Amicus Curiae Brief — Air and Liquid Systems Corp., et al., Petitioners v. Roberta G. DeVries, Individually and as Administratrix of the Estate of John B. DeVries, Deceased, et al.

No. 17-1104

______________________________________________________

IN THE

Supreme Court of the United States

_____________________________________________

AIR AND LIQUID SYSTEMS CORP., et al.,

Petitioners,

v.

ROBERTA G. DEVRIES,

Individually and as Administratrix of the

Estate of John B. DeVries, Deceased, et al.,

Respondents.

___________________________

On Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

___________________________

BRIEF OF AMICUS CURIAE

AMERICAN ASSOCIATION FOR JUSTICE

IN SUPPORT OF RESPONDENTS

______________________________________________

ELISE SANGUINETTI

President

AMERICAN ASSOCIATION

FOR JUSTICE

777 6th Street, NW

Washington, DC 20001

Counsel for

Amicus Curiae

JEFFREY R. WHITE

Associate General Counsel

Counsel of Record

AMERICAN ASSOCIATION

FOR JUSTICE

777 6th Street, NW #200

Washington, DC 20001

(202) 944-2839

jeffrey.white@justice.org

_______________________________________________________

i

Table of Contents

TABLE OF AUTHORITIES ................................... iii

INTEREST OF AMICUS CURIAE ......................... 1

SUMMARY OF ARGUMENT.................................. 1

ARGUMENT ............................................................ 7

I. Manufacturer Liability for Negligently Failing

to Warn of Serious Danger to Users Due to the

Installation or Replacement of an Integral

Component of the Manufacturer’s Product Falls

Well Within Settled Principles of Tort and

Products Liability Law. ..................................... 7

A. Accepted Tort Principles Recognize a Duty

to Warn Those Who Are Placed in Danger

by the Defendant’s Conduct. ...................... 8

B. Products Liability Law Recognizes a

Manufacturer’s Duty to Warn of Dangers

Presented by a Component Part of the

Manufacturer’s Product, Even Where the

Component Is Incorporated into the

Product After Delivery. ............................. 11

C. Arguments Advanced Against the Decision

Below Fail to Address the Products

Liability Issue Before This Court. ............ 17

ii

II. The Availability of Insurance Covering

Liability for Asbestos Caused Harm,

Including Harm Caused By Long-Ago

Exposure, Supports Recognition of the

Manufacturer’s Duty to Warn of Dangers

of Asbestos Components............................... 23

A. Insurability of Loss Due to Negligence Is Not

Essential to Duty to Exercise Due Care. .... 23

B. Liability Insurance for Harm Caused by

Long-Ago Asbestos Exposure. ..................... 25

III. This Court has Historically and Consistently

Shown Special Solicitude for the Rights of

Seamen. ....................................................... 33

CONCLUSION ....................................................... 36

iii

TABLE OF AUTHORITIES

Cases

Acoba v. Gen. Tire,

986 P.2d 288 (Haw. 1999) ............................. 15, 16

Aguilar v. Standard Oil Co. of New Jersey,

318 U.S. 724 (1943) ............................................. 35

Am. Excess Ins. Co. v. MGM Grand Hotels, Inc.,

729 P.2d 1352 (Nev. 1986) .................................. 27

Appalachian Ins. Co. v. Gen. Elec. Co.,

863 N.E.2d 994 (N.Y. 2007) ................................ 26

Atlantic Sounding Co. v. Townsend,

557 U.S. 404 (2009) ............................................. 36

Bainbridge v. Merchants’ & Miners’ Transp. Co.,

287 U.S. 278, 282 (1932) ..................................... 35

Bell v. Foster Wheeler Energy Corp. et al.,

No. 15-6394, 2016 WL 5780104

(E.D. La. Oct. 4, 2016) ........................................ 17

Chicano v. Gen. Elec. Co.,

No. Civ.A. 03-5126, 2004 WL 2250990

(E.D. Pa. Oct. 5, 2004) ........................................ 13

Escola v. Coca Cola Bottling Co. of Fresno,

150 P.2d 436 (Cal. 1944) ..................................... 25

