Insurer Sues Montana Over Asbestos Settlement

By MATTHEW BROWN | February 27, 2012

A Nebraska insurance company has filed a lawsuit against the state of Montana to recover $16 million that was used primarily to cover a sweeping financial settlement of asbestos-related claims from residents of the Superfund town of Libby.

The lawsuit from the Omaha-based National Indemnity Co. asks a Montana judge to order the return of any payments in the settlement that fell outside the state’s insurance policy.

Most of the money from National Indemnity went toward a $43 million settlement in September with more than a thousand asbestos victims. Claimants in the case said the state knew for decades that asbestos dust from a W.R. Grace vermiculite mine was sickening people in Libby, but failed to act.

An estimated 400 people have been killed and 1,750 sickened in and around Libby, considered the country’s deadliest Superfund site.

The settlement money was put into a trust that was not named as a defendant in the case. That means the dispute is not expected to take away from payments to victims.

“I don’t think this has any effect on the trust,” said Bill Gianoulias, chief legal counsel for the Montana Department of Administration, which oversaw the settlement.

Gianoulias declined to comment further on the lawsuit and said the state will respond in court filings.

National Indemnity said in the lawsuit that it paid into the settlement under a 2005 agreement that reserved the company’s right to seek future recovery of the money. The company claims the state failed to properly notice the company about the lawsuits, and that an outside counsel for the state decided to fight the claims without notifying National Indemnity.

The insurance policy at the center of the case was a comprehensive general liability policy effective from July 1973 to July 1975, when it was cancelled one year early for unknown reasons.

“National and the state have ongoing disputes about the parties’ respective rights and obligations” under the terms of the policy, the lawsuits states.

National Indemnity attorney John Maynard declined to discuss the suit.

In addition to the money from National Indemnity, the settlement was covered by $26.8 million from the state’s self-insurance reserve fund and $100,000 from the Montana Insurance Guaranty Association.

More than 60 percent of the claimants in the Libby settlement, or 764 people, had received settlement checks through mid-February, according to Nancy Gibson, the Missoula-based attorney who is overseeing the settlement trust.

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