The Insurance Industry and Asbestos

The Life Insurance Examiner 1888

        In the late 1880's an examining surgeon of the Travelers Insurance Company, Dr. Charles Stillman, wrote a book with the aim of the author “to present a concise, practical manual, which will enable even the beginner in life insurance examinations to conduct an examination satisfactorily to the company by whom he is employed – to the applicant and to himself – and it is intended to be a systematic and complete treatise upon the subject of life insurance examinations.”

            The second part of the book, Examination of the Applicant, includes a section entitled “Environment” with a sub-heading of “Occupation” and states at the outset, “We append at the close of this paragraph a table showing a classification of the relative influence of the various occupations on the duration of life in general, but it must be the task of the Examiner to determine, in each individual case, how far the applicant’s particular employment is likely to prove prejudicial to longevity, in view of what is elicited by the insurance examination.” In addition Dr. Stillman notes, “In some occupations danger of accidents must be considered; in others, the general deleterious circumstances.”

            As mentioned, Dr. Stillman’s treatise includes a table of “Classification of Risks According to Occupation.” The table places dozens of occupations into four classes of risks. As to certain trades the doctor notes: “Painters, using lead, turpentine and oils, require careful scrutiny before they can safely be admitted. For their case, outside work in the fresh air is preferable to indoor work, and the constitution and physical status must be sound. Workers in phosphorous and quicksilver present the same objections. Stone-cutters, millers, and those engaged in similar occupations, which necessitate constant breathing of air laden with irritating particles, are questionable risks, unless the applicant is exceptionally strong and careful, and his place of business is provided with improved methods of ventilation.”

            The Appendix includes life insurance statistics from a treatise on the records of 30 American life insurance companies, which will be discussed in more detail in the next blog entry.

Marsh and Forster 1940s-1960s

In the mid 1940s Marsh & McLennan, the predecessor to Marsh, began conducting what it self described as “illegitimate business” on behalf of entities including asbestos litigation defendants such as Foster Wheeler Corporation, The Ruberoid Company and Chubb & Son.  For many years – the exact number or years has not been determined but at least exceeding 15 years – Marsh obtained insurance coverage for entities through fraudulent means through an entity in Canada in violation of state insurance laws of the United States. 

In the 1980s, Mr. J. Douglas Paterson testified that:  He was employed with the Forster Insurance Group in Canada until 1962.  Mr. Paterson held different positions over the years and traveled at times to the Marsh & McLennan offices in the United States. Mr. Paterson described the business of Forster during the years 1948 to 1962 as being a "facility or conduit” to channel Marsh & McLennan business into the London insurance market. 

Mr. Paterson described the umbrella insurance placement and renewal process as follows: Initially, Forster would obtain underwriting information regarding the insured. This information would be submitted by the Marsh & McLennan office handling the account in the form of a questionnaire or over the telephone. Mr. Paterson testified that this information was always provided by Marsh & McLennan. Mr. Paterson recalled working with several Marsh & McLennan employees from Marsh & McLennan 's New York office. Upon obtaining full underwriting information, Forster would send that information to London.

Forster's next involvement included receipt of price information, Mr. Paterson always forwarded this information to Marsh & McLennan. A cover note was sent on to Marsh & McLennan and eventually an official policy would be received, which was sent both to the client and Marsh & McLennan.

With respect to umbrella placements Mr. Paterson did recall in some instances "direct communications" with the client as opposed to Marsh & McLennan. Mr. Paterson characterized these communications as a sham intended to create the illusion that Forster was dealing directly with those clients when in fact all of its dealings were with Marsh & McLennan. He described this arrangement as a "subterfuge" intended to aid Marsh & McLennan in its evasion of domestic insurance laws precluding its placement of insurance in the London Market. He recalled that this subterfuge was in particular use by Marsh & McLennan 's New York office.

Mr. Paterson stated that with respect to all umbrella insurance placements Forster made on behalf of Marsh & McLennan during the 1948 to 1962 time period, Marsh & McLennan was the producing broker.  Mr. Paterson stated that it was his understanding-- as well as common knowledge at Forster during that time period--that the entire producer's commission was passed on to Marsh & McLennan.
By this arrangement, Marsh & McLennan was put in the same position it would have been has it been dealing directly with the London brokers.