Feres v. United States,

340 U.S. 135 (1950) ............................................. 20

iv

Garvin v. AGCO Corp.,

No. 2012-CP-40-6675, 2014 WL 8628438

(S.C. Ct. C.P. Dec. 10, 2014) ............................... 14

Harden v. Gordon,

11 F. Cas. 480 (C.C. Me. 1823) ........................... 35

Ilosky v. Michelin Tire Corp.,

307 S.E.2d 603 (W. Va. 1983) ............................. 15

In re MGM Grand Hotel Fire Litig.,

570 F. Supp. 913, 915–16 (D. Nev. 1983) ........... 27

In re N.Y.C. Asbestos Litig.,

59 N.E.3d 458 (N.Y. 2016) ...................... 14, 24, 25

In re: Asbestos Prod. Liab. Litig. (No. VI),

873 F.3d 232 (3d Cir. 2017) ................................ 11

Macias v. Saberhagen Holdings, Inc.,

282 P.3d 1069 (Wash. 2012) ............................... 14

May v. Air & Liquid Sys. Corp.,

129 A.3d 984 (Md. 2015) ................... 14, 16, 24, 25

McKenzie v. A.W. Chesterton Co.,

373 P.3d 150 (Or. Ct. App. 2016)........................ 14

Norfolk & W. Ry. Co. v. Ayers,

538 U.S. 135 (2003) ............................................. 28

O’Neil v. Crane Co.,

266 P.3d 987 (Cal. 2012) ..................................... 16

v

Ramsay v. Allegre,

25 U.S. 611 (1827) ............................................... 35

Reynolds v. Bridgestone/Firestone, Inc.,

989 F.2d 465 (11th Cir. 1993)............................. 15

Schwartz v. Abex Corp.,

106 F. Supp. 3d 626 (E.D. Pa. 2015) .................. 13

U.S. Bulk Carriers, Inc. v. Arguelles,

400 U.S. 351 (1971) ............................................. 34

Whelan v. Armstrong International, Inc.,

2018 WL 3716036 (N.J. Aug. 6, 2018)................ 13

Statutes

11 U.S.C. § 524(g)................................................... 21

Other Authorities

Stephen P. Baginski et al., Catastrophic Events and

Retroactive Liability Insurance: The Case of the

MGM Grand Fire, 58 Journal of Risk and

Insurance 247 (1991) .......................................... 28

Berkshire Hathaway, Inc.,

2009 Annual Report to Shareholders ................. 31

Berkshire Hathaway, Inc.,

2015 Annual Report to Shareholders ................. 31

vi

Berkshire Hathaway, Inc.,

2017 Annual Report to Shareholders ................. 32

Brief of Amici Curiae Association of Trial Lawyers

of America, et al., Sonnenberg v. United States,

498 U.S. 1067 (No. 90-539) (1991)...................... 21

Brief of Amicus Curiae American Association for

Justice in Support of Petition for a Writ of

Certiorari, Witt v. United States of America,

564 U.S. 1037 (No. 10-885),

2011 WL 493955 (2011) ...................................... 21

Brief of Amicus Curiae American Association for

Justice in Support of the Petition for a Writ of

Certiorari, Read v. United States, 571 U.S. 1095

(2013) (No. 13-505), 2013 WL 6174913 (2013)... 20

Stephen J. Carroll et al., RAND Inst. for Civil

Justice, Asbestos Litigation (2005) ..................... 22

Lloyd Dixon et al., RAND Inst. for Civil Justice,

Asbestos Bankruptcy Trusts: An Overview of

Trust Structure and Activity with Detailed

Reports on the Largest Trusts (2010) ................. 22

Lloyd Dixon & Geoffrey McGovern, RAND Inst. for

Civil Justice, Asbestos Bankruptcy Trusts and

Tort Compensation (2011) .................................. 23

Terry Morehead Dworkin,

Fear of Disease and Delayed Manifestation

Injuries: A Solution or A Pandora's Box?,

53 Fordham L. Rev. 527 (1984) .......................... 28

vii

Laura A. Foggan & Richard A. Ifft, Retroactive

Reinsurance and Loss Portfolio Transfers: Bad

faith scheme or a normal and healthy part of the

insurance industry, ABA Insurance Coverage

Litig. Comm. CLE Seminar (Mar. 5-8, 2014) .... 30

Mark Greenblatt, Berkshire Hathaway subsidiaries

deny, delay asbestos, hazard claims, suits,

insiders allege, Scripps News (Oct. 6, 2013) ...... 32

Deborah R. Hensler & Mark A. Peterson,

Understanding Mass Personal Injury Litigation:

