1. Emerging and Latent Risks for Commercial Liability: Other than Asbestos Smitesh Davé

2. Disclaimers All opinions and views contained herein are my own, and are not necessarily the views of the Casualty Actuarial Society or the American Academy of Actuaries, nor of the Travelers.

3. Agenda Environmental Liability Environmental Liability Cumulative Injury Other than Asbestos (CIOTA) Cumulative Injury Other than Asbestos (CIOTA) –Silica: A brief tour –Lead: A Public Nuisance? Emerging issues Emerging issues

4. Environmental Liability

5. Address the “unintended coverage” only, not the covered (limited or sudden and accidental) pollution claims Address the “unintended coverage” only, not the covered (limited or sudden and accidental) pollution claims CERCLA, enacted by Congress in 1980, assigned liability to entities responsible for releases of hazardous waste. CERCLA, enacted by Congress in 1980, assigned liability to entities responsible for releases of hazardous waste. Comprehensive Environmental Response, Compensation and Liability Act Courts have consistently found insurance coverage for this in the “pre-pollution exclusion” policies Courts have consistently found insurance coverage for this in the “pre-pollution exclusion” policies

6. Environmental Liability Note: Claim Counts are only a representation

7. Environmental Liability Courts have also frequently over-ruled the pollution exclusions that have been in use since the mid-1980’s Courts have also frequently over-ruled the pollution exclusions that have been in use since the mid-1980’s

8. Environmental Liability Note: %’s are only a representation

9. Environmental Liability Overall, the trends are favorable: Overall, the trends are favorable: –Major Superfund sites have been addressed –Major “polluters” have been identified –Fewer claims and smaller claims? Uncertainties still remain: Uncertainties still remain: –Courts –Politicians Remember – Dirt doesn’t die! Remember – Dirt doesn’t die!

10. CIOTA – Silica

11. Silicosis (like asbestosis) is a scarring of the lungs, caused by the inhalation of large quantities of silica usually as fine sand dust. Silicosis (like asbestosis) is a scarring of the lungs, caused by the inhalation of large quantities of silica usually as fine sand dust. Like asbestosis, silicosis is a disappearing disease because of strict governmental regulations and employer practices. Like asbestosis, silicosis is a disappearing disease because of strict governmental regulations and employer practices. Deaths attributable to silicosis have dropped steadily (NIOSH data) Deaths attributable to silicosis have dropped steadily (NIOSH data) 1,157 deaths in 1968 448 deaths in 1980 308 deaths in 1990 187 deaths in 1999 148 deaths in 2002

12. CIOTA – Silica Silicosis claim filings exploded in 2002, especially in state courts in Texas and Mississippi Silicosis claim filings exploded in 2002, especially in state courts in Texas and Mississippi

13. CIOTA – Silica Note: Claim counts are only a representation

14. CIOTA – Silica Why? Why? –U.S. Senate (Hatch) started talking about asbestos reform legislation –Some states (TX, MS) enacted comprehensive asbestos litigation reform

15. CIOTA – Silica Plaintiffs were mostly sandblasters, foundry workers, or other work involving silica dust Plaintiffs were mostly sandblasters, foundry workers, or other work involving silica dust Defendants made products that contained silica, were made for working with silica, or protected workers from silica exposure Defendants made products that contained silica, were made for working with silica, or protected workers from silica exposure

16. CIOTA – Silica MDL MDL – Multi-District Litigation MDL – Multi-District Litigation On 9/4/03, 22 actions were centralized into a federal multi-district litigation (MDL), presided over by U.S. District Court Judge Janis Jack On 9/4/03, 22 actions were centralized into a federal multi-district litigation (MDL), presided over by U.S. District Court Judge Janis Jack –85 additional actions were added, creating one suit involving 10,000 plaintiffs seeking damages from 250 corporate producers of silica products

17. CIOTA – Silica MDL Judge Jack had been a nurse and was married to a doctor. Judge Jack had been a nurse and was married to a doctor. 12 doctors (B-readers) accounted for more than 9,000 of the diagnoses 12 doctors (B-readers) accounted for more than 9,000 of the diagnoses Judge Jack allowed defense lawyers to challenge the admissibility of these medical experts’ testimony – VERY UNUSUAL Judge Jack allowed defense lawyers to challenge the admissibility of these medical experts’ testimony – VERY UNUSUAL

18. CIOTA – Silica MDL Dr. M Dr. M –responsible for 36%+ of the diagnoses –under oath, recanted all of his diagnoses, testifying that he “did not intend to make a diagnosis of silicosis…” and that he did not even know how to diagnose silicosis.

