Insurer’s Failure to Defend in Minn. Asbestos Case Costs $52 Million

December 12, 2005

A jury has awarded $52.5 million to a Roseville, Minn. construction company that sued its Boston-based insurer for failing to defend it against hundreds of personal injury and wrongful death claims tied to asbestos exposure.

Court officials said the verdict returned in favor of API Inc. could be the largest ever in Ramsey County.

“The big message is you cannot mistreat your policyholders who went out and bought that insurance for protection,” said API’s attorney, John Faricy Jr.

Attorneys for OneBeacon America Insurance Co. of Boston did not comment Friday. But OneBeacon could file motions with Ramsey County District Judge John Finley to set aside or reduce the verdict.

The jury awarded API $27.5 million for breach of contract, $10 million for operating in bad faith and $15 million for breach of duty.

Asbestos was commonly used until the mid-1970s in insulation. When inhaled, the tiny fibers can cause cancer and other diseases that often take decades to develop.

API installed and distributed building insulation materials that included asbestos. The dispute centered on the existence and terms of insurance policies from 1958 to 1966. Starting in the 1980s, API was hit with more than 700 lawsuits alleging wrongful death and injury due to asbestos exposure.

API hired investigators to try to locate any records or evidence of insurance. The investigators never found policies but did undercover records indicating that the construction company was covered by General Accident Insurance Co.

API then filed claims with the company’s successor, OneBeacon, which denied the existence of the insurance policies and then disputed the extent of the coverage.

Citing its asbestos liabilities, API filed for Chapter 11 bankruptcy in January. API said OneBeacon’s denial of coverage had forced it to pay out $41 million to settle asbestos claims.

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