In another example of the increasing pressures placed upon insurers due to the scope and duration of the asbestos litigation, two excess insurers recently filed a complaint in Illinois state court contending that they are not responsible for asbestos injury claims occurring before 1981, because the insured has not yet demonstrated that the coverage owed by the primary insurers has exhausted.  Click here for a complete copy of the Complaint.

Continental Casualty Co. and Columbia Casualty Co. brought a declaratory judgment action against Hennessy Industries Inc., as successor-in-interest to Ammco Tools, Inc., and 16 insurance companies in the Cook County Circuit Court.  Hennessy, as Ammco’s successor-in-interest, has been named as a defendant in various actions that allege it is subject to tort liability for injuries allegedly sustained because of exposure to asbestos that was caused by the use of products Ammco manufactured, distributed, or sold.  The alleged period of exposure extends from 1955 through 1987.

Continental issued umbrella and excess third-party liability insurance policies to Ammco. Columbia issued one excess general liability insurance policy to Ammco.  As Ammco’s successor, Hennessy has demanded that its excess insurers, including Continental and Columbia, pay for costs associated with claims where the plaintiff has alleged a date of last exposure before September 30, 1981.

Continental and Columbia dispute that they are obligated to pay any costs associated with claims where the plaintiff has alleged a date of last exposure prior to September 30, 1981, in accordance with the methodology outlined in a confidential cost-sharing agreement that Hennessey concluded with its primary insurers in 2008.  Despite these objections, and under a complete reservation of rights, Continental has agreed to, and in fact has, funded certain costs of defending Hennessey.  To date, Continental has spent more than $3 million, which it seeks to recoup through the lawsuit.

Continental and Columbia seek a declaration that they have no duty to indemnify Hennessy for underlying actions where all available primary coverage has not properly exhausted.   Continental and Columbia contend that Hennessy has not proven proper exhaustion of the insurance policies beneath their respective layers.  Additionally, Continental seeks reimbursement of the costs associated with its defense of Hennessy.

We will monitor the case and post appropriate updates as events warrant.