In Continental Insurance Company v. Honeywell International, the New Jersey Supreme Court held that Honeywell was not required to contribute to damages related to brake and clutch pads containing asbestos, even though the company continued to make those products for more than a decade after 1987, when it could no longer obtain insurance coverage.  Specifically, the Court held “an insured is not forced to assume responsibility in that allocation during the insurance coverage block for years in which insurance coverage is not reasonably available for purchase.”

Asbestos coverage disputes are unique in that, because asbestos-related diseases generally do not emerge until decades after exposure, many years of coverage are implicated, and determining what policies will pay has proven to be a complicated task.  Under New Jersey law, each insurer pays based on the degree of risk assumed, and the amount of time each policy was on the risk.  Normally, if the policyholder did not purchase insurance for a particular period, they would be on the hook for that portion of liability.  However, the Honeywell court affirmed prior New Jersey precedent that, if no insurance was available, then the unavailability exception applies and the policyholder will not be required to contribute.  This is the case even though asbestos exclusions became ubiquitous in 1987 and Honeywell continued to manufacture asbestos products.  To that end, the court focused on the goals of “maximizing insurance resources” and spreading risk across the insurance industry.

In dissent, Justice Albin noted the negative impact of the holding, writing, “This court compels insurance carriers that previously insured the corporation – but later refuse to do so – to remain guarantors for claims arising during the years the corporation continues to manufacture its dangerous products.”  This underscores the potential negative effects that could follow should other states follow the New Jersey Supreme Court.  Given the thousands of outstanding asbestos cases throughout the country, and because this issue could come up over again, asbestos insurers may be required to pay for millions in future lawsuits.

Thanks to Douglas Giombarrese for his contribution to this post.