Mr. Paterson stated that he was generally aware of the fact that at some time during the 1950's, Forster sent documents to the homes of Marsh & McLennan employees rather than to their business address. Mr. Paterson did not recall being personally involved in this practice but he understood it to be part of the subterfuge employed by Marsh & McLennan to disguise its involvement in the placement of the insurance.

Mr. Paterson stated that there has never been any question in his mind that Marsh & McLennan was the producing broker in the umbrella insurance placements which Forster was placing in the London market during the 1950's and that there has never been any question in his mind that Marsh & McLennan was receiving commissions on all of those placements.

Casualty Companies Inspections 1927

The following are excepts from an address by F. Highlands Burns, President of the Maryland Casualty Company, before the United States Chamber of Commerce in May, 1927.

"So far as the public is concerned, probably the best and most widely known service rendered by the companies is accident prevention accomplished by inspections and the education of the employer and employee in safety work. The record of 35 companies shows they spent $9,342,000 in 1926 for inspections, including accident prevention, and it is safe to say the other companies engaged in the business spent several millions more."

"It is impossible to state the total saved in the way of mental and physical suffering, loss in wages, loss in production and economic loss generally, due to the service rendered by the casualty companies in safety work."

"The casualty companies were the pioneers in industrial accident work in this country. In the days of employers' liability they began to realize that their duty to their policyholders did not lie alone in the prompt settlement of claims, but that a necessary element that could and should be rendered was co-operation with their policyholders in accident prevention work. The outgrowth of this is the employment of many trained and experienced men who inspect each risk periodically, make recommendations for the elimination of defects, which if allowed to continue might easily cause loss of thousands of dollars in property and untold loss in life and disability. The average manufacturer can not afford to employ a safety engineer, or safety expert, nor can he afford to provide safety literature and material necessary to properly conduct safety supervision in his plant. This service is provided by the companies. 'No accident campaigns' are conducted under the auspices of representatives of the casualty companies. Their safety engineers assist in designing and constructing safety devices and safeguards, attend plant meetings and assist in conducting them."

Insurance Brokers 3.0 1936

During the 1930s and 1940s, the Insurance Brokers' Association of Illinois, Inc. published The Insurance Broker.

In November 1936, The Insurance Broker featured an article entitled, "What Price Occupational Diseases? Fear and Hysteria vs. Intelligence" authored by C. O. Sappington, a consulting industrial hygienist from Chicago, Illinois. The following are some excerpts:

"In this article it is proposed that we consider briefly some of the current comments taken at random and representing ideas of various types of people and groups; a consideration of what the real trend is; and last, but by no means least, a discussion of the remedy."

"Fear and hysteria regarding Silicosis must be and gradually are being displaced by intelligent efforts directed toward conquering the disease. The problems presented are no more difficult or involved than many other industrial problems."

"Current Comments. - Silicosis is a true occupational disease; this is a point upon which all authorities agree."

"One should not lose sight of the fact that silicosis is not the only occupational disease which may cause disability or which occurs characteristically as the result of specific industrial environmental influences."

"Facts and Trends - Silicosis is an occupational disease of the lungs, contracted by the continuous breathing of fine particles of free silica dust over a considerable period of years. In simple or uncomplicated silicosis, it is now believed that the employee may continue as a useful individual for many years before complete disability occurs, or a grade of disability which prevents continuance of employment. It is important to keep the employee free from infection, particularly tuberculosis, which is a complicating factor and which actually produces disability interfering with working programs.

"The cause of silicosis is the inhalation of finely divided silica dust against which the employee is not properly protected. The effect is the disease which has been described in simple terms above with the resulting disability when complicated by infection.

 "The socio-economic implications of silicosis and the other occupational diseases present many difficult problems. In this problem the wise employer has no intention of evading compensation for actual and typical occupational disease, but should not be compelled to pay for non-occupational diseases which have no definite relationship to employment. The employee, on the other hand, should realize the necessity for intelligent cooperation with the employer in the prevention of occupational disease, particularly with regard to the proper use of protective equipment, manufacturing processes, and the handling of materials. The employee has every right to expect that he can labor in the process of making his living without undue industrial hazard, but he may not and should not expect to draw compensation for disability resulting from diseases of non-industrial pursuits.

