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In Re: Fed-Mogul Global, Inc. – Ruling on Asbestos Trusts

Boston mesothelioma lawyers have been following the developments surrounding the case involving Fed-Mogul Global, Inc. gavel.jpg

In Boston mesothelioma cases – and really, in mesothelioma cases all over the country – it’s been common over the last 20 years for businesses accused of exposure to asbestos to file for Chapter 11 bankruptcy.

They do this because they otherwise wouldn’t be able to stay in business if they had to pay out even a handful of the past, current and future asbestos exposure claims. So with a Chapter 11 bankruptcy, they can re-organize the business in such a way that they establish an asbestos trust that they regularly pay into.

People who have legitimate claims against that company for asbestos exposure and a subsequent illness, such as mesothelioma, can file a claim for a portion of that trust money.

The idea is to ensure that as many people as possible will be able to obtain compensation for dangerous exposure, rather than only a few complainants sucking the company dry and forcing it to close.

Many companies see handling these cases in bankruptcy court more favorable than having them wrung through the regular tort system, where they would likely be tied up in litigation for decades.

This was the track Fed-Mogul Global Inc. took. This company, the world’s largest manufacturer of automobile parts, as well as 150 of its affiliates, filed for Chapter 11 bankruptcy back in 2001. this was amid some 500,000 personal injury claims against the company for asbestos exposure. At the time, it had spent more than $350 million both defending against and settling asbestos exposure claims. And the claims showed no signs of stopping.

The establishment of a trust through a Chapter 11 bankruptcy, the company asserted, would assure they could pay out as many as possible and still stay in business. As part of that bankruptcy, the company listed as an asset its right to recovery liability insurance on the claims. So in other words, plaintiffs seeking relief from the trust could also go after the insurance companies as well if the exposure happened while the company was covered by a particular insurer.

However, insurance companies bucked this, saying that the contract the insurers had with the company expressly stated that plan would violate the anti-assignment provisions in the contract. In other words, Fed-Mogul Global could not transfer policies or insurance rights without the consent of those insurance companies – which they obviously weren’t going to provide in this case.

So now, the U.S. Court of Appeals in the Third Circuit, in a 68-page opinion, has sided with the insurance companies in stating that Fed-Mogul Global could not transfer its responsibility onto the insurance companies.

It’s important to note that while bankruptcy law is intended to permit well-intended, honest debtors to start afresh, it should not be a means for wrong-doers to obtain a safe haven. Our Boston mesothelioma attorneys understand that a bankruptcy does not absolve a company of responsibility for their past actions, and we will fight to gain you the compensation you rightly deserve.

If you or someone you love has been diagnosed with mesothelioma in Boston, call for a free and confidential appointment at 1-888-367-2900.

Additional Resources:
In Re: Fed-Mogul Global, Inc.

More Blog Entries:
McDonald v. A.C.&S., Inc. et al. Addresses the Rules Surrounding Summary Judgment in Mesothelioma Cases, April 20, 2012, Boston Mesothelioma Lawyers Blog