A Socio-Legal Analysis,

59 Brook. L. Rev. 961 (1993) .............................. 27

Tamar Lewin Insurance for Past Risks,

N.Y. Times, April 6, 1982. .................................. 27

Restatement (Second) of Torts §§ 321-325 .............. 9

Restatement (Second) of Torts § 402A ............ 13, 24

Restatement (Third) of Torts § 18 (2010) ................ 9

David W. Robertson, Punitive Damages in U.S.

Maritime Law: Miles, Baker, and Townsend, 70

La. L. Rev. 463 (2010) ......................................... 35

Michael L. Smith & Robert C. Witt, An Economic

Analysis of Retroactive Liability Insurance,

52 Journal of Risk and Insurance 379 (1985) .... 28

viii

Dean Starkman, AIG’s Other Reputation: Some

Customers Say the Insurance Giant Is Too

Reluctant to Pay Up, Wash. Post

(Aug. 21, 2005) .................................................... 33

Jeffrey W. Stempel, Assessing the Coverage

Carnage: Asbestos Liability and Insurance After

Three Decades of Dispute,

12 Conn. Ins. L.J. 349 (2006).............................. 29

John M. Sylvester & Max Louik, Policyholder

Litigation Involving Claims Handling by Resolute

Management Inc. 2015 Update, ABA Insurance

Coverage Litigation Committee CLE Seminar

(March 5-7, 2015) ................................................ 33

John Sylvester, Policyholder Litigation Involving

Claims Handling by Resolute Management Inc.,

ABA Insurance Coverage Litigation Committee

CLE Seminar (March 5-8, 2014) ........................ 33

Ernest J. Weinrib, The Case for A Duty to Rescue,

90 Yale L.J. 247 (1980) ......................................... 9

Joanne Wojcik, Reinsurers writing retro cover for

asbestos, Business Insurance (June 23, 2002) ... 29

1

INTEREST OF AMICUS CURIAE 1

The American Association for Justice [“AAJ”]

is a voluntary national bar association whose members practice in every state. AAJ members primarily

represent plaintiffs in personal injury, civil rights,

employment rights, and consumer rights litigation.

Many AAJ members represent asbestos victims and

their families.

AAJ is concerned that defense contractors like

Petitioners, and others who marketed machines and

equipment that required post-sale installation of asbestos components, seek absolute immunity from accountability for their failure to take reasonable steps

to warn U.S. military personnel of the serious dangers they would encounter in the ordinary course of

using and maintaining that machinery.

SUMMARY OF ARGUMENT

1)

Manufacturer liability for negligently failing

to warn of dangers to users presented by installation

or replacement of an integral component after the

product’s delivery to the purchaser falls well within

common-law tort and product liability principles.

Such a cause of action should therefore be recognized

under federal maritime law.

1 Pursuant to Rule 37.6, amicus affirms that no counsel for any

party authored this brief in whole or in part and no person or

entity, other than amicus, its members, or its counsel has made

a monetary contribution to its preparation or submission. Petitioner and Respondent have consented to the filing of this brief.

2

The court below properly rejected Petitioners’

proposed bright-line rule precluding any liability for

harm caused by products not made or sold or distributed by defendant, that is, for harm caused by products outside the manufacturer’s “chain of distribution.” The lower court did not impose upon manufacturers a duty to warn of dangers posed by every

other product that might conceivably be used with

or near defendant’s product. Instead, the Third Circuit properly allowed a negligence cause of action to

proceed in the narrow circumstance where a dangerous addition or replacement is so integral to the

manufacturer’s finished product that it may be

deemed a component part of the manufacturer’s

product, though installed post-sale. Requiring the

manufacturer to take reasonable steps to warn users

of known dangers associated with that component

strikes an appropriate balance of fairness and accountability.

