Opinion ID: 63053
Heading Depth: 2
Heading Rank: 2

Heading: The Property Damage Litigation

Text: Before the initial wave of bodily-injury suits against asbestos manufacturers in the 1970s had subsided, a second wave of property-damage suits appeared on the horizon. Such suits were foreseen by Celotex, which anticipated an 3 The focus of the coverage dispute over bodily-injury claims was whether “asbestosis” was one discrete disease or a term the parties used to refer generically to all symptoms and diseases resulting from asbestos exposure. The bankruptcy court chose the former interpretation. 5 “explosion” of property-damage litigation similar to the then-familiar bodily-injury cases. Asbestos-related property-damage suits were encouraged by the federal government. In 1979, the EPA published a document called the Orange Book which provided guidance to owners of buildings containing asbestos. The Orange Book advised building owners that any exposure to asbestos, even in small amounts, could be carcinogenic, and that owners should remove asbestos from their buildings. Congress passed legislation in 1980 which obligated school districts to look for asbestos in their buildings, assisted them in doing so, and assisted them in mitigating hazardous conditions resulting from asbestos exposure. See generally 20 U.S.C. § 3601 et seq. The first asbestos-related property-damage suits were filed in 1980, but Celotex was not a party. In 1981, pursuant to federal statutory requirements, the Attorney General issued a report on the state of asbestos litigation which was essentially a blueprint for school boards to sue asbestos manufacturers; the report included a model complaint and specifically named Celotex as a potential defendant. The first asbestos-related property-damage suit naming Celotex was filed in 1981, and more soon followed. In June 1982, the first of five class action suits seeking damages for asbestos-related property damage was filed against Celotex. The other four suits included a case filed January 1983 involving 4,000 buildings. 6 Altogether, the pre-1985 property-damage suits against Celotex sought about $2 billion in damages. Nonetheless, Celotex did not notify its excess insurers of these suits as the pleadings were received. Celotex and Aetna did not pay anything on an asbestos-related propertydamage claim, whether by judgment or settlement, until 1986. From 1986 to 1988, Aetna, the primary insurer, paid only $785,000 in property-damage claims. Further, these payments were well within the limits of property-damage coverage under the primary policies, so no indemnity was due from the umbrella and excess policies. When Celotex filed for bankruptcy in 1990, it still had remaining propertydamage coverage under the primary policies;4 no excess carriers had yet been impacted. Celotex initiated this declaratory judgment proceeding to determine its rights under the policies. Approximately $20 billion in proofs of claim were filed against Celotex alleging property damage from its asbestos products. Its ultimate liability for property damage is not yet known, but Celotex estimates it will be on the order of billions of dollars.