AIA Praises Appeals Court Ruling in Asbestos-Disease Workers’ Compensation Case

August 17, 2005

The U.S. Fifth Circuit Court of Appeals ruled recently that asbestos disease is an occupational disease under the terms of a workers’ compensation policy, and not an injury, thereby maintaining the integrity of workers’ comp insurance contracts under Louisiana law, the American Insurance Association (AIA) reported.

The New Orleans-based U.S. Court of Appeals upheld a lower court decision in Louisiana in the case of Graphic Packaging International Inc. v. Employers Insurance of Wausau. The original case developed in 2000, when Graphic Packaging International Inc. (formerly Riverwood International) made a $1.5 million settlement with 260 former and current employees who claimed they were injured by exposure to asbestos at the company’s paperboard manufacturing plant in Louisiana.

The employer filed a workers’ comp claim citing “bodily injury by disease,” which was denied by Wausau. The employer filed suit against Wausau based on the unclear definition of “accident.” The appeals court found that “an asbestos-related disease does not constitute a ‘bodily injury by accident'” and the policy language is supported by Louisiana case law.

“Employers with asbestos liabilities were attempting to use a part of their workers’ compensation policy to off-load their liabilities on to insurers by contorting the English language. The court’s ruling makes it clear that employers cannot ‘shoe-horn’ coverage of an occupational disease into policy coverage for injuries,” said Bruce Wood, AIA assistant general counsel.

“If the court had held otherwise, employers with asbestos liabilities owed their employees would have been able to improperly transfer their decades-old liabilities to insurance policies that did not provide coverage and for which no premium had ever been charged or collected. Insurers would have been hit with retroactive and unfunded liabilities reaching back decades,” explained Wood.

AIA and other insurance trade associations filed a joint amicus brief in the case arguing the statutory difference between “accidents” and “occupational diseases.”

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