(a)

Such a carefully confined duty to warn

– not Petitioners’ bright-line rule denying any obligation to warn in all circumstances – comports with

settled tort law principles. Although there is no general common-law duty to rescue a stranger from dangers created by a third party, such a duty may arise

when the defendant’s own conduct has placed the

plaintiff in a dangerous position.

In this case, Petitioners knew that the machinery they supplied to the Navy would not be

placed into service until it was coated by highly dangerous asbestos insulation. They knew that asbestos-containing internal components would be

3

replaced by similar components many times during

the life of the equipment. Having played a role in

placing Navy personnel at risk for asbestos-caused

disease, Petitioners owed them at least the obligation to take reasonable steps to alert them of the

danger and of procedures to reduce it. A similar obligation attends the use of components that will necessarily require replacement. The duty to warn is

analogous to the duty owed by the maker of a gas

can to warn of the dangers of inhaling gasoline

fumes, though the can’s contents will necessarily be

replaced many times.

(b)

This duty to warn also comports with

settled principles of product liability law. The court

below carefully circumscribed the duty of a product

manufacturer to warn users of dangers posed by asbestos that was added post-sale. That duty arises

only where (a) the product was originally equipped

with an asbestos-containing part that is expected to

be replaced, (b) the manufacturer specifically directed that the product be used with an asbestoscontaining part, or (c) the product required an asbestos-containing part to function properly. In short, a

duty to warn attaches only if the add-on asbestos

may fairly be viewed as an integral component of the

manufacturer’s finished product. That was the case

here, where manufacturers knew that the equipment they supplied to the Navy would not be placed

into service without asbestos insulation and would

require regular replacement of asbestos-containing

internal parts.

4

A majority of state courts that have addressed

this issue, in addition to well-reasoned decisions by

federal courts, are in accord with the narrowly tailored position taken by the Third Circuit in this case.

Moreover, the decisions relied upon by Petitioners do

not support the no-duty they advocate.

(c)

Many of the contentions propounded by

Petitioners and supporting amici are straw man arguments that do not address the question presented.

First, Petitioners rewrite the decision below as imposing liability based solely on foreseeability that a

manufacturer’s product might be used with or near

another’s product. Stretching that notion to logical

extremes may yield absurd results, but it bears no

resemblance to the lower court’s actual holding.

Additionally, Petitioners seek to cast much of

the responsibility for the harm in this case onto the

United States Navy. Respondents, of course, cannot

hold the Navy accountable. The government’s immunity from suit for injuries incurred during active

military service ought to be revisited and rejected.

But it does not justify conferring immunity on private military contractors for failing to warn military

personnel of deadly dangers associated with using

and maintaining their equipment.

Finally, Petitioners suggest that asbestos victims seek compensation from asbestos trust funds

established to provide compensation to those

harmed by the asbestos products of now-bankrupt

companies. Solvent defendants contributed nothing

to those funds. The asbestos trusts are woefully

5

underfunded, providing only pennies on the dollar to

asbestos victims for their injuries. Solvent defendants who are held liable in asbestos litigation are

generally entitled to an offset for payments plaintiffs

have received from asbestos trusts. But the asbestos

trusts do not exist to subsidize an immunity for solvent defendants at the expense of future asbestos

victims.

2)

The fact that insurance coverage is available

for liability arising out of asbestos exposure occurring decades ago supports imposition of the duty to

warn recognized in this case. Although indemnity

coverage is not essential to recognizing a duty to exercise due care, its availability, allowing a manufacturer to spread the risk of loss among the broader

public, supports the imposition of such a duty.

Indemnity coverage for liability indemnity for

asbestos harms is available under commercial general liability policies. Indeed, some Petitioners in

this case have indicated that they have obtained

such coverage.

Even accepting that companies manufacturing machines designed for the addition of asbestos

insulation or replacement parts could not have anticipated liability for the negligence alleged in this

case, retroactive insurance and reinsurance is available. Retroactive underwriting is premised on the

fact that insurers receive premiums when the policy

is written and can profitably invest those premium

dollars until such time that they are required to

make indemnity payments to injured plaintiffs.

6

Following the publicized purchase of retroactive liability coverage following the 1980 fire at the

MGM Grand Hotel in Las Vegas, such coverage has

become well accepted. Because asbestos-related diseases often do not become manifest until decades following exposure, coverage for liability for asbestos

harms is well suited to retroactive insurance. For

this reason, insurance covering liability for asbestos

losses has proved profitable.

