Travelers Ordered to Abide by $500 Million Asbestos Pact

Travelers Cos. (TRV) must pay more than $500 million to victims of asbestos-related diseases under a settlement proposal first approved by a judge in 2004, an appeals court ruled in a case that has been to the U.S. Supreme Court and back.

Travelers was ordered to pay the amount under settlements stemming from the bankruptcy of Johns Manville Corp., once the largest supplier of asbestos and asbestos-containing products. Travelers, based in New York, had been the primary insurer of the company, which sought bankruptcy protection in the 1980s while facing claims related to asbestos exposure.

The U.S. Appeals Court ruling today in New York is the latest in a line of decisions over the proposed payout. The case found its way to the Supreme Court, which in 2009 overturned a ruling allowing suits against Travelers units by people harmed by asbestos exposure and revived the $500 million settlement.

U.S. Bankruptcy Judge Burton Lifland in Manhattan ruled in 2011 that the insurer had to abide by the settlement and pay the victims, saying the dispute had dragged out for too long.

A year later, a federal district court found that certain disputed conditions involving the settlement agreement hadn’t been met and reversed the lower court. The appeals court today disagreed, also finding that Travelers “did not timely raise its arguments” regarding those settlement conditions.

Patrick Linehan, a spokesman for Travelers, said in an e-mail that the company is still reviewing the decision.

‘Potential Outcome’

“This is a matter we have disclosed for more than 10 years and we have contemplated this as a potential outcome” by reserving funds for potential payment, he said. He added that the company didn’t make provisions for about $75 million in pretax interest that was included in the ruling.

Claimants who sought funds from Travelers said the insurer engaged in wrongdoing by misrepresenting Johns Manville’s knowledge of the dangers of asbestos and failed to disclose what it knew about the hazards, according to the opinion issued today.

The appeals panel threw out the district court order and sent the case back with instructions to reinstate the bankruptcy court’s judgment.

Joe Rice, a South Carolina lawyer who represented a portion of the asbestos claimants, said in a phone interview that he was pleased with the appeals court’s decision.

“It’s taken a long time,” he said. Travelers “tried to wiggle out of paying the claimants,” he said.

The case is In Re: Johns-Manville Corp., 12-1094, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Christie Smythe in federal court in Brooklyn, New York, at csmythe1@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net. Joe Schneider, Andrew Dunn

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