An exclusion for claims ‘arising out of asbestos’ was upheld by the US Third Circuit because it is unambiguous and therefore enforceable. The Appeal Court overturned a $36 million judgment against the insurer, which is only part of the policyholder’s liability for $120 million worth of asbestos-related claims. The court did not accept the argument that the exclusion was ambiguous and that it only related to raw asbestos in its unprocessed form.
The court held that the phrase ‘arising out of’ is unambiguously satisfied by the ‘but for’ causation test. Because the losses relating to the underlying asbestos suits would not have occurred but for asbestos, raw or within finished products, the exclusion was upheld and the lower court’s judgment was set aside.
This decision comes after a long battle between the insured, General Refractories Co, and insurers relating to tens of thousands of claims brought by plaintiffs who say they were injured after being exposed to the company’s asbestos-containing products.
The case is General Refractories Co. v First State Insurance Co.