Insurance companies dispute who pays in Montana asbestos mining settlement

OMAHA, Neb. (CN) — Years after the state was found liable for asbestos risk to miners and residents near Libby, Montana, two insurance companies are still duking it out over who’s responsible for tens of millions of dollars based on “reinsurance” contracts inked more than a half-century ago.Reinsurance — dubbed “insurance of insurance companies” by the Reinsurance Association of America — is the crux of the trial that began Monday.Under reinsurance, one insurance company indemnifies another for a loss the company buying the policy cannot handle alone — something that National Indemnity claims TIG Insurance Company did not fully do.The issue of reinsurance is characterized by its “long tail” of low frequency but high-volume payouts, and its complexity.“It’ll be a long haul,” Scott L. Davis, a Dallas-based attorney for the Spencer Fane firm, representing TIG, warned jurors in opening statements.Davis said that National Indemnity, which insured Montana, had experienced a costly defeat in the state, spurring it to try to get TIG to cover more losses than it was obligated to cover.“[National Indemnity] breached its duties to the state of Montana and now wants my client TIG to pay the consequences," he told jurors.But National Indemnity maintains TIG was responsible for one-third of National Indemnity’s costs to Montana, to the tune of $44.5 million, according to Michael Knoerzer, a New York-based attorney for Clyde & Co., representing National Indemnity.In 2022, National Indemnity and Montana agreed to resolve all coverage claims over widespread asbestos contamination from the mine since the 1960s for $157 million.National Indemnity billed its reinsurers more than $101 million. They did not pay. Since first filing the lawsuit in 2022, all other reinsurers have been dropped from the suit, but TIG remains. TIG has paid National Indemnity what it believes it owes — $12.7 million.According to National Indemnity, the insurance contract required National Indemnity to pay as much as $3 million per loss. At first, the state said there were 21 occurrences of state inspectors not warning the miners of the asbestos risk.But National Indemnity feared that with potentially thousands of miners and locals affected by the asbestos exposure, the number of occurrences could multiply as the matter moved again through Montana courts, with the state Supreme Court having told the parties to litigate the occurrence number.Ultimately, National indemnity and the state settled at 27 occurrences. At $3 million apiece, that number came to $81 million. The roughly $76 million remaining was largely made up of past and present defense costs.Under their contract, TIG was responsible for one-third of National Indemnity’s costs. So it would have to pay $1 million for each occurrence, Knoerzer said.But Davis argued that in the 2 million pages of documents in the case, he said, Montana never argues for 27 occurrences.“Not once not ever did the State of Montana say there was 27 occurrences," Davis said. “Neither did NICO, until they sent us their bill.”“They keep changing the basis of the calculation to maximize their reinsurance coverage," he added.The insurance companies are also tussling over if National Indemnity fulfilled its requirement to keep TIG abreast of developments in the caseNational Indemnity argues it more than did so, but TIG never took advantage of the opportunity to associate with National Indemnity during the process.Knoerzer said jurors would view images of multiple messages sent from National Indemnity to TIG, starting on April 29, 2005, and going to June 12, 2019.“I can guarantee it went well beyond that,” Knoerzer said. “At no point after receiving these notices did TIG say, ‘we want to associate with this.’”Davis said it was true that National Indemnity did notify its reinsurers but, after April 2005, did not communicate with TIG for four years.“By the time we knew what had happened four years later, it was too late to associate," he said.The case will unfold over the next two weeks at the federal courthouse in downtown Omaha, Nebraska, where National Indemnity Company is based.National Indemnity insured the state of Montana from July 1, 1973, to July 1, 1975. During that same period, TIG provided it reinsurance coverage.And from 1963 to 1990, W.R. Grace & Co. mine, about seven miles outside the small city of Libby in northwest Montana, extracted vermiculite.Vermiculite, once commonly used for fireproof roofing, insulation and wallpaper, itself was not dangerous. But the asbestos the mining stirred up was.Decades of widespread asbestos contamination from the mine caused the U.S. Environmental Protection Agency to declare its first-ever public health emergency during a 2009 Superfund cleanup.Thousands of W.R. Grace workers, their families and local residents since the 1960s have been injured or died from lung disease related to working at, or living near, the mine.The fight over who should be held liable started about 2000, shortly after reports of workers falling ill sparked an emergency cleanup. Contamination has since been blamed for hundreds of deaths.Federal grant funding for Libby’s screening clinic for asbestos patients has ended, leading to its closure in August, local media reported, leaving the people of Libby, particularly those whose health was altered by their exposure, worried about their futures.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads