Case: Travelers Indemnity v. Bailey & Common Law Settlement Counsel v. Bailey (consolidated)

Date: Monday, March 30, 2009

Issue: Can a bankruptcy judge extend the cone of protection beyond the company of focus to insurance companies that provide funds in a trust for present and future asbestos claims?

Background: This case has its roots in the terrible medical problems suffered by tens-of-thousands of Americans exposed to asbestos. Johns-Manville Corporation was a major asbestos manufacturer and after many lawsuits for health related claims it filed for bankruptcy in 1982. The bankruptcy agreement called for a trust fund to pay all current and future claims and was supplemented by the inclusion of millions of dollars from Johns-Manville's insurers including Travelers Insurance. That agreement protected Travelers from any asbestos-related litigation. But that didn't stop some victims from filing "direct action" lawsuits against Travelers. The Second Circuit Court of Appeals ruled the bankruptcy judge lacked the authority to protect Travelers from the litigation and allowed those suits to proceed. Travelers is appealing that decision and is asking the Supreme Court to affirm the bankruptcy judge's original decision protecting them from litigation.