A Montana attorney who helped win a $36.5 million jury verdict for a worker exposed to asbestos at the Libby Mine is asking a federal court to void a loss-portfolio deal that transferred liability for hundreds of similar claims from Zurich American Insurance Co. to a Bermuda-based reinsurer.
Allan M. McGarvey of Kalispell has filed a federal lawsuit that seeks a ruling that Zurich’s “retrocession reinsurance” agreement with Enstar Group Ltd. violates Montana public policy. He said Zurich and Enstar have unreasonably failed to engage in settlement negotiations.
The lawsuit seeks an injunction that to block any third-party influence over the mine workers’ claims and force Zurich to pay medical, hospice and other expenses from the workers’ illnesses.
“If I succeed, the acquirers of this liability lose control,” McGarvey said during a telephone interview.
Zurich became liable for hundreds of asbestosis claims when it acquired Maryland Casualty Co., which provided workers’ compensation insurance to W.R. Grace and its vermiculite mine in Libby, Montana. In 2019, Zurich transferred liability for those claims, along with $623 million in loss reserves, to Enstar in exchange for a $507 million fee, according to reports to the Securities and Exchange Commission.
Enstar describes itself as “the industry’s largest stand-alone run-off consolidator,” holding $2.4.4 billion in assets but only $17.9 billion in liabilities. The company said asbestos and environmental liability claims make up 27% of its portfolio.
“If we are successful at settling claims or otherwise manage the expected value of the losses for less than our carried reserves, we recognize favorable prior period development within our net incurred loss and loss adjustment expenses,” the company explains in its 2020 annual report.
McGarvey said investment companies have no business managing personal injury claims. His lawsuit alleges Zurich’s arrangement with Enstar violates public policy because it creates an incentive for a third party to withhold or delay payments and resolve claims, despite the insurer’s legal responsibilities to make timely payments.
“This scheme is not insurance at all, it is a vehicle for turning human suffering into an investment commodity,” the lawsuit says.
McGarvey acknowledged there’s no Montana law that specifically prevents an entity from acquiring someone else’s legal liability and then profiting off delayed payments. But he said it undermines rules intended to make insurance companies act in good faith.
The lawsuit lists 17 living and 29 deceased plaintiffs who contracted lung disease after exposure to asbestos dust from the W.R. Grace mine during the 1960s and 1970s. McGarvey said his clients badly need advance payments for ongoing medical expenses, but Enstar refuses to even discuss settlement terms.
McGarvey represented former W.R. Grace employee Ralph Hutt in a case that resulted in a 2020 Montana Supreme Court decision that found workers who were exposed to asbestos dust from the Libby Mine could pursue lawsuits against Maryland Casualty.
Normally claims for illnesses caused by exposure at work would be confined to the workers’ compensation system, but the Montana high court found that the workers could pursue tort claims because Maryland Casualty had failed to warn them that exposure to the asbestos could endanger their health. The company also provided workplace safety services to W.R. Grace.
The Montana court system created a special asbestos court to handle Libby Mine claims. Judge Amy Eddy chose Hutt’s lawsuit for the first trial. A jury in Great Falls awarded Hutt $6.5 million in damages and $30 million in punitive damages.
Even though that award clearly shows the extent of potential damage awards, McGarvey said Zurich and Enstar continue to make no effort to resolve the some 900 claims that remain pending against Maryland Casualty. He said three more trials to hear claims against Zurich are scheduled for this year.
McGarvey said he is hoping his lawsuit will “disrupt” Enstar’s industry. “Investors shouldn’t have anything to do with these claims,” he said.
McGarvey filed the lawsuit at the U.S. District Court for Montana on Monday. Zurich had not yet filed a reply as of Tuesday. A spokesman for the company told the Associated Press that it does not comment on pending litigation.
–The Associated Press contributed to this report.
About the photo: In this Feb. 18, 2010 file photo, Dr. Brad Black, director of the Libby, Mont., asbestos clinic, looks at X-rays. A doctor in Libby since 1977, Black has been at the front lines of Libby’s asbestos fight.
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