Clapper, Patti, Schweizer and Mason

The American International Group (AIG) insurance agency transferred the liability for over $1.85 million in asbestos-related insurance claims to Berkshire Hathaway earlier this month.  The liability was incurred by Chartis, the “Property and Casualty” branch of AIG. 

While many of the company’s total claims have already been paid, AIG was—until this new deal was signed—still responsible for over $3.5 million in asbestos liability.  From here on, that liability will be split between AIG and Berkshire. 

The liability was incurred when Chartis undersigned insurance policies concerning health risks due to asbestos exposure in the workplace including mesothelioma and asbestosis.    It is important to note that all of this liability was actually incurred by vouching for insurance policies written before 1985.  After that time, the federal government imposed strict regulations on the use of asbestos containing materials and any new manufacture of asbestos products. 

The move to transfer liability was part of AIG’s restructuring and designed to make them look like a better investment for their shareholders, not out of any concern for the potential victims of asbestos exposure. 

The deal was structured by Chartis Chief Executive Officer Peter Hancock who was given the position after AIG underestimated it’s liability by more than $4 billion, requiring them to desperately seek a  boost in revenue or suffer dire financial consequences.

Company officials have not yet stated whether or not future claimants will experience any new adversities or obstacles when filing and asbestos-related health claim using one of these insurance policies but future processing and handling will be orchestrated by Berkshire Hathaway. 

AIG was quick to add that the deal will not affect any insurance claims already filed with the company, only the cases of future claimants.

Berkshire Hathaway, one of Warren Buffet’s companies, has a history of taking on the asbestos-related debt of other companies, including Lloyd’s of London and CNA Financial Corp., and has paid out nearly $30 million in asbestos-related insurance claims since 1991.  Under the new agreement, the liability will be assumed by Berkshire’s National Indemnity group.

Why would such a company accept such a deal knowing the risk of asbestos and the cost of mesothelioma treatments?  Berkshire is hoping that the actual amount of claims will be less than the estimated $3.5 million so that they can earn a profit on their investment—in essence gambling with the health and lives of the insured. 

Though the insurance policies in question were written before the asbestos ban, Berkshire Hathaway has still incurred a great deal of risk in the deal.  Because of the long incubation period, or latency period as it is sometimes called, associated with asbestos related illnesses like mesothelioma, patients exposed 25 years ago may already have asbestos-related diseases and not even know it.  Some mesothelioma patients don’t develop symptoms of the disease until 50 years after initial exposure. 

Even with an insurance policy that includes provisions for health conditions caused by asbestos, it may be a good idea, or even necessary, to contact a mesothelioma lawyer in order to simplify the process of filing a claim or fighting to get the full amount of any monetary award that the insured may be entitled to.