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ASBESTOS LITIGATION: Suits Still Pending v. Inactive Quaker Unit
An inactive subsidiary of Quaker Chemical Corporation continues to be a defendant in numerous lawsuits alleging injury due to exposure to asbestos, according to the Company's annual report filed with the Securities and Exchange Commission on March 5, 2009.
The Company acquired the subsidiary, which sold certain products containing asbestos, in 1978. The subsidiary discontinued operations in 1991 and has no remaining assets other than the proceeds from insurance settlements received.
To date, most of these claims have been disposed of without payment and there have been no adverse judgments against the subsidiary. It is currently projected that the subsidiary's total liability over the next 50 years for these claims is about US$12.2 million (excluding costs of defense).
These cases were handled by the subsidiary's primary and excess insurers who had agreed in 1997 to pay all defense costs and be responsible for all damages assessed against the subsidiary arising out of existing and future asbestos claims up to the aggregate limits of the policies.
A significant portion of this primary insurance coverage was provided by an insurer that is now insolvent, and the other primary insurers have asserted that the aggregate limits of their policies have been exhausted. The subsidiary has challenged the applicability of these limits to the claims being brought against the subsidiary.
In response to this challenge, two of the three carriers entered into separate settlement and release agreements with the subsidiary in late 2005 for US$15 million and in the first quarter of 2007 for US$20 million.
The payments under the latest settlement and release agreement are structured to be received over a four-year period with annual installments of US$5 million, the first of which was received early in the second quarter of 2007, and the second of which was received in the first quarter of 2008.
The subsequent installments are contingent upon whether or not Federal asbestos legislation is adopted by the due date of each annual installment.
During the third quarter of 2007, the subsidiary and the remaining primary insurance carrier entered into a Claim Handling and Funding Agreement, under which the carrier will pay 27 percent of defense and indemnity costs incurred by or on behalf of the subsidiary in connection with asbestos bodily injury claims for a minimum of five years beginning July 1, 2007.
At the end of the term of the agreement, the subsidiary may choose to again pursue its claim against this insurer regarding the application of the policy limits.
The Company also said it believes, that if the coverage issues under the primary policies with the remaining carrier are resolved adversely to the subsidiary and all settlement proceeds were used, the subsidiary may have limited additional coverage from a state guarantee fund established following the insolvency of one of the subsidiary's primary insurers.
Headquartered in Conshohocken, Pa., Quaker Chemical Corporation develops, produces, and markets formulated chemical specialty products for various heavy industrial and manufacturing applications. The Company offers and markets chemical management services.
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Lloyd's Asbestos Litigation Reporter
is a weekly newsletter distributed every Friday co-published by
Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and
Beard Group, Inc., Frederick, Maryland, USA.
Copyright 2008. All rights reserved. ISSN: 1945-4694.
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Additional e-mail subscriptions for members of the same firm
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