Annual Report 2001 - Chubb Group of Insurance Companies

(9) Unpaid Claims and Claim Expenses basis. As the Ñnancial resources of traditional asbestos
defendants have been depleted, plaintiÅs are targeting
The process of establishing loss reserves is complex
these peripheral parties with greater frequency and, in
and imprecise as it reÖects signiÑcant judgmental factors.
many cases, for larger awards. In addition, the plaintiÅs'
This is true because claim settlements to be made in the
bar continues to solicit new claimants through extensive
future will be impacted by changing rates of inÖation and
advertising and through asbestos medical screenings. Litiother
economic conditions, changing legislative, judicial
gation is then initiated even though many of the claimand
social environments and changes in the property and
ants do not show any signs of asbestos-related illness.
casualty insurance subsidiaries' claim handling
Thus, new asbestos claims and new exposures on existing
procedures.
claims have continued unabated despite the fact that
Most of the property and casualty insurance subsidiar- usage of asbestos has declined since the mid-1970's.
ies' loss reserves relate to long tail liability classes of Based on published projections, it is expected that the
business. For many liability claims signiÑcant periods of property and casualty insurance subsidiaries will con-
time, ranging up to several years or more, may elapse tinue receiving asbestos claims at the current rate for at
between the occurrence of the loss, the reporting of the least the next several years.
loss and the settlement of the claim. The longer the time
span between the incidence of a loss and the settlement Early asbestos claims focused on the major manufac-
of the claim, the more the ultimate settlement amount turers, distributors or installers of asbestos products
can vary.
under the products liability section of primary general
liability policies, which typically had aggregate limits that
Judicial decisions and legislative actions continue to capped an insurer's liability. A growing number of asbesbroaden
liability and policy deÑnitions and to increase tos claims by insureds are being presented as
the severity of claim payments. As a result of this and ""non-products'' claims, such as those by installers of
other societal and economic developments, the uncer- asbestos products and by property owners who allegedly
tainties inherent in estimating ultimate claim costs on the had asbestos on their property, under the premises or
basis of past experience have been exacerbated, further operations section of primary general liability policies.
complicating the already complex loss reserving process. Unlike products exposures, these non-products exposures
typically had no aggregate limits, creating poten-
The uncertainties relating to asbestos and toxic waste
claims on insurance policies written many years ago are tially greater exposure. Further, in an eÅort to seek
exacerbated by inconsistent court decisions and judicial additional insurance coverage, some insureds that have
and legislative interpretations of coverage that in some substantially eroded their products coverage are present-
cases have tended to erode the clear and express intent of ing new asbestos claims as non-products premises or
such policies and in others have expanded theories of operations claims or attempting to reclassify old products
liability. The industry as a whole is engaged in extensive claims. The extent to which insureds will be successful in
litigation over these coverage and liability issues and is obtaining coverage on this basis is uncertain.
thus confronted with a continuing uncertainty in its
eÅorts to quantify these exposures.
The expanded focus of asbestos litigation beyond as-
bestos manufacturers and distributors to installers and
Asbestos remains the most signiÑcant and diÇcult mass premises owners has created in some instances conÖicts
tort for the insurance industry in terms of claims volume among insureds, primary insurers and excess insurers,
and dollar exposure.
primarily involving questions regarding allocation of indemnity
and expense costs and exhaustion of policy
The property and casualty insurance subsidiaries' most
signiÑcant individual asbestos exposures involve tradition
with the potential for inconsistent results.
limits. These issues are generating costly coverage litiga-
tional defendants who manufactured, distributed or installed
asbestos products for whom excess liability
coverages were written. While these insureds are relaity
of the property and casualty insurance subsidiaries
SigniÑcant uncertainty remains as to the ultimate liabil-
tively few in number, such exposure has increased in
recent years due to the increased volume of claims, the
related to asbestos related claims due to such factors as
erosion of much of the underlying limits and the bankdisease
manifestation and the resulting potential for in-
the long latency period between asbestos exposure and
ruptcies of target defendants.
volvement of multiple policy periods for individual
Other asbestos exposures are mostly peripheral de- claims as well as the increase in the volume of claims by
fendants, including a mix of manufacturers, distributors plaintiÅs who claim exposure but who have no symptoms
and installers of certain products that contain asbestos as of asbestos-related disease and an increase in claims Ñled
well as premises owners. Generally, these insureds are under the non-aggregate premises or operations section
named defendants on a regional rather than a nationwide of general liability policies.
58