Montana Court Upholds Most Points in Ruling That Cost Insurer $98M for Libby Mine Claims

By Jim Sams | November 24, 2021

The Montana Supreme Court upheld all but one point in a ruling that requires Berkshire Hathaway’s National Indemnity Co. to reimburse the state nearly $98 million for the cost of asbestos litigation tied to the Libby Mine.

In a 6-1 decision released Tuesday, the high court affirmed a decision by the district court in Helena that National Indemnity had breached its duty to defend the state against claims that it failed to warn workers and residents about the danger of exposure to asbestos released from W.R. Grace’s vermiculite mining and milling operations. Hundreds of claimants have filed lawsuits against the state alleging they were injured from asbestos exposure from the 1950s through the 1970s.

After the first lawsuits were filed in 2000, the state hired its own lawyers to defend it. It won in initial rounds, but the Supreme Court ruled in 2004 that the danger of asbestos exposure was well known when the state made regular inspections at the Libby Mine yet failed to warn workers and residents of the potential harm.

Before that ruling, the state had dug through its records storage and located the comprehensive general insurance policy that it had purchased from National in 1973. It notified National of the initial claims in 2002.

National agreed to defend the suit on the condition that the state acknowledge it was liable only for a pro-rata share of costs proportional to the two-year period when the state was insured by its policy, which was canceled on July 1, 1975. The state refused.

The state reached a “global settlement” with the Libby Mine claimants for $43 million in 2011. It then sued National, arguing that coverage was owed for each claimant who was exposed to asbestos during the time the policy was in effect because the policy covered injuries from “continuous or repeated exposure.”

National appealed after the district court judge entered a judgment for$97,883,193.39, even though the state had asked for more. The district court ruled that because the insurer had breached its duty to defend the state during various periods, it could not deny the claims tendered to it during those times.

The insurer argued that it wasn’t liable because the state had concealed its knowledge about the potential asbestos hazard when it purchased the policy. Also, National said that the policy limited coverage to $3 million “per occurence” and all of the claims stem from the same occurrence regardless of how many individuals were injured.

The Supreme Court rejected those arguments.

“In the end, National delayed so long as to prejudice the state by forcing it to litigate and settle cases in coverage darkness,” the court said.

The high court, however, found that the district court had erred in how it defined “occurrence” under the policy. The district court decided each exposure to asbestos counted as a separate occurrence, triggering a separate $3 million coverage limit, if “it were distinct from the time, location, routes, and circumstances of the exposures of other Libby claimants.”

That was a broader definition than offered even by the state, which argued that a separate occurrence was triggered for each of the 21 times that the state failed to disclose the results of mine inspections that revealed unhealthy levels of asbestos.

The Supreme Court said the state’s theory is correct, but it refrained from ruling on the exact number of occurrences because factual determinations are the responsibility of the trial court. It remanded the case so that determination can be made.

The opinion did not state how that finding would impact the amount awarded. A footnote in the decision states that if the trial court’s definition of occurrence were used, the amount of damages “would be in the uncalculated billions of dollars.”

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. State regulators are taking over responsibility for protecting residents of Libby and nearby Troy from exposure to asbestos that remains after a decades-long cleanup of the communities. (AP Photo/Rick Bowmer, File)

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