The Insurance Industry and Asbestos

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.

Chubb and Sun

Earlier blog entries reference Sun Indemnity Company of New York as being a predecessor to Chubb Indemnity. Sun Indemnity was founded in 1922 and later changed its name to Sun Insurance Company of New York. Chubb acquired Sun Insurance in 1994 but the companies had a long term relationship prior to the acquisition.

In the 1950s, Chubb & Son held itself out as the managers for the Federal Insurance Company, Vigilant Insurance Company, The Marine Insurance Company, Ltd., The Sea Insurance Company, Ltd., London Assurance (Marine Dept.) and Alliance Assurance Company, Ltd.

By 1963 Chubb was managing the Sun Insurance Group's United States entities. Here is a March 10, 1966 Chubb & Son letter which states that Chubb & Son is the manager of the Sun Insurance Company. This letter related to Sun Indemnity Company of New York insurance policies for Philip Morris.

During the 1980s, Chubb's Annual Reports stated that Chubb & Son was the U.S. manager of four of Sun Group's insurance companies - "a relationship of many years' standing."

Chubb's management relationship with Sun continued into the 1990s through the time Chubb acquired the Sun Insurance Company of New York in the mid 1990s.

Prudential and Chubb 1918 - 1930s

In 1918, Frederick Hoffman, a Prudential Insurance Company of America statistician and Vice President, authored a bulletin entitled "Mortality From Respiratory Diseases in Dusty Trades." Here is an excerpt from page 178 of the bulletin which discusses asbestos:

"Most of the asbestos used in the United States is mined in Canada, and an excellent report on 'Asbestos, its occurrence, exploitation, and use,' has been published by the mines branch of the Department of the Interior of the Dominion of Canada (Ottawa, 1905), which contains a descriptive account of mining methods and of the dressing of asbestos by hand or by mechanical treatment, including the final crushing by means of rollers, fiberizers, beaters, cyclones, and pulverizers. All of these processes unquestionably involve a considerable dust hazard, but the hygienic aspects of the industry have not been reported upon. It may be said, in conclusion, that in the practice of American and Canadian life insurance companies asbestos workers are generally declined on account of the assumed health-injurious conditions of the industry."

In the 1923, Hendon Chubb was appointed to Prudential's Board of Directors and remained on the board for over fifteen years. While on Prudential's board Mr. Chubb was a Partner in Chubb & Son, the President and a Director of the Federal Insurance Company, the Chair of the Executive Committee for United States Guarantee and a Director for United States Guarantee. Here is an excerpt from Mr. Chubb's congressional testimony in 1939 in which he details some of the relationships between Prudential, Chubb & Son, the Federal Insurance Company and the United States Guarantee Company.

Edward Duffield, Prudential's President and a Director during the 1920s and 1930s was on the Board of Directors for the United States Guarantee Company during the same time period. John Stedman, a Prudential Vice President was on the Board of Directors for Federal Insurance. Albert Wall was a Director for both Prudential and Federal Insurance.

Chubb Group of Insurance Companies

The Chubb Group of insurance companies includes the Federal Insurance Company, Chubb & Son (which is now a division of Federal), and Chubb Indemnity Insurance Company. Examples of companies the Chubb Group worked with include asbestos product manufacturers Raybestos Manhattan and Bell Asbestos Mines.

 

Chubb has specialized since the 1920s in underwriting mines in the Quebec, Canada. The majority of asbestos used in the United States was from Quebec province.

 

 

During the 1930s Hendon Chubb was an officer and board member of Chubb & Son and was on the board of directors of the Prudential Insurance Company and the St. Joseph Lead Company.