IBMs Legal Woes Reflect U.S. Tort Environment

International Business Machines Corp., the world's top provider of computer hardware, is facing legal woes from hundreds of its former employees, and some insurance experts are saying it's part of a larger trend in the U.S. tort environment where many trial lawyers zero in on workplace toxins.

Robert Hartwig, senior vice president and chief economist at the Insurance Information Institute in New York, commented that this type of claim is not new in the greater scheme of things “people becoming ill from exposures from some sort of chemical in the workplace. This is not altogether a path-breaking type of litigation,” Mr. Hartwig observed.

But, he added, IBM's legal troubles do open up a new avenue in this “well-trodden path,” where occupational injuries wind up in the tort system. “And in many cases, they wind up being very expensive,” he noted.

In February, the Armonk, N.Y.-headquartered IBM squared off in Santa Clara County Superior Court in California with two of its retired workers, who alleged that systematic chemical poisoning at IBM's San Jose, Calif., manufacturing plant caused cancer, and that IBM managers hid adverse health effects of chemicals used at their plant from their factory workers.

In its defense, the computer giant presented occupational-health specialists who argued that chemical-exposure levels at the IBM plant were very low well within established health guidelines and not a likely cause of cancer.

And while the jury in that case ruled unanimously against the plaintiffs, who were seeking millions of dollars in damages, in March, IBM decided to settle a separate suit filed in New York. In that suit, the plaintiff, a 23-year-old woman who was born without knee caps and with a deformed skull and who suffers from brain damage, alleged she is the victim of birth defects caused by chemicals used in yet another IBM plant.

The plaintiff, Candice Curtis, the daughter of a former IBM employee who started working in the company's semiconductor plant in East Fishkill, N.Y., when she was pregnant, was seeking $100 million in damages. Ms. Curtis has alleged she had developed her conditions because her mother inhaled noxious fumes when dipping silicon wafers into acrid chemicals in her workplace. The terms of the settlement, which the two parties reached just as the jury selection was beginning for the case, is not currently disclosed.

IBM spokesperson Chris Andrews explained to National Underwriter that the “Curtis case” has now been concluded and dismissed. “Terms of the resolution are confidential and will not be disclosed.”

“Cases settle because both parties take into account the many contingencies, risks and unknowns of litigation, and make decisions accordingly,” Mr. Andrews said. He added that for its part, IBM still firmly believes based on facts and evidence that it had no liability in this case and that its workplace didn't cause the plaintiff's injuries.

However, IBM's legal adversity is far from over. In fact, there are still hundreds of related lawsuits brought on by the Big Blue's former employees, who charge they developed cancer or poisoning while being exposed to chemicals used in IBM plants.

“A lot of it depends on how they are brought forward by the plaintiffs and their attorneys, because they may group some together or pair them up,” as was the case in the California trial in February, observed Mr. Andrews. But he added that the ballpark figure for IBM lawsuits still awaiting trial currently number around 200.

“They generally involve some sort of illness or injury that plaintiffs allege is caused by the workplace,” he explained, adding that among them, 45-to-50 cases involve birth defects in children of workers or former workers.

Rita Novak, assistant vice president at Des Plaines, Ill.-based Property Casualty Insurers Association, who is keeping a close watch on workplace-toxin litigations around the country, remarked that the Candice Curtis case involved “a horrible situation.” But at the same time, she added, “IBM was very upfront. They said they had no knowledge whether anything was toxic. No one can say whether these birth defects are the results of Ms. Curtis' mother working in the IBM facility.”

As for such a legal proceeding's impact on IBM's financial bottom line and its insurance coverage, the company may be to a large extent self-insured, Mr. Hartwig observed. “Most major companies do have very large retentions when it comes to virtually any kind of liability suit filed against them.”

And while IBM declined to elaborate on its insurance arrangements, Mr. Hartwig remarked that it's probably the case that a large proportion is financed by IBM itself.

“But I can tell you that most major computer companies in this country do buy private liability coverage. So it's quite possible there's some private coverage in place here,” he said. He added that these types of claims would typically affect the higher-level liability insurers, such as excess-casualty insurers that pay on high-dollar-value awards settlements.

Furthermore, when looking beyond IBM in cases of other semiconductor companies that may retain less of the risks themselves and purchase more insurance in the private sector there is the potential for substantial exposures.

