The Law

State Jurisdiction Holds: Underlying Asbestos-Exposure Suit Would Not Be Covered

It was a tough lesson learned in court: When a company holds facilities in multiple jurisdictions, an insured is most prepared when it knows under which jurisdiction its policies live.
By: | September 14, 2018

In 1970, Tenneco, an oil and gas corporation with headquarters in Houston, acquired J.I. Case, which primarily did business out of Wisconsin. At the time, J.I. held insurance coverage through CNA Financial. When the CNA policies expired in 1972, Tenneco added J.I. to its general insurance policies under Travelers Indemnity Company.

These policies covered Tenneco and all its wholly-owned subsidiaries with an anti-assignment provision that stated, “Assignment of interest under this policy shall not bind the company until its consent is endorsed hereon.”

J.I. assigned certain assets and liabilities to CNH Industrial America, which also primarily did business out of Wisconsin. CNH believed insurance coverage to be a part of the agreement, however neither J.I. or Tenneco informed Travelers of the assignments.

When CNH found itself in an asbestos-exposure suit, it sought coverage for defense costs and losses. CNH turned to both CNA Financial and Travelers, yet the two insurers denied duty to defend.

A Wisconsin court quickly ruled that CNA Financial’s policies with J.I., and under Wisconsin law, would cover the suit and the two parties settled. However, the court deemed it could not decide Travelers’ involvement due to those policies stemming from Texas jurisdiction.

CNH argued that the relationship between J.I. and Travelers was “direct, extensive, and centered in Wisconsin and independent of Travelers’ relationship with Tenneco.”

However, Tenneco found within its policies general requirements for several of its major divisions and how these requirements were to be applied to its subsidiaries. Within these clauses, it argued that J.I.’s relationship with Travelers was not “independent of Travelers’ relationship with Tenneco,” and therefore the Texas law would govern the ruling.

Travelers pointed back to the clause on anti-assignments and relied on the lack of notice from either J.I. and Tenneco, and the court ruled in the insurer’s favor.

Scorecard: CNA Financial will cover defense costs for the underlying asbestos-exposure suit against CNH, but Travelers is off the hook.

Takeaway: When a company holds facilities in multiple jurisdictions, an insurer is most prepared when it defines under which jurisdiction its policies live.

Autumn Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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