Manville Corporation Form 10-K for 1981: Legal Proceedings (1982)

The cover page and Item 3, Legal Proceedings, of Manville Corporation's annual report to the Securities and Exchange Commission for 1981. At December 31, 1981, J-M was a defendant in about 9,300 asbestos lawsuits brought by about 12,800 plaintiffs, with new cases averaging about 400 a month brought by about 525 plaintiffs. It reported that during 1981 J-M was "for the first time" found liable by juries for punitive damages, in five cases, and said that the eventual outcome "cannot be predicted at this time nor can the ultimate liability to J-M, after application of available insurance, be reasonably determined."

What it shows

The filing reports that 802 cases representing 1,463 plaintiffs were disposed of in 1981, with J-M's share averaging about $15,430 per claim, excluding legal expenses; disposition costs to date had been "substantially all" charged to insurance. The figure leaves out 20 cases on appeal, in which the average judgment against J-M was about $223,360. It describes the punitive damage verdicts: Moran in Cleveland ($350,000 compensatory and $500,000 punitive), Neal in Philadelphia (a consolidation of fifteen plaintiffs, with punitive damages in eleven), Noecker in Pennsylvania, Janssens in Jacksonville ($1,107,600 compensatory and $750,000 punitive, which J-M called "grossly excessive"), and Fischer in New Jersey. J-M said it continued "to believe, however, that it has substantial defenses to punitive damage claims, and no new evidence has been presented to support punitive damage allegations." Because no loss could be determined, "no liability has been recorded in the financial statements," though the costs "could be substantial." See Punitive Damages.

The filing sets out the company's defenses. For insulation workers and others who handled its products, most of them shipyard workers, J-M maintained that during the years of exposure the authorities and suppliers believed the U.S. Public Health Service dust standard protected workers, and that "there was no basis for product warnings or hazard controls" until studies linking disease in insulation workers to asbestos "were made public in 1964" (the Selikoff studies). For its own employees, it relied on workers' compensation as the Exclusive Remedy, noting that the California Supreme Court had recently allowed employees to sue where the employer fraudulently concealed their disease. For workers at plants that bought its fiber, J-M maintained that their employers had the same knowledge it had and that any duty to warn "rested with the plaintiffs' employers"; 683 such claims by former Raybestos-Manhattan employees had been settled. J-M also said it believed that since at least the beginning of 1978 "no significant new potential liabilities have been created" for it.

The filing also reports suits by former employees against J-M's contract physicians for failing to tell them they had lung disease, with the physicians seeking indemnity from J-M; six purported class actions, three on behalf of workers at the Manville, New Jersey plant; the insurance disputes, including notice on April 2, 1981, that J-M's primary coverage was exhausted, with only one excess carrier paying (about 35% of current costs) and J-M advancing the rest; a suit against its broker, Marsh & McLennan, filed November 23, 1981; and the shareholder class action begun May 4, 1979, in which the court certified the class and denied J-M summary judgment on November 13, 1981.

Beside the board presentations

In July 1981 the company's lawyers had shown the board a projection of 32,500 plaintiffs and $1,473,791,000 in costs through 1991, with insurance running out in 1986 (that presentation is earlier in this binder). The 10-K gave investors no projection, saying the ultimate liability could not be reasonably determined "in accordance with applicable accounting standards." Manville filed for Chapter 11 in August 1982; its next annual filing is the 1982 annual report and 10-K.