Libby asbestos case goes to Supreme Court

In a textbook example of the importance of fine print, the state of Montana and its former insurance company have asked the state Supreme Court to decide who’s liable for almost $100 million in damages due to Libby asbestos victims.

The state won a district court lawsuit in 2018 when the judge ruled National Indemnity Co. was responsible for the full settlement, even though it only had the state as a client from July 1, 1973, to July 1, 1975. The settlement involved claims from Libby residents who weren’t warned about the health dangers of asbestos exposure from W.R. Grace and Co.’s vermiculite mine between the 1950s and 1980s. When the district court ruled, the settlement amount was estimated to be $43 million to more than 200 victims.

The current case started in 2012, when NIC sued the state, demanding $16.1 million it spent defending the state over the asbestos claims. Montana officials counter-sued, saying the insurance company not only failed to properly defend against the injury claims but that it was required to cover the subsequent settlements.

At Friday’s Supreme Court hearing, NIC attorney Mary Beth Forshaw said the liability claim now stood at $97 million. She argued that state health and safety inspectors knew about the sickness and death suffered by Libby asbestos victims for decades before they sought insurance from NIC, and that the company should only be responsible for the damages that occurred during the two years it had the insurance contract.

“Otherwise, it’s like buying policy after you get in a car accident, saying you didn’t know the other guy was going to sue me,” Forshaw told the justices. Furthermore, NIC attempted to defend the state when the asbestos victims brought their claims to court in 2002, but the state refused to let the company participate in the case, she said.

Arguing for Montana, attorney John Sullivan said NIC had a duty to defend the state when the victims brought their injury claims in 2002, and it failed to do so.

The fact that health damage from asbestos exposure can take years to develop and that victims may have suffered the effects in years other than the timeframe when NIC had the insurance contract shouldn’t matter, Sullivan argued. The state sought insurance when its legal advisers realized they might not be able to claim sovereign immunity for their inspectors, meaning that by doing the inspections, the state shared the legal blame for not stopping the asbestos exposure.

“For almost 20 years, NIC has been able to avoid its contract duties to defend the state,” Sullivan said. “NIC admits that loss is the reason the state has had to pay multi-millions of dollars to settle thousands of claims. Its duty to defend is triggered by notice of potential claims. NIC admits these are potential covered claims.”

Although the Libby asbestos health problems were suspected as far back as 1946, the victims made their claims against Montana when NIC was insuring the state in 2002. Sullivan said the company didn’t participate in the lawsuit — which the state lost — so it should have to pay the damages.

On rebuttal, Forshaw said the historical record showed state officials knew about their risk and insisted on handling it themselves without NIC’s offers to help.

The Supreme Court is expected to issue a ruling in 2021.