The Hartford Financial Services Group, Inc. announced on Friday that it has agreed to a global settlement of all claims arising out of its historical insurance relationship with Mac Arthur Company and its subsidiary Western MacArthur Company. The agreement calls for The Hartford to pay $1.15 billion during the first quarter of 2004 “in full and final satisfaction of all claims by Mac Arthur or asbestos claimants against Mac Arthur.”
The bulletin noted that the agreement “is subject to several conditions, including bankruptcy court approval and the final confirmation of a bankruptcy plan of reorganization for Mac Arthur granting The Hartford a channeling injunction against any further direct or indirect liability for asbestos-related claims against Mac Arthur.” The payments will be held in escrow until the conditions are met. They will then be paid into a bankruptcy trust for the benefit of present and future Mac Arthur asbestos claimants.
“Accepting this agreement was very difficult, but absolutely the right thing to do,” stated Hartford’s Chairman and CEO Ramani Ayer. “My team and I fervently believe that The Hartford long ago satisfied all of our obligations to Mac Arthur. Nonetheless, because of the unique facts associated with this matter, this exposure presented a potential multi-billion-dollar risk to our company if our defenses failed. Mac Arthur was far and away our largest asbestos exposure. However strong my belief in the merits of The Hartford’s position, I could not gamble the interests of our shareholders, customers and employees when the opportunity became available to end the litigation.”
Ayer also offered a forthright opinion on the present state of asbestos litigation, noting that the injustice of the system “cries out for real reform, and we at The Hartford will continue to work unceasingly towards that end.” He added that “If any one needed proof that the system is broken, I can offer this case.”
The cost of the settlement will be funded from The Hartford’s existing reserves. “Our reserve study allowed for a very large ultimate liability for Mac Arthur,” Ayer indicated. “We will absorb this settlement without a charge and will be comfortably within the middle of the actuarial range we determined last May. With this settlement, we end the year having dealt thoroughly with asbestos and having eliminated what was by far our most significant exposure.”
Standard & Poor’s Ratings Services reacted to the announcement with a statement that the settlement “will not result in any rating actions on HIG or its member companies at this time.” Fitch Ratings commented, “this planned global settlement aligns with current rating expectations and, thus, does not alter Fitch’s current rating opinion.”
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