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In 1981, flooring product manufacturer Congoleum Corporation began facing asbestos-related injury claims pertaining to asbestos contained in the company's products. For the next 20 years in the tort system, the company paid only $13.5 million to resolve over 33,000 claims; the asbestos encapsulated in Congoleum's product posed few health hazards.

However, in 2002 the company received an adverse decision in the first half of a bifurcated asbestos trial and shortly afterward entered into pre-packaged bankruptcy discussions with plaintiffs' attorneys. In January 2003, the company surprised its insurers when it announced that it planned to file a prepackaged bankruptcy following the global settlement of its asbestos liabilities. It hired law firm Gilbert Heintz and Randolph (GHR) to represent it in pursuing the bankruptcy. At this time, GHR was the majority owner of Kenesis, a claims reviewer, which reviewed and approved for payment the asbestos claims resolved under the Claimant Agreement. In December 2003 Congoleum filed the prepackaged plan of reorganization. In February 2004, Congoleum tendered to its insurers $465.6 million in claims allowed and liquidated under its Claimant Agreement.

The defendant insurers declined to provide coverage for the Claimant Agreement on multiple grounds, including: [1] the fact that Congoleum did not include the insurers in negotiations prior to the Claimant Agreement and entered into the settlement without the insurers consent; [2] counsel representing Congoleum in the negotiations had also represented claimants that would be subject to the Agreement; [3] the claims reviewer was partly owned by counsel negotiating the Claimant Agreement; [4] Congoleum made a settlement payment directly to lawyers involved in negotiating the Claimant Agreement (described as a “payoff” by Congoleum representatives); [5] the Claimant Agreement would result in the payment of claims that would have no value in the tort system; and [6] the Claimant Agreement included values that exceeded Congoleum's historical average payments, yet the Agreement contained both weak exposure and medical causation requirements.

Insurance counsel retained a NERA team to provide consulting advice in the case submit an expert report. NERA's analysis addressed the quality of claims submitted under the Claimant Agreement, both on medical grounds and on product exposure. In particular, NERA assessed whether the claims approved for payment would have had value in the tort system, based on the quality of the claims submitted and whether the case would have standing (accounting for tort reforms, deferred dockets and statutes of limitations in different jurisdictions).

In October 2005, the US Court of Appeals for the Third Circuit found that GHR had a conflict of interest in representing Congoleum—as GHR also represented thousands of asbestos claimants who would be compensated as a result of negotiations with Congoleum. Subsequently, the Bankruptcy Court ordered GHR to disgorge over $9 million in fees.

On 18 May 2007, Judge Nicholas Stroumstos of the Superior Court of New Jersey Law Division of Middlesex County ruled in favor of the defendants, finding that the Claimant Agreement was neither reasonable nor made in good faith and that the insurers had no coverage obligations for the Claimant Agreement under New Jersey law. In addition, the Court found that GHR had colluded with Congoleum to create a framework that would provide Congoleum with both the insurance money and also protect against asbestos liability, while leaving the insurance companies to bear the cost. The Court also found that the prepackaged bankruptcy plan enabled GHR's lawyers to liquidate their claims before Congoleum filed their bankruptcy petition, thereby giving them an unfair priority in relation to the company's other creditors. The Claimant Agreement significantly abandons viable defenses in the tort system, including requirements of product identification, statute of limitations, and the existence of deferred dockets for claims of unimpaired claimants in certain states.