Reulet v. Lamorak Ins. Co. (M.D. La., Oct. 19, 2022)

Our plain-English summary of Reulet v. Lamorak Ins. Co. (U.S. District Court, Middle District of Louisiana, October 19, 2022).

Joanne Reulet and other plaintiffs brought a wrongful death and survival action over the January 2019 death of Kirk Reulet. They say he developed fatal mesothelioma from asbestos exposure during a 45-year career as a welder in marine-economy jobs. They sued many defendants, including employers, premises owners, asbestos makers and distributors, and insurers. Two of the insurers, Employers Insurance Company of Wausau and Liberty Mutual, were sued under Louisiana's Direct Action Statute because they covered Reilly-Benton Company, a now-bankrupt company that allegedly delivered asbestos products to Reulet's worksites. The insurers asked the court to dismiss or stay the claims under the Bankruptcy Code's automatic stay, because Reilly-Benton's Chapter 7 case was ongoing and might involve thousands of asbestos claims. The court followed a similar March 2022 ruling by the Eastern District of Louisiana in the Savoie case. It stayed the direct action claims against Wausau and Liberty until the Reilly-Benton bankruptcy is resolved. The stay covers only those two insurers, and either side may ask to lift it.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: U.S. District Court, Middle District of Louisiana
• Decided: October 19, 2022
• Docket: Civil Action No. 20-00404-BAJ-EWD
• Stage: Jurisdiction, venue or removal
• State: Louisiana

Outcome. The court granted in part the motion by insurers Wausau and Liberty and stayed the plaintiffs' direct action claims against them pending the Reilly-Benton bankruptcy; the claims were not dismissed.

What the court held. Where a siege of tort claimants threatens the debtor's estate beyond policy limits, insurance proceeds may be property of the bankruptcy estate, so the automatic stay can apply to direct actions against the debtor's insurers; the bankruptcy court is the best forum to decide this first.

Issues decided: Asbestos Bankruptcies, Insurance Coverage.

The people and their exposure

• Kirk Reulet: mesothelioma; died

The defendants

• Employers Insurance Company of Wausau (insurer)
• Liberty Mutual Insurance Company (insurer)
• Lamorak Ins. Co. (insurer)
• Reilly-Benton Company, Inc. (supplier)

Other decisions in this case

Other rulings from the same court in the same case, in our library:

• Reulet v. Lamorak Ins. Co. (October 21, 2022). The court granted the plaintiffs' motion for partial summary judgment, finding no genuine dispute that Kirk Reulet had mesothelioma and that it resulted in his death, over the opposition of Bayer CropScience, Hopeman Brothers and Liberty Mutual.
• Reulet v. Lamorak Ins. Co. (October 21, 2022). The court denied American Insurance Company's motion for summary judgment on coverage, so the plaintiffs prevailed, and ordered American's counsel to show cause why sanctions should not be imposed.
• Reulet v. Lamorak Ins. Co. (October 24, 2022). The district court denied Aerojet Rocketdyne's motion for summary judgment, finding fact disputes on whether the decedent was exposed to asbestos at Barnard and Burk and whether Aerojet inherited its liabilities, so plaintiffs and Avondale prevailed on the motion.
• Reulet v. Lamorak Ins. Co. (October 31, 2022). The court denied the summary judgment motions of General Electric and ViacomCBS/Westinghouse, so the plaintiffs' claims against the two turbine manufacturers go forward.
• Reulet v. Lamorak Ins. Co. (October 31, 2022). The court granted in part and denied in part Berkshire's summary judgment motion: claims tied to the second policy period and to the father's second-hand exposure were dismissed with prejudice, while the claim of direct exposure during the first policy period survived for Plaintiffs and Avondale.

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

JOANNE REULET, ET AL.,

v.

LAMORAK INS. CO., ET AL.

Civil Action No. 20-00404-BAJ-EWD.

October 19, 2022.

United States District Court, M.D. Louisiana.

RULING AND ORDER

BRIAN A. JACKSON, District Judge.

This wrongful death and survival action seeks damages related to the death of Decedent Kirk Reulet in January 2019. In broad strokes, Plaintiffs contend that during the course of his 45-year career, Decedent—a welder—worked various marine-economy jobs where he was exposed to asbestos, ultimately causing him to develop terminal mesothelioma. Plaintiffs seek damages from dozens of Defendants— including Decedent's employers, owners of premises where Decedent worked, asbestos manufacturers and distributors, and multiple insurers—but the thrust of their claims is essentially the same as to all: Defendants dealt in asbestos and, to some degree or another, played a role in causing Decedent's exposure to the deadly product. (See Doc 95 at ¶¶ 94-95).

