The Tort Claim Industry - Seminar on Allocation of Losses Among Insurers and Insureds for "Nonproducts" Asbestos Cases and Environmental Cases

As noted before, substantive seminars are now a standard part of litigation industry and are indeed a driver of the industry. Today, for example, snail mail brought me brochures for seminars on drug and medical device litigation, automotive product liability litigation and food-borne illness litigation. The seminars usually are interesting because they bring the opposing sides together and force some dialog between the various constituencies. The participants of course do not put all of their cards on the table, but most seminars do produce some new insights and sometimes valuable data on a given substantive area if only because trial lawyers usually are competitive.

The tort litigation industry of course is driven by money. So, another significant part of the seminar industry is devoted to seminars and other educational forums in which the attendees focus on the distribution of financial responsibility for the underlying claims. Seminars of this sort run the gamut, including seminars regarding how to seek out insurance coverage, seminars on when insurers properly deny coverage, and issues between and among insureds, insurers and reinsurers. All of the issues of course must arise from some underlying set of facts, and then a variety of arguments regarding how the facts and attendant financial losses would or should be allocated between or among the various actors in the underlying facts, and their insurers and reinsurers. An example of this sort of seminar landed in my email in-box again this week and prompts this excursus. Specifically, Bates White and Environ will next week host a Chicago conference in which they will talk about the ways in which science and economics come together with respect to allocations of underlying losses from certain types of asbestos cases and "environmental cases."

The link for seminar registration is here, and attendance is free. See below for key excerpts from the description.
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Qualifying & Estimating Environmental Damages:How and when are policies triggered?

Losses to businesses or insurers from asbestos, environmental, and health hazards are inherently uncertain due to the long-term nature of such potential exposures. However the uncertainty can be mitigated by better understanding the damages and by understanding when and how much insurance will be triggered. This is accomplished through site evaluations, identifying all potential damages, and estimating future damages. For example, ongoing screening is done during site evaluations to determine when environmental damage (both historic and potential future) meets the definition of recoverability. These actions will ensure that companies and insurers alike know what potential costs will be and how they will be allocated.

Our experts from Bates White and Environ will demonstrate that for the typical policyholder facing potential environmental damages, our process and experience allows the insurer or policy holder to manage their risk moving forward. Quantifying Nonproduct Losses: How and when were claimants exposed?Which claimants’ exposure to asbestos occurred during business operations and which claimants’ exposure occurred afterwards? The answer to this question may determine if the policyholder’s insurers owe tens of millions, hundreds of millions, or billions.

If a claim is determined to be a “products” claim, such that exposure did not occur during the policyholder’s contracting operations, then insurance recoveries will be subject to the explicit aggregate limit specified in each insurance policy’s products and completed exclusion clauses. In contrast, if a claimant claims exposure during the policyholder’s operations, then the claim may fall outside exclusion clauses (such as a “non-products” claim) and the amount of insurance recovery may not be subject to an aggregate limit.

Our experts from Bates White and Environ will demonstrate that for the typical policyholder with contracting activities, a minority of its claimants were exposed while contracting activities were ongoing; the majority of claimants were exposed long after the contracting activities were completed. They will provide concrete examples. CLE accreditation of this program is approved in Illinois.

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More on Bankuptcy Court Powers and Cutting Off Claims in Tort Cases

Today, more on the amazing world of bankruptcy where some say bankruptcy code section 105 may be used to issue an injunction to solve pretty much any and all problems of a debtor parent,including issuing injunctions to protect solvent subsidiaries.


Courtesy of LAW360, here's the link to an amazing adversary complaint filed in the Lyondell bankruptcy. There, the debtor seeks to enjoin creditors from suing 94 affiliated entities not yet in bankruptcy regarding a paltry $ 650 million. So, rather like the Tribune seeking to give the Cubs the benefit of bankruptcy without all the annoying hassles of being bankrupt, we now see yet another debtor seeking the benefits of bankruptcy without having to undergo the hassles of bankruptcy, all on the theory that issuing an injunction would in some way help the debtor. (Actually, Lyondell has done much the same thing before - this is just a new example.) I used to be impressed by the awesome power of federal district judges, but they may be pikers next to a bankruptcy judges wielding bankruptcy code section 105 powers.

Think about how this same principle could play out in the context of product laibility or other tort claims against uninsured subsidiaries of a debtor. For example,the next case may be a debtor asking the court to enjoin inconvenient things like co-defendants in tort suits bringing cross-claims against debtor entities not in bankruptcy. Thus, Parent Co. could file for chapter 11 but not put sits ubsidiaries into chapter 11. Parent Co. could then go to bankruptcy court to ask for an injunction barring cross-claims or tort claims against subsidiaries on the grounds it could be inconvenient to Parent Co.

Bad policy? Giving debtors that kind of power surely gets rids of some of the incentives to do responsible things like buying adequate insurance, carefully manufacturing well-designed products or otherwise acting responsibly. That outcome is bad news for responsible entities left as targets in the tort system. And, how do good lawyers craft meaningful warranty and indemnification agreements for sales of products between entities if tort and contract risks and obligations can all be terminated just by filing a petition for a parent entity.


Can you imagine the howls of "unfairness" and "bad policy" if a Chinese bankruptcy court issued such an order to protect non-bankrupt subsidiaries of a Parent Co. maker of defective cars that killed or maimed many people ?


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Here's a key quote from the complaint:

NATURE OF ACTION
1. This is an adversary proceeding brought pursuant to Rules 7001 and 7003
of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).

2. The Plaintiff-Debtors assert this complaint for a preliminary injunction
pursuant to section 105(a) of title 11 of the United States Code (the “Bankruptcy Code”), Rule
65 of the Federal Rules of Civil Procedure, and Rules 7001(7) and 7065 of the Federal Rules of
Bankruptcy Procedure (the “Bankruptcy Rules”) to enjoin until at least January 31, 2010 any
attempts to enforce any rights or exercise any remedy under the $615,000,000 and
€00,000,000 8.375% senior notes due August 15, 2015 (collectively, the “2015 Notes”) against
guarantors of the 2015 Notes that have not filed a petition for chapter 11 protection (the “Non-
Debtor-Guarantors”).