One company that has thrived by underwriting asbestos liability coverage is Berkshire Hathaway, Inc. By engaging in loss portfolio transfers

through its insurance subsidiaries, Berkshire enables other insurers to remove long-term contingent

liabilities from their books while providing Berkshire a “float” of premium dollars to invest. The company has amassed the largest portfolio of asbestos

coverage in the world. Berkshire chairman Warren

Buffett has repeatedly highlighted for shareholders

the profitability of this strategy, strongly indicating

that liability insurance for asbestos injury will remain readily available.

The same strategy also provides a financial

incentive for insurers to maximize the time they can

invest premiums by delaying and denying even valid

claims. In fact, accusations have surfaced that Berkshire has engaged in such a strategy. However, reversal in this case and denial of a cause of action for

asbestos victims would bestow a windfall on insurers.

7

3)

The court below gave proper weight to the

longstanding principle of maritime law that the

rights of seamen are worthy of special solicitude. For

nearly 200 years, this Court has consistently recognized that the rights of seamen are worthy of judicial

protections because they are “wards of the admiralty.” Recently this Court emphatically rejected arguments that modern seafarers have no need for this

special solicitude. Affirmance of the Third Circuit’s

recognition of a negligence cause of action increasing

the protections of U.S. Navy sailors and other seafarers is wholly consistent with the historic maritime principles of this Court.

ARGUMENT

I.

MANUFACTURER

LIABILITY

FOR

NEGLIGENTLY FAILING TO WARN OF

SERIOUS DANGER TO USERS DUE TO

THE INSTALLATION OR REPLACEMENT OF AN INTEGRAL COMPONENT

OF THE MANUFACTURER’S PRODUCT

FALLS WELL WITHIN SETTLED PRINCIPLES OF TORT AND PRODUCTS LIABILITY LAW.

The American Association for Justice addresses this Court regarding the primary question

presented in this case. Petitioners contend that under maritime law a manufacturer owes no duty to

warn of, and cannot be liable for harm caused by a

product made or sold by another. Petitioners’ Br. 22;

General Electric [“GE”] Br. 2-3. Phrased differently,

8

Petitioners contend that product liability is confined

to the manufacturer’s “chain of distribution.” Petitioners’ Br. 20. In this case, decedents were exposed

to asbestos in insulation installed after delivery of

Petitioners’ equipment (“bare-metal” products) or to

asbestos contained in replacement parts installed

post-sale (wear-and-tear products). Neither Mr.

DeVries nor Mr. McAfee were exposed to asbestos

that was actually supplied by Petitioners. Under Petitioners’ proposed bright-line rule, “[t]hat should be

the end of the inquiry.” GE Br. 2.

The court below determined otherwise. The

Third Circuit did not impose a duty to warn on every

supplier of every product that might foreseeably be

used with or near asbestos. The court did hold that

in the relatively narrow circumstance where asbestos serves as an integral component of the final product, though expected to be added later, the manufacturer owes a duty to take reasonable steps to warn

users of this hazard. That rule strikes the appropriate balance of fairness and accountability.

A.

Accepted Tort Principles Recognize a

Duty to Warn Those Who Are Placed in

Danger by the Defendant’s Conduct.

Petitioners complain that liability for harm

caused by asbestos products that they did not manufacture or supply would violate “foundational tortlaw principles,” Petitioners’ Br. 20, and “represent

an unprecedented expansion of strict products liability.” GE Br. 21. In fact, the duty to warn those whom

9

the defendant has placed in danger is a settled tort

law principle.

Petitioners invoke a basic proposition that a

defendant “owes no duty to protect the public from

dangers that third parties create.” Petitioners’ Br.

21, citing Restatement (Second) of Torts § 315

(1965). To uphold the Third Circuit’s decision, Petitioners contend, “would amount to imposing a duty

to rescue.” Id.

There are exceptions and caveats and restrictions to the no-duty principle. See, e.g., Restatement (Second) of Torts §§ 321-325; Ernest J. Weinrib, The Case for A Duty to Rescue, 90 Yale L.J. 247,

248 (1980) (“[M]any of the outposts of the doctrine

that there is no general duty to rescue have fallen.”).

