Newark, NJ, August 3—Congoleum had no choice but to declare bankruptcy under the weight of lawsuits from people saying they became ill after being exposed to asbestos in the flooring, its attorneys said in an article in the Newark, Star-Ledger.
And Congoleum's insurers should be required to cover tens of thousands of outstanding claims that could reach roughly a half-billion dollars, they said.
But a collection of those insurance companies say Congoleum is trying to shirk its financial responsibilities and cut a deal, without proper input from them, that makes it too easy for people with minor injuries to collect.
So went opening arguments yesterday in a trial that is viewed as an important test of how the courts are coping with asbestos-related lawsuits. A flood of such cases have crippled the nation's courts and confounded Congress, which has been unable to craft a solution.
"This is a case about the status of the state of the asbestos tort system," said Jerome Randolph, a lawyer representing Congoleum.
The trial opened yesterday in state Superior Court in New Brunswick to a standing-room-only crowd where lawyers and spectators filled the benches and even the jury box. Proceedings could last into the fall and will feature a parade of witnesses, possibly including some high-profile lawyers who represent asbestos victims. It will be decided by Judge Nicholas Stroumtsos, not a jury.
The outcome will also have an effect on whether Congoleum, which employs about 500 people, can resolve its pending bankruptcy before a federal judge in Trenton. The money the company is seeking from the insurers is central to a plan to form a trust fund to pay for asbestos claims.
The case pits Congoleum against insurance companies such as Travelers Casualty and Surety Company, and Wausau.
Congoleum's lawyers said the company has increasingly become a target of asbestos claims since larger manufacturers declared bankruptcy. About 70,000 cases have been filed. Lawyers said the company tried to defend the claims, but its arguments that the asbestos exposure from the tiles was limited didn't work.
Instead, it decided to settle cases -- even ones where the injuries were questionable. Eventually, the insurance companies said Congoleum had exhausted its policies, and they refused to pay for the defense or settlement of claims, company lawyers argued.
By 2003, company officials felt bankruptcy was the only option.
"(It) offered a viable chance to survive the asbestos crisis," said another company lawyer Russell Hewit.
Lawyers for the insurance companies, however, said Congoleum's actions are not so innocent.
They argued the $500 million settlement that is part of the bankruptcy package is unwarranted. Defending claims and settling others has been a successful strategy and didn't require such a large settlement fund, said Barry Ostrager, who represents Travelers. Up to 2002, the company had only paid out $13.5 million in asbestos settlements.
Congoleum didn't negotiate the settlement in good faith, he added. It agreed to pay claims that were backed by doctors whose diagnoses have been questioned by a federal judge in Texas. He said the company colluded with lawyers representing victims, including some who are the subject of a federal investigation, to stick the insurers with the tab.
"This is a remarkably conflict-ridden arrangement," he said. "The negotiations took place in secret ... to structure the deal."