London Market Insurers Win Significant Legal Action Against Lockheed Corporation

Strategic Insights -

London market insurers, including Lloyd's of London, have secured a major legal victory against the Lockheed Corporation in a California court. The court ruled in favor of the insurers, denying Lockheed's motion for a $475 million security bond under the California Insurance Code. The insurers, represented by the San Francisco litigation firm Hancock, Rothert & Bunshoft, presented evidence that they had maintained sufficient funds in the U.S. to satisfy a potential judgment in favor of Lockheed. The court found that Lockheed's brokers were licensed for all years except 1977, and the insurers had made the required showing with respect to U.S. funds.

Key Takeaways:

  • Lockheed Corporation sought to impose a $475 million security bond against London market insurers for pollution-related liabilities at Burbank Airport and other sites.
  • Judge Alden Danner denied Lockheed's motion for pre-answer bond at Santa Clara Superior Court, California, due to the insurers' compliance with applicable surplus line laws and maintenance of sufficient U.S. funds.
  • The insurers, Procter and Companies, represented by Hancock, Rothert & Bunshoft, presented evidence of surplus line brokers' compliance with California's surplus line laws and maintained over $11 billion in trust funds in the U.S.
  • The court ruled that Lockheed's brokers were licensed for all years except 1977, and the insurers had made the required showing with respect to U.S. funds.
  • A hearing on the amount of the bond, if any, solely for 1977 policies is scheduled for August 4, 1995.
  • The decision is seen as a significant victory for London market insurers, which are increasingly facing lawsuits seeking coverage under California law for pollution-related liabilities.
  • Similar motions have been filed in California courts by Raytheon Company and Hughes Aircraft.
  • Hancock, Rothert & Bunshoft has previously obtained jury verdicts for London insurers in other large pollution coverage cases, including those involving Shell Oil company and Aerojet-General Corporation.

Statistics:

  • Lockheed Corporation claimed hundreds of millions of dollars from the insurers for the clean-up of 13 polluted sites located in California and other states, including nearly $375 million arising from Lockheed's activities since 1928 at its Burbank facility.
  • The insurers, Procter and Companies, maintained over $11 billion in trust funds in the U.S., with over $4 billion of which could be used to satisfy a Lockheed judgment.
  • Judge William Cahill ordered a $30-35 million bond in the Raytheon case, stating that "I have to follow the law, there's no question about that, but usually the law makes sense."

Sources:

  • "LONDON, June 30 /PRNewswire/ -- Lloyd's of London and other London market insurers have won a significant legal action in the United States brought by the Lockheed Corporation." (PRNewswire)
  • "Judge Alden Danner denied Lockheed's motion for pre-answer bond at Santa Clara Superior Court, California yesterday (Thursday)." (Santa Clara Superior Court)
  • "The London market insurers, appearing in the lawsuit as 'Procter and Companies,' were represented by San Francisco litigation firm Hancock, Rothert & Bunshoft." (Hancock, Rothert & Bunshoft)
  • "Lockheed contended in its motion that its surplus line brokers, Marsh & McLennan and Swett & Crawford, did not comply with California's surplus line laws in placing Lockheed's London policies." (Lockheed Corporation)