Warren Buffet's much loved "float" is finally receiving some scrutiny, at least as to the asbestos-generated float. For years, anyone well-versed in asbestos watched various shell games among various insurers as they sought to avoid the sting of asbestos litigation. One of the biggest collective player of all - the London insurers - took one of the big steps with the creation of a chimera known as "Equitas." Later, Equitas ultimately used Buffet to put in an allegedly final barrier of reinsurance.
Today, Warren Buffet and his Berkshire insurance entities are the biggest player in asbestos insurance. And within the asbestos community, the reputation is that they delay, deny, and defend. The biggest vehicle for the tactic is known as Resolute. Current defendants that cannot claims paid by Resolute are not happy.
Now, Scripps and others are starting to put some focus on the reality that Resolute and others fail to pay claims in good faith. A new article by Mark Greenblatt is here and collects some of the verdicts and claims stories in cases in which insureds and victims have argued and won on claims that actions by the Berkshire companies cannot be squared with the duty of good faith and fair dealing implied in every contract.
Set out below are some key quotes from Mr. Greenblatt's article:
"Scripps interviewed more than 20 sources -- some confidential -- reviewed dozens of lawsuits and spoke with former insiders, who all allege the Berkshire-owned companies that handle its asbestos and pollution policies -- National Indemnity Co. and Resolute Management Inc. -- wrongfully delay or deny compensation to cancer victims and others to boost Berkshire’s profits. In multiple cases, courts and arbitrators have ruled that the Berkshire subsidiaries’ tactics have been in “bad faith” or intentional.
Through 25 known deals, insurers like American Insurance Group, CNA Financial Corp. and Lloyd’s of London have paid Berkshire to assume their risk for tens of billions of dollars in future asbestos and pollution claims.
“I do believe we have the largest single exposure to asbestos and pollution claims of any insurer today,” Berkshire Hathaway Reinsurance Division President Ajit Jain told Scripps via email. He and Warren Buffett declined repeated requests for interviews.
Until Berkshire has to pay those claims, it can invest and potentially profit from the money. And it gets to decide when claims get paid.
Dozens of large corporations are angry, too [at Berkshire].
Ford Motor Co., Estee Lauder Inc. and others allege wrongdoing by Berkshire-owned National Indemnity and Resolute. These companies bought commercial policies to protect against long-term claims for pollution and health-related problems linked to their products or services. They’re suing for reimbursement of fines, legal fees and payments of injury claims.
The idea of "float" is at the core of Berkshire's overall success....In his 2009 message he wrote: “Our float has grown from $16 million in 1967, when we entered the business, to $62 billion at the end of 2009.” By 2012, that number had grown to $73 billion.
As a former claims executive, Robert Burns took his orders from Resolute. In August of this year, he testified in Estee Lauder’s ongoing New York lawsuit that Resolute routinely based claims-payment decisions on the company’s financial goals, not the merits of each case.
Burns declined an interview. But Scripps exclusively obtained a copy of the recent video deposition in which Burns said under oath Resolute President Thomas Ryan set “targets” that were tracked by Berkshire executives.
“The entire operation was driven by the target numbers,” Burns testified. “They wanted to hit the projected numbers in the books of business so they could maximize their return on investment.”
Burns said company targets and projections ran 20 to 25 years into the future, designed for Berkshire to ensure its rate of return on its money.
And he testified that Ryan told him those targets had to be hit for Ryan to get his bonus.
Ajit Jain told Scripps, “Mr. Ryan, as well as others who work at the reinsurance division, are not paid based on a bonus structure; compensation is based on a fixed salary that is reviewed each year.”
Jain did not respond to questions about any additional forms of compensation or incentives Ryan received or may receive, and said Ryan declined an interview.
Burns also testified that claims adjusters felt “extreme frustration” when bosses balked at paying what adjusters viewed as reasonable settlements. “We were told, ‘You’re not paying it. Find a way to avoid paying it.’ ”
(Contact Scripps national investigative correspondent Mark Greenblatt at firstname.lastname@example.org.)