Opinion ID: 768223
Heading Depth: 3
Heading Rank: 1

Heading: The Wellington Agreement

Text: 2 National Gypsum Company (National Gypsum) was a manufacturer of asbestos-containingproducts, while Insurance Company of North America (INA) was one of its insurers, having issued liability insurance policies to National Gypsum in the 1950s. Beginning in the 1970s, National Gypsum was sued for bodily injury and property damage claims arising from the asbestos-containing products it sold. An insurance coverage dispute soon followed mirroring the litigation taking place throughout the country between other former asbestos manufacturers and their insurers. 3 A large part of this industry-wide litigation was ended when a number of parties reached a negotiated settlement, commonly referred to as the Wellington Agreement. This accord, signed in 1985 by numerous manufacturers and their insurers -- including National Gypsum and INA -- resolved persistent contribution and indemnity issues, thereby allowing for joint representation in thousands of pending asbestos-related lawsuits. The Wellington Agreement provided for the creation of the Asbestos Claims Facility to analyze, defend, and settle pending and future asbestos-related bodily injury claims referred to it by participating former asbestos producers. Under the agreement, funding for the payment of settlements, judgments, and legal expenses incurred in the defense of asbestos-related bodily injury claims against the party-producers was provided by the party-insurers. 4 But not all insurers signed the agreement, causing gaps in coverage to arise where non-signatory insurer payments were called for. Under the Wellington Agreement, party-insurers agreed to make gap-filling payments to cover the non-signatory insurers' share of defense and indemnity costs. It was recognized that this would cause the insurers to pay out their policy limits more quickly than they would if the non-signatory insurers were participating. In response, Section XX of the Wellington Agreement was designed to compensate signatory insurers for these interim payments. Under Section XX, producers are required to use their best efforts to obtain coverage from non-signatory insurers. To encourage producers to pursue non-signatory insurers, interest on gap-filler payments begins to accrue two years after payment is made. The producer must thereafter pay interest quarterly until the earlier of (a) a settlement with or final judicial determination against the non-signatory insurer, or (b) the date on which the signatory insurer would have exhausted its policy limits if the non-signatory insurer had been a participating party to the Wellington Agreement. 5 Some of National Gypsum's insurers did not sign the Wellington Agreement, thus INA's successor in interest, Century Indemnity Company (Century), allegedly made gap-filling payments on behalf of National Gypsum for amounts owed by non-signatory insurers from October 1987 through May 1990. According to Century, Section XX interest accrued on the amount due to Century through March 1994, and prejudgment interest continues to accrue. Century claims that National Gypsum has never paid any portion of the now more than five million dollars owed to Century.