Hartford To Pay $1.15B To Settle Mac Arthur Litigation

By Michael Ha

NU Online News Service, Dec. 22, 1:40 p.m. EST?The Hartford Financial Services Group Inc. said it will pay $1.15 billion to settle all claims related to its Mac Arthur Company asbestos litigation.[@@]

The agreement calls for the Hartford, Conn.-based insurer to pay the settlement amount during its 2004 first quarter "in full and final satisfaction of all claims" by Mac Arthur or asbestos claimants against Mac Arthur.

The settlement involves primary general liability policies sold from 1967 to 1976 by The Hartford Accident and Indemnity Company, a subsidiary of The Hartford, to the Mac Arthur Company and its Western Mac Arthur unit, a former distributor and installer of asbestos products to shipyards, refineries and power plants. Mac Arthur began to seek payment for asbestos-related claims from The Hartford beginning in 1978.

In 1987, The Hartford notified Mac Arthur that it had paid the full limit of its policies. But in 2000, Mac Arthur filed suit against The Hartford in U.S. District Court in Eastern New York, contending that limits on those policies had not yet been exhausted. That suit was dismissed last March.

However, Mac Arthur filed a separate suit against The Hartford Accident and Indemnity in 2002, in the Superior Court in Alameda County in California, which was ongoing.

In June of 2002, the St. Paul Companies Inc., based in St. Paul, Minn., another major insurer that sold policies to Mac Arthur, reached its own settlement to pay some $975 million to resolve its asbestos liability.

"That's when Mac Arthur really showed up on anyone's radar screen, when the St. Paul took that hit," said Bill Yankus, an analyst at New York-based Fox-Pitt, Kelton Inc, who has been monitoring Mac Arthur asbestos litigations.

Commenting on the settlement decision, The Hartford Chairman and Chief Executive Officer Ramani Ayer said in a statement that accepting this agreement was "very difficult but absolutely the right thing to do."

"My team and I fervently believe that The Hartford long ago satisfied all of our obligations to Mac Arthur," Mr. Ayer said. "Nonetheless, because of the unique facts associated with this matter, this exposure presented a potential multibillion-dollar risk to our company if our defenses failed."

Mr. Ayer also explained that Mac Arthur was "far and away our largest asbestos exposure" and that no matter how strong his belief in the merits of the carrier's position in litigation, "I could not gamble the interests of our shareholders, customers and employees when the op-portunity became available to end the litigation."

The Hartford noted that it won't incur any earnings charge for the settlement, since the cost will be funded through existing reserves. Last May, the insurer strengthened its asbestos reserves by $2.6 billion and posted a $1.7 billion charge to its 2003 first-quarter earnings. The Hartford would still lose its previously anticipated investment income on the cash that will now be used to fund the settlement, but the company said that loss won't be big enough to alter its previous earnings guidance for 2004.

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Hartford To Pay $1.15B To Settle Mac Arthur Litigation

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