Most relevant here, Plaintiffs' Second Supplemental And Amending Complaint added Defendants Employers Insurance Company of Wausau ("Wausau") and Liberty Mutual Insurance Company ("Liberty"), on the basis that these Insurers provided liability coverage to non-party Reilly-Benton Company, Inc. ("Reilly-Benton"), a now-bankrupt company that manufactured asbestos-laden products and delivered them to Decedent's worksites during time period at issue in this dispute. (Doc. 95 at ¶¶ 52, 93). Plaintiffs pursue their claims against Wausau and Liberty under Louisiana's Direct Action Statute, La. R.S. § 22:1269, which "authorizes a suit directly against the insurer when the insurance contract at issue was written or delivered ... in the State of Louisiana or if the injury occurred within the state." Marriner v. Talos Petroleum, LLC, 576 F. Supp. 3d 412, 415 (E.D. La. 2021) (Fallon, J.) (quotation marks omitted).

Now before the Court is Wausau's and Liberty's Motion To Dismiss Or Stay (Doc. 236, the "Motion"), which argues that Plaintiffs' claims against them are barred—or, at minimum, must be stayed—pursuant to the Bankruptcy Code's automatic stay provision, 11 U.S.C. § 362(a). Wausau and Liberty contend that Reilly-Benton's Chapter 7 bankruptcy case is ongoing and potentially involves thousands of asbestos-related claims,[1] thus triggering the "limited circumstances" under which the United States Court of Appeals for the Fifth Circuit instructs that insurance proceeds are property of the debtor's estate, thereby subjecting related direct action claims to the automatic stay. See In re OGA Charters, L.L.C., 901 F.3d 599, 604 (5th Cir. 2018) ("We now make official what our cases have long contemplated: In the `limited circumstances,' as here, where a siege of tort claimants threaten the debtor's estate over and above the policy limits, we classify the proceeds as property of the estate."); Sosebee v. Steadfast Ins. Co., 701 F.3d 1012, 1025 (5th Cir. 2012) ("Where a court finds insurance proceeds to be property of the bankruptcy estate the automatic stay will apply to direct actions against insurers, see 11 U.S.C. § 362(a)(3)[.]"). Plaintiffs oppose the Motion. (Doc. 241).

Significantly, this Court is not the first to address precisely this issue. Just six months ago, the U.S. District Court for the Eastern District of Louisiana entertained an identical request from Wausau and Liberty to dismiss or stay separate mesothelioma-related direct action claims against them based on insurance policies issued to Reilly-Benton. On March 3, 2022, after hearing argument, the Eastern District stayed the plaintiffs' direct action claims against Wausau and Liberty, reasoning that under the Circuit's decisions in OGA Charters and Sosebee, supra, the Bankruptcy Court is the best forum to decide (in the first instance) whether plaintiffs' claims must be pursued through the ongoing Reilly-Benton bankruptcy proceedings. See Lorita M. Savoie, etal., v. Huntington Ingalls Incorporated, etal. No. 15-cv-01220, Doc. 724 (E.D. La. Mar. 23, 2022) (Barbier, J.) (staying plaintiffs' direct action claims against Wausau and Liberty); see also id., Doc. 725 at pp. 26-37 (transcript of oral argument setting forth reasons for decision).

This Court agrees with the reasoning of its brethren in the Eastern District, and the outcome of the proceedings therein. Accordingly, for the same reasons stated on the record in the Savoie case,

IT IS ORDERED that Wausau's and Liberty's Motion To Dismiss Or Stay (Doc. 236) be and is hereby GRANTED IN PART, and that Plaintiffs' direct action claims against Wausau and Liberty be and are hereby STAYED pending resolution of In re: Reilly-Benton Company, Inc., No. 17-12870, United States Bankruptcy Court for the Eastern District of Louisiana. IT IS FURTHER ORDERED that, consistent with the relief set forth herein, the telephone status conference set for October 26, 2022 at 2:00 p.m. to determine a new motions deadline for Wausau and Liberty be and is hereby CANCELLED. The stay set forth herein applies to Defendants Employers Insurance Company of Wausau and Liberty Mutual Insurance Company only. As appropriate, Plaintiffs and/or Wausau and Liberty may move independently or jointly to lift the stay set forth herein.

[1] See In re: Reilly-Benton Company, Inc., No. 17-12870 (Bankr. E.D. La.).

Sources

• The opinion on Google Scholar
• Louisiana asbestos laws
• Louisiana asbestos exposure sites