Supreme Court Denies Petition To Review Ruling In Asbestos Coverage Lawsuit

Supreme Court Denies Petition To Review Ruling In Asbestos Coverage Lawsuit

WASHINGTON, D.C.- (Mealey's) The U.S. Supreme Court on Nov. 30 denied an insurer's petition for certiorari seeking review of the Second Circuit U.S. Court of Appeals' ruling that a 1986 injunction issued in asbestos manufacturer Johns-Manville Corp.'s bankruptcy proceedings does not apply to Chubb Indemnity Insurance Co. because Chubb did not have constitutionally sufficient notice of the injunction (Travelers Indemnity Co., et al. v. Chubb Indemnity Ins. Co., No. 10-244; U.S. Sup.).

Travelers Indemnity Co. and Travelers Casualty and Surety Co. provided 30 years of primary liability coverage to Johns-Manville from 1947 to 1976.  The world's largest manufacturer of asbestos materials filed for bankruptcy in 1982.  The debtor's reorganization plan, which was confirmed in 1986, contains an injunction that permanently enjoins "all persons" from bringing any action against any of the settling insurance companies to "directly or indirectly" collect or recover payment regarding any claim or other asbestos obligation.

U.S. Bankruptcy Judge Burton R. Lifland of the Southern District of New York ruled that the confirmation of Johns-Manville's plan prohibited the direct actions. 

The Second Circuit U.S. Court of Appeals held that the Bankruptcy Court lacked subject matter jurisdiction in 1986 to enjoin direct actions.  The Second Circuit issued the ruling in an appeal of a settlement that three classes of plaintiffs reached with Travelers in 2004, holding that the Bankruptcy Court's authority to clarify prior orders could not be used to enjoin claims over which it had no jurisdiction.

Travelers Indemnity, Travelers Casualty, Travelers Property Casualty Corp. and the Common Law Settlement Counsel filed petitions for writs of certiorari with the Supreme Court appealing the Second Circuit's ruling.  

In a June 18, 2009, opinion, a majority of the Supreme Court declined to decide whether any particular party is bound by the 1986 injunction and instructed the Second Circuit to address Chubb's due process argument and other objections on remand.  Chubb seeks to pursue contribution and indemnity claims against Travelers Indemnity.

On March 22, the Second Circuit found that the 1986 injunction issued in Johns-Manville's bankruptcy proceedings does not apply to Chubb because the insurer did not have constitutionally sufficient notice of the 1986 injunction.

Travelers filed a petition for writ of certiorari in the Supreme Court on Aug. 18. 

The Supreme Court denied the petition.  Justice Sonia Sotomayor did not take part in the decision.

[Editor's Note:  Full coverage will be in the Dec. 1 issue of Mealey's Litigation Report: Insurance.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

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