. I know that a lot of you boomers do remember.)
But some things never change. Back in the 80’s, the firm that I was with had a very active practice group in asbestos defense. You would think that over the years, asbestos cases would dwindle, since asbestos was banned from many applications in the United States in the 1970s. Yet people continue to contract mesothelioma and other asbestos-related diseases, and asbestos litigation proliferates. I’m currently involved in trying to negotiate settlements of coverage disputes on behalf of several manufacturers whose products allegedly contained asbestos at some point in the distant past. The interesting (infuriating?) thing about these particular matters is that almost all of my clients’ exposure has been for defense costs. Very few of the plaintiffs have proven that my clients’ products actually injured them. But the beat goes on.
Recently, an interesting case came out of the Eastern District of Pennsylvania, dealing with the proper interpretation of an asbestos exclusion in an excess liability policy. The policyholder, General Refractories (GRC), manufactured and supplied heat-resistant products that, at some point, may have contained asbestos. GRC ended up as a defendant in many asbestos-related suits throughout the United States. It managed to settle with all of its carriers except one – Travelers. Travelers disclaimed coverage for the asbestos suits, because of an exclusion in its policies for injuries or loss “arising out of asbestos.” GRC argued that “arising out of asbestos” did not mean the same thing as “arising out of asbestos-containing products.” According to GRC, asbestos was a raw mineral, while asbestos-containing products were…well, products.
According to Travelers’ lawyers: “Asbestos meant asbestos. It didn’t mean asbestos in one particular form. It meant asbestos, the stuff that was causing these injuries, causing these diseases and that was causing these lawsuits.”
I think that many defense-oriented judges would have agreed with Travelers. In this case, however, the Court held a bench trial on the interpretation of the exclusion. At trial, GRC presented the testimony of an expert (Gene Locks, a lawyer, who was the only live witness presented by either side). Locks testified that from the late 1970s until 1985, the terms “asbestos” and “asbestos-containing product” had distinct meanings and usages in the insurance industry. According to Locks: “Asbestos was the raw fiber. Asbestos-containing products were products manufactured by companies that sold them in interstate commerce that contained some asbestos fiber.” As support for its position, GRC also introduced evidence that several other major insurance companies used policy forms in the 1970s and 1980s that differentiated between asbestos in its raw form, and products containing asbestos.
Noting that the term “asbestos” contained a “latent ambiguity as to what it denotes,” the Court resolved the issue in favor of GRC, writing as follows: “As between the parties’ conflicting interpretations of the Asbestos Exclusion, it need not be decided which is the more reasonable. Each is not without its objective reasons. Yet, in order to prevail, Travelers must show not only that its interpretation is reasonable, but also that GRC’s interpretation is not reasonable. This has not been done. Accordingly, the Exclusion’s phrase – ‘arising out of asbestos’ – is ambiguous. In other words, it is reasonably susceptible of different constructions and capable of being understood in more than one sense. This requires a ruling that favors insurance protection for the policyholder.”
Interestingly, GRC had argued to the Court that the exclusion was not ambiguous – that is, that “asbestos” unambiguously did not mean “asbestos-containing products.” The Court expressly disagreed with GRC’s position, and held that the exclusion was in fact ambiguous. I’m pretty sure that GRC wasn’t too upset that the Court rejected its argument.
I think that what this case demonstrates most of all is excellent lawyering for the policyholder. The use of a credible expert to explain the differentiation in the insurance industry between asbestos and asbestos-containing products had an impact on the Court, as did the introduction of the other policy forms differentiating between asbestos and asbestos-containing products. If the decision makes it to the Third Circuit, I’m very interested to see what will happen. Meanwhile, if your company faces asbestos lawsuits, read your policies carefully.
You can read the full decision here.