Travelers Companies, the second-largest property-casualty underwriter in the U.S., recently paid out $449 million dollars to settle claims against one of its former policyholders. The company in question, Armstrong Contracting and Supply Corporation (ACandS), was a subsidiary of Armstrong World Industries, and was involved in the sale, distribution and installation of asbestos insulation products. The parent company had been in the asbestos manufacturing business since 1910. ACandS was spun off in the late 1950s as an insulation contracting division. It was severed from the parent company when management employees formed a holding company and purchased all ACandS stock. Although ACandS was assigned some of AWI trademarks, they were not licensed to use the trademark of the former parent company itself. During the 1960s, ACandS used two AWI products in its installation work: a spray-on asbestos insulation material called Armaspray and a product called LT Cork Covering.
According to Armstrong VP of Communication Meg Graham, neither product was “commercially successful.” On 1 January 1974, ACandS announced that it would discontinue the use of friable asbestos products. ACandS filed for Chapter 11 bankruptcy protection in 2002. To date, ACandS has incurred well over $2.6 billion dollars in liability. According to Travelers chairman and chief executive Jay Fishman, “…ACandS has been one of our most significant and longest-standing exposures.” As of 2006, Travelers had nearly 1800 policyholders with pending asbestos claims against ACandS. According to the terms of the settlement, Travelers will pay $365 million, while its reinsurers–companies that protect insurance companies against catastrophic claims–will pay the remaining $84 million. Fishman expressed some relief over the settlement, saying, “Eliminating the uncertainty inherent in this litigation makes this a very good outcome for our company and our shareholders.” The settlement should not affect Travelers’ earnings, since the company had added $860 million to a special asbestos and environmental claims reserve fund in anticipation of such a situation following an unfavorable ruling in the ACandS matter by a federal court in January 2006.