US Supreme Court Bars Direct Asbestos Claims Against Travelers Insurance

The US Supreme Court ruled that the direct action claims against Travelers Insurance Company for its conduct in the asbestos conspiracy with Johns-Manville Corporation (Manville) were barred by the 1986 reorganization plan of the Manville.

"As part of the 1986 reorganization plan of the Johns-Manville Corporation (Manville), an asbestos supplier and manufacturer of asbestos containing products, the Bankruptcy Court approved a settlement providing that Manville’s insurers, including The Travelers Indemnity Company and related companies (Travelers), would contribute to the corpus of the Manville Personal Injury Settlement Trust (Trust), and releasing those insurers from any “Policy Claims,” which were channeled to the Trust. “Policy Claims” include, as relevant here, “claims” and “allegations” against the insurers “based upon, arising out of or relating to” the Manville insurance policies. 

"The settlement agreement and reorganization plan were approved by the Bankruptcy Court (1986 Orders) and were affirmed by the District Court and the Second Circuit. Over a decade later plaintiffs began filing asbestos actions against Travelers in state courts (Direct Actions), often seeking to recover from Travelers not for Manville’s wrongdoing but for Travelers’ own alleged violations of state consumer-protection statutes or of common law duties. Invoking the 1986 Orders, Travelers asked the Bankruptcy Court to enjoin 26 Direct Actions. Ultimately,a settlement was reached, in which Travelers agreed to make payments to compensate the Direct Action claimants, contingent on the court’s order clarifying that the Direct Actions were, and remained, prohibited by the 1986 Orders. 

"The court made extensive factual findings, uncontested here, concluding that Travelers derived its knowledge of asbestos from its insurance relationship with Manville and that the Direct Actions are based on acts or omissions by Travelers arising from or related to the insurance policies. It then approved the settlement and entered an order (Clarifying Order), which provided that the 1986 Orders barred the pending Direct Actions and various other claims. Objectors to the settlement (respondents here) appealed. The District Court affirmed, but the Second Circuit reversed. 

"Agreeing that the Bankruptcy Court had jurisdiction to interpret and enforce the 1986 Orders, the Circuit nevertheless held that the Bankruptcy Court lacked jurisdiction to enjoin the Direct Actions because those actions sought not to recover based on Manville’s conduct, but to recover directly from Travelers for its own.