Continental Insurance Co. will not have to cover claims against a former division of Michigan-based automotive supplier Federal-Mogul Corp. for lung cancer and mesothelioma linked to asbestos in brake parts and other automotive components.
The Federal-Mogul U.S. Asbestos Personal Injury Trust, created to address claims after Federal-Mogul emerged from a six-year Chapter 11 bankruptcy reorganization in December 2007, had sued Continental in 2008. But U.S. District Judge Arthur Tarnow dismissed the case last year.
Late last week, the U.S. Court of Appeals for the 6th Circuit upheld that decision.
The trust claims that an umbrella policy it holds requires Continental to defend the trust from claims made against Vellumoid Co., a former division of Federal-Mogul that from 1965 to 1981 made gaskets and other components using asbestos.
Federal-Mogul held three primary-level general insurance policies that the bankruptcy reorganization plan reassigned from the auto supplier to the trust — one each from Travelers Indemnity Co., Globe Indemnity Co. and Liberty Mutual Insurance Co. The trust also holds an umbrella policy from Continental and claims that the Travelers policy is now exhausted and that Continental must "continue as underlying insurance" on the Vellumoid claims.
"For Continental's duty to defend to arise, the Vellumoid claims must not be covered by either Travelers or any other underlying insurance collectible by the trust," the appeals court ruling states. The defense of those claims is still currently covered by Liberty Mutual and Globe Indemnity. Therefore, the court ruled, "Continental's duty to defend … has not yet been triggered."