Former workers and contractors who worked with the company’s products were primarily affected. Many of these cases against similar companies reached fast settlements when their insurance companies agreed to pay the damages, but Congoleum’s insurers fought the claims in court.
Lawsuits and Bankruptcy
Congoleum Corporation initially started trying to file for bankruptcy in the 1990s but did not emerge reorganized until years later, amending its plan in 2011. Congoleum’s bankruptcy was unique in that this company’s bankruptcy dragged on for years before a plan was ever approved by the courts.
While the company was trying to get its plan approved, it was facing litigation from insurers who alleged that the company’s lawyers were involved in conflicts of interest, and a judge ultimately agreed. Andrews Asbestos Litigation Reporter reported in 2007 that the bankruptcy judge required the company to file a new plan of reorganization after a NJ state court judge sided with insurance companies that said the flooring maker’s original plan was “based on an unreasonable asbestos-settlement deal.”
The first plan filed by the company stated that Congoleum would distribute approximately “$500 million in insurance money to people who filed asbestos-related injuries.” The insurance companies argued that the bankruptcy plan involved a conflict of interest, because the company’s law firm was simultaneously representing both asbestos plaintiffs and the company in its settlement negotiations. In May 2007, a NJ superior court ruled that the insurance companies were not liable for the asbestos-based claims that had been negotiated as part of the bankruptcy case.1
Congoleum Plan Trust
In March 2008, the Andrews Insurance Coverage Litigation Reporter further reported that Congoleum asked the federal bankruptcy judge to halt proceedings in the New Jersey state court dispute with a myriad of insurance companies over the coverage of asbestos-related injury claims. The bankruptcy court later required that a trust be set up to cover these claims at approximately half of the $500 million originally proposed.
In April 2018, the bankruptcy plan trustee filed an annual report that stated the Congoleum Corporation asbestosis trust had paid out $7,280,000 in 2017.
They paid 12.5 percent of each asbestosis claim. They paid a total of 780 claims in 2017. These claims were from individuals who had become ill or died as a result of exposure to asbestos-based products, not from asbestos-property-damage claims. Claims involving damage to property were paid off in 2011.2
The Future of Congoleum Corporation
Because mesothelioma can take so many decades to be diagnosed, it is not unusual that Congoleum is still continuing to pay out claims at such a high rate. Research shows that it can take 10 to 40 years or more for someone to become ill from exposure to these products.