19. CIOTA – Silica MDL Dr. H found lung opacities (consistent with silicosis) in 99.6% of the 6,350 B-reads he performed Dr. H found lung opacities (consistent with silicosis) in 99.6% of the 6,350 B-reads he performed Earlier, Dr. H diagnosed 1,807 of the same plaintiffs as having lung opacities consistent with asbestosis Earlier, Dr. H diagnosed 1,807 of the same plaintiffs as having lung opacities consistent with asbestosis This dual-disease phenomenon, while theoretically possible, is a clinical rarity – experts testified that they had never seen one This dual-disease phenomenon, while theoretically possible, is a clinical rarity – experts testified that they had never seen one

20. CIOTA – Silica MDL The doctors involved in this MDL had positive rates of over 92% The doctors involved in this MDL had positive rates of over 92% Experts (Johns-Hopkins study) re-reading a sample (492 of the X-rays used in the litigation) had an average positive rate of 4.5% Experts (Johns-Hopkins study) re-reading a sample (492 of the X-rays used in the litigation) had an average positive rate of 4.5%

21. CIOTA – Silica MDL Judge Jack ruled that the case had been improperly moved out of state courts and into the federal court Judge Jack ruled that the case had been improperly moved out of state courts and into the federal court Judge Jack did make public all of the findings Judge Jack did make public all of the findings Lester Brickman, Professor of Law, Yeshiva University, NY, has written at length about the applicability of this litigation to asbestos litigation Lester Brickman, Professor of Law, Yeshiva University, NY, has written at length about the applicability of this litigation to asbestos litigation

22. CIOTA – Lead

23. Rhode Island verdict: Rhode Island verdict: –“Cumulative presence of lead pigments…constituted a public nuisance.” –Three liable defendants “caused or substantially contributed to the creation of the public nuisance.” –Three liable defendants “should be ordered to abate the public nuisance.” Future action: Appeal Future action: Appeal

24. CIOTA – Lead Other States: Wisconsin – Appellate decision allowing nuisance claim; trial in early 2007 Wisconsin – Appellate decision allowing nuisance claim; trial in early 2007 California – Appellate decision allowing nuisance claim; no trial date scheduled California – Appellate decision allowing nuisance claim; no trial date scheduled New Jersey – Appellate decision allowing nuisance claim; pending review by state supreme court New Jersey – Appellate decision allowing nuisance claim; pending review by state supreme court

25. CIOTA – Lead What is a Public Nuisance? “An unreasonable interference with a right common to the general public” – The Restatement (Second) of Torts “An unreasonable interference with a right common to the general public” – The Restatement (Second) of Torts Most of the questions in front of the courts involve the “reasonableness” issue Most of the questions in front of the courts involve the “reasonableness” issue Examples: Examples: –Erecting a gate across a public road –Pouring toxic chemicals into a public water source

26. CIOTA – Lead: Public Nuisance Advantages to Plaintiff under this theory –Statutes of Limitations/Contributory Negligence/Comparative Negligence unavailable to defendants –State can bring one case to encompass a large body of claims –Standards are vague and malleable –Focus on present harm rather than past conduct –No requirement of Product ID –Availability of injunctive relief

27. CIOTA – Lead Product ID Initial wave of products liability litigation against paint manufacturers failed Initial wave of products liability litigation against paint manufacturers failed Plaintiffs had difficulty proving symptoms were caused by lead, or that this lead was from paint (as opposed to gasoline, water, soil, or any other source of lead) Plaintiffs had difficulty proving symptoms were caused by lead, or that this lead was from paint (as opposed to gasoline, water, soil, or any other source of lead) Plaintiffs could not prove which manufacturer’s paint caused the alleged injury Plaintiffs could not prove which manufacturer’s paint caused the alleged injury

28. CIOTA – Lead Is Public Nuisance a Covered Loss? In theory, “equitable” remedies (as opposed to “legal” remedies) are not covered by a GL policy In theory, “equitable” remedies (as opposed to “legal” remedies) are not covered by a GL policy In reality, it depends on how the courts define the parameters of the nuisance cause of action In reality, it depends on how the courts define the parameters of the nuisance cause of action

29. CIOTA – Lead Is Public Nuisance a Covered Loss? Precedents: Environmental – YES, in virtually all jurisdictions Environmental – YES, in virtually all jurisdictions Gun – mostly NO; see 4 th Circuit (2001) decision: “As a general rule, comprehensive general liability policies do not extend coverage to claims for equitable relief.” Gun – mostly NO; see 4 th Circuit (2001) decision: “As a general rule, comprehensive general liability policies do not extend coverage to claims for equitable relief.” “Your Product” exclusion has held up in the gun litigation; both 1 st and 4 th Circuits. “Your Product” exclusion has held up in the gun litigation; both 1 st and 4 th Circuits.

30. CIOTA – Lead Is Public Nuisance a Covered Loss? Other coverage issues: –Does the pollution exclusion bar coverage? –Does the lead exclusion bar coverage? –Number of occurrences? –Trigger? –Which policy or policies should respond? –Were the injuries expected or intended because the insured knew of the dangers of the product?

31. CIOTA – Lead Lead is no Asbestos!! Why? Why? Insurers’ “Deep Pockets” have not been successfully accessed: –Products Liability approach has not worked – thus far –Public Nuisance may not be a covered loss –Exclusions on GL policies –General Aggregates on more recent GL policies

32. Other Emerging Issues

33. Car Manufacturers (CA) Car Manufacturers (CA) Benzene Benzene Cotton Dust Cotton Dust WTC WTC Don’t forget about the Trial Lawyers. Don’t forget about the Trial Lawyers.