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St. Paul Travelers reviews apparent setback

The United States Court of Appeals for the Third Circuit has voided on procedural grounds a July 2003 arbitration decision that was in favor of Travelers (St. Paul Travelers) in litigation brought by ACandS Inc.

The 2003 arbitration decision had found that third-party asbestos bodily injury claims against ACandS were subject to the aggregate limits of the policies issued by Travelers to ACandS, which had been exhausted. The procedural grounds upon which the Third Circuit’s decision was based related to ACandS’s bankruptcy proceedings. However, the court did not reject any of St. Paul Travelers’ coverage positions.

As a consequence of this ruling, the Third Circuit also reinstated a case which, based on the 2003 arbitration decision, had been dismissed as moot in September 2004 by the U.S. District Court for the Eastern District of Pennsylvania (ACandS Inc. v. Travelers Casualty and Surety Co., U.S.D.Ct., E.D. Pa.). In that case, ACandS asserted that each asbestos bodily injury claim against ACandS is subject to a separate occurrence limit under insurance policies issued by Travelers, while Travelers asserted that such claims are subject to a single occurrence limit, which had been exhausted.

St. Paul Travelers Companies said it continues to believe that it has meritorious positions in these proceedings and intends to litigate vigorously.

The lead attorney for ACandS, David Killalea, said that he believes the ruling will have a nationwide impact. specifically regarding other bankruptcy litigation and what insurers will be required to pay.

“This ruling restricts the ability of an insurer to diminish the value of a bankrupt policyholder’s assets and that is critical,” Killalea said. His client, ACandS, is one of the largest installers in the country and once was a subsidiary of Armstrong, separating from the parent in 1969.

The company said it is reviewing the ruling and would reflect any impact on its previously announced 2005 review of asbestos reserves. St. Paul Travelers said it will review its fourth quarter and full-year 2005 financial performance, as well as the company’s annual review of asbestos reserves.

Topics USA