And there are plenty of possible plaintiffs waiting in the semiconductor industry. The sector currently employees some 250,000 workers in all, with the number of people who have worked in semiconductor fabrication adding up to tens of thousands during the past 40 years, according to John Greenagle, the spokesperson for the San Jose, Calif.-based Semiconductor Industry Association.

“How many workers have been exposed to these chemicals? Although hard numbers are not easy to come by, there are at least tens of thousands of people who fit into this category and who can at least in theory file lawsuits if they develop ailments,” Mr. Greenagle told National Underwriter.

And Mr. Hartwig also observed that, certainly, these cases seem to be escaping the workers' compensation realm “to try to circumvent the statutory benefits prescribed by state workers' comp system which is important to note.” He added that many of these former employees likely have been receiving workers' comp benefits already but as what's happened in areas such as asbestos, there is a trend toward trying to “break the shackles of the workers' comp exclusive-remedy doctrine.”

“The model for this type of litigation is asbestos, where virtually all exposures were occupationally related, yet you wound up filing claims under products liability, and operations-type policies were being hit,” he explained. “There is a very strong incentive for trial lawyers to do this because there is potentially far more money involved in class-action suits alleging negligence against deep-pocketed defendants than there is for them in the workers' comp system.”

Ms. Novak from PCI said, “I think it's way too early to tell how big in scope this will become.”

“You are talking about exposures to workplace chemicals its an emerging issue,” she added.

“Certainly, there is a concern in the insurance industry but is this going to be the next asbestos? I don't think it's going to hit that,” Ms. Novak said.

But similar types of litigations to circumvent workers' comp systems have also been found in the type of claim called silicosis, and even in the toxic-mold area.

As for the semiconductor industry, Mr. Greenagle from the Semiconductor Industry Association said computer-chip makers now have a plan for a new study to examine their historical records to evaluate cancer rates among their plant workers, who sometimes come in contact with harsh chemicals. The decision, he explained, followed an 11-month effort by a team from the Johns Hopkins University's Bloomberg School of Public Health to determine whether a sufficient amount of data exists to undertake such a study.

“We are talking about a study that's going back 40 years,” said Mr. Greenagle, who emphasized the necessity for an in-depth analysis to counter allegations made by some plaintiffs.

“All the companies are concerned all the companies have followed the developments of these cases. But interestingly, critics of the industry are pretty long on making accusations but pretty short on bringing out the evidence,” Mr. Greenagle said.

When Popcorn is Toxic

IBM's settlement of a liability lawsuit in March was just one of a number of cases in which workers say workplace toxins made them sick and they're not confined to the semiconductor industry.

Another notable legal action in recent weeks involved a $20 million jury award in the so-called “popcorn lawsuit” in March, where a factory worker claimed his lungs have been ruined as a result of mixing butter-flavoring oils used in microwave-popcorn products. In that case, a former factory worker in Jasper, Mo., filed his suit against International Flavors and Fragrances Inc., a manufacturer of butter flavorings and there are now reportedly scores of similar suits awaiting trial in Missouri and other states.

In an SEC filing on March 15, the company said it will appeal the decision. The filing added that while IFF could not predict the outcome of the appeal or remaining cases involving workers at the same factory which used butter flavor supplied by IFF, “in light of the merits of its defense and the availability of insurance, the company does not expect the litigation to have a material adverse impact” on its financial condition.

A smaller verdict, a $1 million award to a retired welder late last year, is also drawing the attention of plaintiffs' lawyers, according to Mark A. Behrens, a defense attorney in the Washington office of Shook, Hardy & Bacon. Mr. Behrens, who is also counsel to the Coalition for Litigation Justice, a Washington-based insurer group, said that six earlier welding rod cases, alleging that manganese fumes released in the welding process cause illnesses such as Parkinson's disease, resulted in defense verdicts.

But last year's jury award in Madison County, Ill., has put the issue back on the radar screen of plaintiffs' lawyers, he said, noting a high number of conferences and seminars that now include discussion of the issue.

Reproduced from National Underwriter Edition, April 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Special Reports /

IBMs Legal Woes Reflect U.S. Tort Environment

Related Stories

Recommended For You