A bankruptcy judge in Pittsburgh has ruled that insurers for Federal-Mogul Corp. may be required to pay in excess of $500 million into a bankruptcy trust to compensate the victims of Federal Mogul’s asbestos products. Judge Judith Fitzgerald rejected the insurers’ claims that they had committed to pay claims against the company, but paying into a bankruptcy trust did not fall under that deal. The ruling required the insurers to immediately begin paying claims being handled by the trust just as they would have paid claims against Federal Mogul had it never filed for bankruptcy. The judge’s ruling makes more money available for asbestos claimants, but it also encourages the strategy, popular with companies facing asbestos liabilities, to divert asbestos claims into a bankruptcy trust funded in part with insurance money.
For the full story, go to the Houston Chronicle.