One that is particularly applicable in this case provides: “A defendant whose conduct creates a risk of

physical or emotional harm can fail to exercise reasonable care by failing to warn of the danger” if the

defendant knows of the risk and knows that those

encountering the risk will not be aware of it. Restatement (Third) of Torts: Liab. For Phys. & Emot.

Harm § 18 (2010). See also Restatement (Second) of

Torts § 321 (similar).

Significantly, the danger need not be the result of the defendant’s negligence. Nor is the duty to

warn limited to dangers associated with objects or

persons that are within the defendant’s control. See,

e.g., Weintrib, supra, at 257 (noting recent case law

recognizing “that the very act of taking a person out

in one’s boat constitutes participation in the creation

10

of the danger of drowning” that would give rise to a

duty to rescue).

In this case, Petitioners were very aware from

the Navy’s specifications that their turbines and

other equipment would be put into service only after

being insulated with asbestos. Petitioners also knew

that Navy personnel would be working in close proximity to their asbestos-insulated machines. The

court below found no duty to rescue Navy personnel

or to take any action to prevent the use of asbestos

with their equipment. The duty in this case extends

only to taking reasonable steps to warn of a danger

associated with the use and maintenance of Petitioners’ own machines. Petitioners and their supporting

amici cannot credibly contend that such a duty offends fundamental tort precepts.

Petitioners claim it would be “absurd if a

boater could sue the seller of marine gasoline for failing to warn about the risks of boating at high

speeds.” Petitioners’ Br. 20. A closer analogue to the

case at bar would be the duty of the maker of the

marine gas can to warn against storing in closed

cabin sleeping quarters, even though the gasoline

that harmed plaintiffs who breathed toxic fumes was

not made or supplied by the defendant.

11

B.

Products Liability Law Recognizes a

Manufacturer’s Duty to Warn of Dangers

Presented by a Component Part of the

Manufacturer’s Product, Even Where the

Component Is Incorporated into the

Product After Delivery.

Petitioners’ primary assertion is that, as a

bright-line rule of land-based products liability law,

a product supplier cannot be liable for “injuries

caused by third-party products foreseeably used

with its own.” Petitioners’ Br. 22. This restriction

“limiting liability to those inside a product's chain of

distribution is a ‘fundamental principle’ of productsliability law.” Petitioners’ Br. 23.

The Third Circuit carefully defined the scope

of its duty-to warn rule. A “bare-metal manufacturer

may be subject to liability” if it not only knew of the

hazards in asbestos, but also knew that “its product

will be used with an asbestos-containing part, because (a) the product was originally equipped with

an asbestos containing part that could reasonably be

expected to be replaced over the product's lifetime,

(b) the manufacturer specifically directed that the

product be used with an asbestos-containing part, or

(c) the product required an asbestos-containing part

to function properly.” In re: Asbestos Prod. Liab.

Litig. (No. VI), 873 F.3d 232, 240 (3d Cir. 2017) (footnotes omitted).

There is little doubt that the asbestos containing additions to Petitioners’ bare-metal equipment

satisfied the third element. Petitioners themselves

12

refer to the record evidence that that without insulation “the ship’s systems ‘would be inefficient due to

loss of heat[,] and sailors would be burned or unable

to operate in engineering spaces due to heat levels,’”

and that, at the time, there was no acceptable substitute for asbestos parts and insulation. Petitioners’

Br. 5, quoting JA36 (Affidavit of Retired Rear Admiral Roger B. Horne). See also JA37 (The Navy had

made clear that “asbestos thermal insulation was essential to safe and efficient operation of its ships.”).

The court’s analysis thus rejected the brightline rule of immunity proposed by Petitioners. But

the court did not impose liability simply on the basis

that defendant’s product could foreseeably be used

in conjunction with asbestos. Instead, the court limited the duty to warn to those circumstances where

asbestos was so important to the function of the

manufacturer’s product that it may be deemed a

component part, even though it was installed after

the manufacturer delivered its product to the Navy.

