Insured Has Burden of Demonstrating that Settlements of Asbestos-Related Claims Were Reasonable

April 30, 2014 | Insurance Coverage

A federal district court in Maryland has ruled that an insured had the burden of demonstrating that settlements of asbestos-related claims were reasonable.

The Case

After thousands of asbestos-related claims were filed against Porter Hayden Company, it entered bankruptcy. The bankruptcy court confirmed Porter Hayden’s plan of reorganization, which established the Porter Hayden Bodily Injury Trust (“the Trust”) to resolve asbestos claims against Porter Hayden pursuant to Trust Distribution Procedures (“TDP”). The TDP outlined the qualifications for an asbestos claim, the evidence needed to support the existence of such a claim, standards ranking the relative severity of claims, and an associated schedule of values for each severity-level of claim.

The company’s insurance carriers went to court to challenge the reasonableness of the settlements, and moved for summary judgment.

The Court’s Decision

The court granted the insurers’ motion for summary judgment as to their ability to challenge the reasonableness of the Trust’s settlements and as to Porter Hayden having the ultimate burden of persuasion to show the settlements were reasonable.

The court decided that the insurers had the initial burden of production such that they had to produce sufficient evidence to raise a triable issue with regard to the reasonableness of the settlements. Then, the court determined, if the insurers satisfied their burden of production, Porter Hayden had the “ultimate burden of persuasion” to show that the settlements were reasonable. 

The case is National Union Fire Ins. Co. of Pittsburgh, Pa. v. Porter Hayden Co., Nos. CCB-03-3408, CCB-03-3414 (D. Md. March 31, 2014).

 

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