"The prevention of occupational diseases is the keynote of the entire situation. Needless expense has been incurred by manufacturers and employers from time to time, exceeding greatly in amount, for the payment of claims and lawsuits, the money which could have been used intelligently in the amelioration or elimination of hazards producing occupational disease. The time is past when the employer can adopt an attitude of 'hiding his head in the sand like an ostrich and claiming that no one can see no one.'"

The third page of the article includes a half page ad for the Continental Casualty Company, and the last page of the article includes a half page ad for the Indemnity Insurance Company of North America.

Association of Casualty and Surety Executives 1935-1936

    In the 1930's the Association of Casualty and Surety Executives periodically published bulletins entitled, Bulletin of the Association of Casualty and Surety Executives. The following statement was on the cover of the bulletins: "The purpose of this Bulletin is to disseminate information bearing upon subjects of popular interest in the field of casualty insurance and suretyship and to answer the active propaganda for state intrusions into the field of insurance and of other lines of private enterprise."

    Some excerpts:

April 1935

    From Bulletin #40:  

    "Silicosis and Asbestosis in Great Britain- The following table is from a summary, published in Monthly Labor Review, December, 1934, of data relative to industrial diseases and poisonings contained in the Annual Report for 1933 of the Factory Department, Great Britain. The figures in the table are the statistics of deaths from silicosis and asbestosis that have been collected 'in the past few years'. The diagnosis in these cases has been confirmed by postmortem examinations." Here's the table.

July 1935

    From Bulletin #41:   

    "Silicosis and Asbestosis in Great Britain- The following data are from Workmen's Compensation-Statistics of Compensation and Proceedings, 1933 (Home Office, London, 1935).

    "In 1933, there were four "Schemes" for compensation for silicosis in force: The Refractories Industry Scheme (covering ganister mines and quarries and silica brick works); the Sandstone Industry Scheme; the Metal Grinding Industry Scheme; and the Various Industries Scheme (which covers a variety of processes in different industries, chiefly pottery, mining, silica or flint milling, stone masons, sand blasting and the mixing of ground silica).

    "Asbestosis also, in certain specified processes, was compensable under the Asbestos Industry Scheme, which took effect June 1, 1931. Under that scheme, £229 was paid in one fatal case and £539 in 18 disablement cases, in 1932; and £162 in 2 fatal cases and £1,136 in 24 disablement cases in 1933."

February 1936

    From Bulletin #43, excerpts from a review of the book "Industrial Medicine", by Clark and Drinker: 

    "Silicosis... presupposes a perfectly definite etiological factor, free silica or quartz, and embraces by far the greatest part of the morbid pathology for which dust inhalation is directly or indirectly responsible."

    "Of the silicates so far studied only asbestos (and possibly sericite) have the specific power to produce disabling fibrosis of the lung tissue."

September 1936

    From Bulletin #45, excerpts from a quote by Dr. Le Roy U. Gardner. Dr. Gardner made the folowing statement on October 1, 1935:

    "Pneumoconiosis should be defined as a condition of the lungs resulting from the prolonged inhalation of dust. Only when this condition is due to a type of dust capable of producing serious and progressive changes in the lungs can a pneumoconiosis be considered a disease. At the present time only two kinds of dust are generally recognized as possessing such irritating properties, Silica, commonly found in nature as quartz, is a notorious offender, and asbestos, a silicate of magnesium is as bad if not worse...

    "What constitutes an 'adequate exposure'? A man must be exposed day after day for a period of years to relatively high concentrations of dust. In the usual industrial concentrations of silica dust it takes from 5 to 20 years to produce silicosis; and from 7 to 11 years in asbestos to produce asbestosis. In rare cases, where the dust concentration is excessive, the time may be shortened to 2 years."

Insurance Brokers 2.0 1937

In the summer of 1937 the official publication of The Insurance Brokers' Association of New York published an article entitled "What of the Dust Danger Now?" by Mr. W. G. Hazard of the Owens-Illinois Glass Company.

The article first identifies the nine costs of a dust control program.

