New Jersey-based textiles manufacturer Congoleum Corp. is to exit Chapter Eleven bankruptcy, with a motions hearing on an exit plan to be heard by the U.S. Bankruptcy Court in Trenton, N.J.

Congoleum has been involved in thousands of asbestos-related lawsuits and has also sued a number of its own insurers for neglecting to provide coverage on the asbestos claims.

However, some of Congoleum’s insurers, including CNA Financial Corp. and Travelers Cos., object to the company’s proposed exit plan, saying that it goes against currently established bankruptcy law and unfairly favors asbestos claimants.

Congoleum, which manufactures various types of flooring products, manufactured certain asbestos-containing products, such as vinyl floor tiles, until 1983. As a result the company has often been named as a defendant in asbestos-related lawsuits.

In 2002 the company entered into a global settlement that was intended to result all of its current and future asbestos claims. As part of the deal Congoleum agreed to file Chapter Eleven bankruptcy.

In addition, Congoleum agreed to fund the settlement using insurance money, but neglected to consult with any of its insurers when making the deal. Because of this, some of the company’s insurers filed a declaratory judgment action in New Jersey’s state court to request that the court find the insurers’ policies didn’t cover the global settlement Congoleum was attempting.

However, once Congoleum filed for bankruptcy, the declaratory judgment action was automatically stayed, due to bankruptcy laws that prevent parties pursuing actions to obtain money or property from a company that has filed for Chapter Eleven.

In 2007, after a four year battle, the courts decided that the insurers did not have to pay the “prepackaged” insurance claims that Congoleum had negotiated.

These prepackaged deals are often advantageous for companies and attorneys, but are rarely so for genuine victims of asbestos-related disease. For the company negotiating the deal, the advantage is that they can control their exposure more easily than they might otherwise be able to.

Critics of these types of deals argue that they allow unscrupulous lawyers to conceal false claims in class action lawsuits that include hundreds or thousands of plaintiffs. The problems involved in these types of cases have also been highlighted this week by the Manhattan Institute’s report on class action asbestos suits.

This entry was posted on Wednesday, May 14th, 2008 at 4:43 pm and is filed under Asbestos Exposure, Jobsite Exposure, New Jersey. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.