Legislation allowing companies facing massive asbestos liabilities to create a settlement trust during bankruptcy to compensate people injured after exposure to the substance provided much-needed relief for policyholders, but legal experts say insurers are skeptical of where they fit into the agreements.
Insurance assets can be a significant factor in a trust's proceeds, experts say, but carriers may challenge whether they should pay claims into a trust. In an effort to avert coverage, carriers may also contend that they issued policies to the debtor company rather than a trust.
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A bankruptcy court's approval for the formation of a settlement trust can offer benefits to settling insurance companies, Robert Horkovich of Anderson Kill PC told Law360.
"If an insurance company settles with the policyholder debtor, claims committee and the future claimants' representative, it can get protection by being designated as a protected party, and get the benefit of a federal court channeling injunction," he said.
Horkovich, who represents policyholders, explained that the injunction requires claimants to seek compensation directly from the trust rather than from the debtor company.
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Horkovich went on to say that there is no end in the near future for asbestos injury claims. He pointed to several studies that forecast the filing of injury claims from exposure cases for at least another 20 years.
"Asbestos has not been outlawed, and it hasn't been completely removed," Horkovich said. "So there's still the possibility of exposure."
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