"Those costs are interesting because they are exactly what large corporations experienced in the five year period just past:
1. Dust survey and dust counts.
2. Change in processes.
3. Change in building structure.
4. Housekeeping facilities.
5. Dust collecting systems.
6. Respirators.
7. Education of workers.
8. Inspection and enforcement.
9. Medical Service."

Hazard states that during the last few years, "Gradually the work of engineers and lawyers was combined with that of equipment manufacturers in definite managerial efforts to reduce exposure and prevent injuries. It is safe to say that every large corporation facing the silicosis problem has investigated the developments in equipment or structural design offered to eliminate all pulmonary diseases."

Hazard further states that:

"One of the most fruitful sources of information for the small company is its insurance carrier. General insurance companies have an engineering and medical service that is outstanding."

Two of the directors for the Insurance Brokers' Association of New York in 1937 were Laurence S. Kennedy of Marsh & McLennan, and L. A. Wallace of Johnson & Higgins.

In addition, Kennedy and Wallace served on the Association's Legislative Committee. Joseph Geoghegan of Marsh & McLennan served with Wallace on the Casualty and Surety Committee.

Owens-Illinois manufactured asbestos insulation products during the 1940s and 1950s.

Insurance Brokers 1935

In the summer of 1935 the official publication of The Insurance Brokers' Association of New York published an article by Henry Sayer entitled "Occupational Diseases." Here is an excerpt:

"One aspect of the occupational disease problem relates to the so-called dust diseases. There have been described by medical men in recent years conditions known as silicosis, asbestosis, pneumoconiosis and siderosis, all being dust diseases due to the inhalation of inorganic dust. Dust is an accompaniment of most industries, certainly a very large proportion of them. We find it not only in the stone-cutting and rock drilling industries, we find it in the factories, in the foundries, grinding processes and the silicosis rate is very high in some of these places. No one knows how high, but it had been estimated in terms of a high percentage of the employees. It is a disease that does not make itself known early, perhaps until after five or more years of occupational exposure."

Two of the directors for the Insurance Brokers' Association of New York at that time were Laurence S. Kennedy of Marsh & McLennan, and L. A. Wallace of Johnson & Higgins.

Marsh and Engineering Pre-1928

Before the 1930s, Marsh & McLennan employees were members of such engineering organizations as:

The American Society of Safety Engineers,

The American Society of Mechanical Engineers,

The American Institute of Electrical Engineers, and the

American Electric Railway Engineering Association.

1914

Here are excerpts from a 1914 Safety Engineering Journal article entitled, "Safety First" in Equitable Building:

"A gigantic building housing the population of a small city in the construction of which every piece of fireproofing material has been tested at 1,800 deg. F.; in which any fire is automatically isolated and the alarm given by means of the most elaborate intercommunicating fire alarm system ever planned and installed; wherein the life and property of every tenant is afforded absolute protection - in the design of which the art of fire-resistive construction and fire-protective equipment has been of first consideration."

"In commenting on insurance engineering in connection with the Equitable building, B. E. Loomis, chief engineer of the firm of Marsh & McLennan, to whom the working out of all details of fire-resistive materials and devices was entrusted said in part: 'In designing the fireproofing and fire protection of the Equitable building, it has been our aim primarily to properly cut off all vertical openings in the building and, in so doing, to use materials that we know will stand a temperature of at least 2,000 degrees... The sub-dividing partitions, doors, locks, hinges, door frames, door bucks, and, in fact, every detail that has entered into the construction of this building, have been known to successfully resist temperatures equivalent to the heat of a conflagration, and every one of these details has the Underwriters' approval as being the highest type of fireproof materials.'"

The elevator doors are described as "pocketed behind tile walls and operate by fusible links. They are made of two walls of cross-laid 22-gauge galvanized steel with air spaces and sheet asbestos between."

The article also contrasted the safety features in the new Equitable Building and the old Equitable Building. The new building has elevators with "brick shafts, metal cars and fire-doors of steel and asbestos."

1921

In a 1921 Safety Engineering issue the following is noted as to the Chicago Safety Council:

"This is a wide-awake organization which functions under the direction of an advisory committee, of which William Otter of Marsh & McLennan is chairman..."