As one district judge insightfully posited in an early

similar case,

GE argues that it did not manufacture

its marine steam turbines with any asbestos materials and, therefore, Chicano could not have inhaled asbestos fibers from its turbines. However, GE's

argument overlooks the fact that its

products are component parts of finished products, because the turbines

cannot function properly or safely without thermal insulation.

13

Chicano v. Gen. Elec. Co., No. Civ.A. 03-5126, 2004

WL 2250990, at *3 (E.D. Pa. Oct. 5, 2004) (emphasis

added). See also Schwartz v. Abex Corp., 106 F.

Supp. 3d 626, 654-55 (E.D. Pa. 2015) (“[A] product

manufacturer has a common law duty to warn about

the asbestos hazards of a component part later used

with its product, which it neither manufactured nor

supplied (i.e., an aftermarket component), if the

manufacturer knew its product would be used with

that type of asbestos-containing component…”) (emphasis added).

The fact that the component was installed after delivery of the bare-metal machine precludes the

manufacturer’s strict liability for the unreasonably

dangerous insulation or replacement part. See Restatement (Second) of Torts § 402A (imposing strict

liability for unreasonably dangerous product when it

leaves the defendant’s control and “is expected to

and does reach the user or consumer without substantial change…”). But Petitioners seek immunity

from any obligation whatever, even to take reasonable steps to advise Navy sailors of the dangers they

are exposed to when working near Petitioners’ machinery.

The clear majority of state courts have

adopted the middle ground position described by the

Third Circuit. See, e.g., Whelan v. Armstrong International, Inc., 2018 WL 3716036, at *1 (N.J. Aug. 6,

2018) (“[A] duty to warn exists when the manufacturer’s product contains asbestos components, which

are integral to the function of the product, and the

14

manufacturer is aware that routine periodic maintenance of its product will require the replacement of

those components with other asbestos-containing

parts.”) (emphasis added); In re N.Y.C. Asbestos

Litig., 59 N.E.3d 458, 463 (N.Y. 2016) (“[T]he manufacturer of a product has a duty to warn of the danger arising from the known and reasonably foreseeable use of its product in combination with a thirdparty product which, as a matter of design, mechanics or economic necessity, is necessary to enable the

manufacturer’s product to function as intended.”)

(emphasis added); McKenzie v. A.W. Chesterton Co.,

373 P.3d 150, 160-62 (Or. Ct. App. 2016), rev. denied,

381 P.3d 841 (2016) (rejecting “bare metal” defense

with respect to failure to warn of dangers of asbestos-containing replacement components); May v. Air

& Liquid Sys. Corp., 129 A.3d 984, 1000 (Md. 2015)

(The bare-metal manufacturer owes a duty to warn

“when (1) its product contains asbestos components,

and no safer material is available; (2) asbestos is a

critical part of the pump sold by the manufacturer;

(3) periodic maintenance involving handling asbestos gaskets and packing is required; and (4) the manufacturer knows or should know the risks from exposure to asbestos.”); Garvin v. AGCO Corp., No.

2012-CP-40-6675, 2014 WL 8628438, at *7-8 (S.C.

Ct. C.P. Dec. 10, 2014) (manufacturer may be liable

for harm caused by asbestos-containing replacement

parts when the manufacturer “recommends, specifies, or requires that asbestos gaskets and packing

be replaced with like materials…”); Macias v. Saberhagen Holdings, Inc., 282 P.3d 1069, 1076 (Wash.

2012) (liability of manufacturer of respirator where

plaintiff who developed mesothelioma from exposure

15

to asbestos while cleaning respirators; distinguishing cases where equipment “only happened to be insulated by asbestos” from the present circumstance

where defendant’s product “by its very nature would

necessarily involve exposure to asbestos.”).

Petitioners suggest that their proposed rule,

that “product manufacturers are not liable for injuries caused by products made, sold, and distributed

by others” is “traditional tort doctrine.” Petitioners

Br. 13. It is not, and the decisions Petitioners cite do

not support such a rule. For example, Petitioners

rely on Reynolds v. Bridgestone/Firestone, Inc., 989

F.2d 465, 471-72 (11th Cir. 1993) for the proposition

that “a tire manufacturer has no duty to warn about

the dangers of the wheels for which the tire is specifically designed.” Petitioners Br. 13 & 19. But the

reason the court found no duty to warn was not the

purported rule against warning of another product’s

dangers. Rather, “Lampley was an experienced tire

changer who was aware of the dangers associated

with mounting tires on multi-piece rims.” Reynolds,

989 F.2d at 471. More typical of the common law is

Ilosky v. Michelin Tire Corp., 307 S.E.2d 603, 609–

10 (W. Va. 1983), where the court upheld the liability of the manufacturer of a radial tire for failure to

warn the user against mixing radials with conventional tires, which could result in loss of control.

