View this article online: https://www.insurancejournal.com/magazines/mag-features/2004/01/12/35718.htm
In mid-December 2003, Houston-basedHalliburton Company filed Chapter 11 bankruptcy proceedings for several of its subsidiaries, including DII Industries (formerly known as Dresser Industries Inc.) and Kellogg Brown & Root (KBR), in an effort to resolve liabilities related to asbestos and silica claims. However, a group of insurance carriers who say they would be left holding much of the payout bag for Halliburton’s settlement responded with a request for the court to put the brakes on Halliburton’s plan.
The bankruptcy proceedings were filed in Pittsburgh, Pa., according to an announcement released by Halliburton on Dec. 16, 2003. The company said the affected subsidiaries will continue to be wholly owned by Halliburton and will continue normal operations. Halliburton’s Energy Services Group and KBR’s government services
business are not part of the bankruptcy filing.
The petition evolved from a proposed reorganization plan approved by 386,00 asbestos claimants and over 21,000 silica claimants through a voting process. According to the company, of the votes validly cast, over 98 percent of asbestos claimants and over 99 percent of silica claimants accepted the proposed plan. The total amount of the settlement is expected to be over $4 billion.
The agreement reached with representatives of asbestos and silica claimants limits to $2.775 billion the cash required to settle pending claims subject to definitive agreements. Additionally, DII Industries agreed to pay $326 million of the $2.775 billion cash amount prior to the Chapter 11 filing.
Halliburton said it plans to increase its accrual for current and future asbestos and silica claims to reflect the full amount of the proposed settlement, which will result in a pretax charge of about $1 billion for the fourth quarter 2003.
According to Associated Press reports, the 20-plus insurers seeking to halt the bankruptcy actions believe they will have to pay a large portion of the $4 billion payout—around $2.1 billion. In a court filing in Houston, the insurers alleged that Halliburton forged the deal with the claimants by offering to pay far more than the historical per claim average in asbestos settlements. They indicated that under Halliburton’s $2.78 billion cash deal the payout would amount to nearly $7,000 per claim. Historically, the average per claim settlement in asbestos cases is $920, according to the carriers.
The insurers also argued that the case should be dismissed because the affected subsidiaries are solvent. Halliburton inherited the asbestos claims when it bought DII for $7.7 billion. Most of the asbestos-related claims were filed against former Dresser subsidiary, Harbison-WalkerRefractories Co., based in Pittsburgh.
A hearing is scheduled for Jan. 13.