"Its activities are divided into four major divisions known as Public Safety, Industrial Safety, Railroad and Public Utilities and Business Administration..."

"In a recent bulletin the Chicago Council said: 'Industrial managers and safety engineers who have had the widest experience in accident prevention are convinced that the industrial accident problem can never be solved and the public accident problem cannot even be touched until safety is incorporated into the community life and is organized just as there is organized health or any other activity having for its purpose the conserving of human life."

Asbestos and the Alliance of American Insurers - 1978

On June 6, 1978, a meeting was held by the claims committee of the Alliance. Some of the companies represented included Liberty Mutual, Lumbermens Mutual Casualty Company, and Prudential Property and Casualty.

Here is the excerpt from the minutes of the committee meeting in Denver, Colorado that discusses asbestosis and some of the insurance issues the carriers were dealing with.

The committee appointed an asbestosis subcommittee consisting of individuals from Liberty Mutual, Lumbermens, Employers Insurance of Wausau, and American Mutual, to formulate recommendations for the full claims committee to consider.

Chubb and Sun 2.0 Update

The relationship between Chubb and the Sun Insurance Companies dates to at least the early 1960s. Sun Indemnity of New York/Sun Insurance Company of New York became Chubb Indemnity in the early 1990s. See January 8, 2010's blog entry for some background.

Here is an excerpt of a 1960s American Insurance Association membership list. Sun Insurance Company of New York (now Chubb Indemnity) and Sun Insurance Office Ltd. were indicated to be affiliated with Chubb.

In addition, in 1980 the asbestos manufacturer Johns-Manville sued some of their insurers and served Chubb with a lawsuit that named Sun Insurance Office Ltd. of Canada. This April 9, 1980 letter discusses Chubb's receipt of the lawsuit. In an April 1980 memorandum, a Johns Manville employee states that an insurance expert he met with in March 1980 said that Chubb manages Sun in the United States.

Chubb Denies Relationship With Sun

On the afternoon of October 22, 2009, oral argument took place at the United States Court of Appeals for the Second Circuit in New York City on issues that arose in part from the Johns Manville bankruptcy. The appeal involves Chubb Indemnity. The attorney for Chubb Indemnity made the following statements to the justices of the Second Circuit:

"The response to that is that Chubb Indemnity Insurance Company, the appellant here, is not Chubb Corporation. Number one. Chubb Indemnity Insurance Company’s a subsidiary of Federal, which is a subsidiary of Chubb Corporation. Perhaps more significantly, until 1992, Chubb Indemnity Insurance Company had no relationship whatsoever with Chubb.”

A justice on the Second Circuit then asked, "So in 1986 there was no relationship?"

The attorney for Chubb Indemnity replied, "Correct, Sir."

Aetna and the Dalkon Shield

Here are some excerpts from an Aetna Annual Report from the 1980s which discusses some of Aetna's involvement in the Dalkon Shield litigation:

"During 1985, the Aetna Casualty and Surety Company or related Aetna companies ('Aetna Casualty') were named as codefendants with A.H. Robins Company ('Robins'), now in Chapter 11 bankruptcy proceedings, in over 100 product liability suits involving the 'Dalkon Shield' intrauterine contraceptive device. These suits allege that Aetna Casualty acted with Robins (the manufacturer of the Dalkon Shield) to prevent disclosure of alleged dangers of the Dalkon Shield...

In November of 1985, all Dalkon Shield-related cases (including those naming Aetna Casualty) were ordered stayed and transferred to the bankruptcy court in Richmond, Virginia...

On April 10, 1986, a class action was filed against Aetna Casualty on behalf of all women who were, or may become, injured by the Dalkon Shield. The allegations of this class suit are similar to the suits filed by individual women during 1985 - i.e. that Aetna Casualty acted with Robins to prevent disclosure of alleged dangers of the Dalkon Shield. The suit, which is pending in the bankruptcy court, seeks unspecified compensatory and punitive damages, and was conditionally certified by the court as a class action on December 29, 1986.

Aetna Casualty provided products liability insurance coverage to Robins for the Dalkon Shield and has established reserves for that coverage. If liability were found against Aetna Casualty in any of the above suits, damages would be in addition to amounts payable under this insurance coverage."