Nor is Acoba v. Gen. Tire, 986 P.2d 288, 305

(Haw. 1999) in accord with Petitioners’ no-duty rule.

See Petitioners’ Br. 19. In Acoba the court stated,

“Assuming arguendo that Firestone had the duty to

warn Romero” of the dangers of mounting its tires

16

on multi-piece rims, Firestone discharged that duty

by providing adequate warnings in its safety and

service manual. Id. at 302–03 (emphasis added).

Petitioners also cite Childress v. Gresen Mfg.

Co., 888 F.2d 45 (6th Cir. 1989), as holding that “the

maker of a component part commissioned for use in

a log splitter need not investigate whether the component is safe for its intended use.” Petitioners Br.

13 & 22. However, that case did not involve an allegation that the log splitter maker owed a duty to

warn the user of any danger. Nor was there an allegation that the component valve was inherently dangerous. Rather plaintiffs alleged that the valve

maker should have supplied a different valve to reduce the danger. Id. at 48-49. The decision does not

illustrate Petitioners’ hoped-for rule.

Finally, Petitioners assert that the court in

O’Neil v. Crane Co., 266 P.3d 987, 991 (Cal. 2012)

found “no liability for third-party asbestos-containing replacement parts.” Petitioners Br. 22. See also

ATRA Br. 9; PLAC Br. 14. However, the California

court there held only that foreseeability alone could

not support liability for failure to warn. In O’Neil,

“the evidence did not establish that defendants’

products needed asbestos-containing components or

insulation to function properly.” 266 P.3d at 1004.

As the Maryland high court observed, O’Neil and

other decisions suggest that where the use of asbestos insulation was not only foreseeable, but necessary to the proper function of defendant’s machine,

defendant owes a duty to warn. May, 129 A.3d at

995–96.

17

C.

Arguments Advanced Against the Decision Below Fail to Address the Products

Liability Issue Before This Court.

As one district court has stated, “the recent

trend in state court asbestos litigation has been to

recognize limited circumstances in which a manufacturer can have duties to warn regarding a product

that the manufacturer did not make, sell, or otherwise control.” Bell v. Foster Wheeler Energy Corp. et

al., No. 15-6394, 2016 WL 5780104, at *2 (E.D. La.

Oct. 4, 2016).

Candidly, however, this is not the universal

rule; nor have the courts arrived at a uniform test.

Refined analysis would assist the courts below. Instead, Petitioners and supporting amici expend extraordinary effort in constructing and then demolishing straw men, an effort that offers no assistance

to this Court or to others who will preside over the

trials arising out of similar tragic circumstances.

1.

The Lower Court Did Not Impose Liability on

Foreseeability Alone.

First and most glaringly, those who want this

Court to reverse strive mightily to rewrite the Third

Circuit’s opinion so that its conclusions might be dismissed as “absurd.” Petitioners’ Br. 20.

In Petitioners’ recasting, the Third Circuit

holding was “based on its mistaken belief that foreseeability alone creates a duty. That is wrong...” Petitioners’ Br. 40-41. See also ATRA Br. 7

18

(“Respondents and the Third Circuit justify their

theory based on foreseeability,” but “foreseeability,

like light, travels indefinitely in a vacuum,” quoting

Thing v. La Chusa, 48 Cal. 3d 644, 659 (1989)).

It is clear from the Third Circuit’s holding,

quoted above, that the court carefully limited its

duty to warn of foreseeable harm to the narrow circumstance where asbestos is so integral to the operation of defendant’s machine as to be a component

part. Nevertheless, Petitioners insist that on a ship,

“most things are connected to other things” so that

affirming “would risk imposing liability on everyone

who made or sold a product incorporated into a

ship's (or a building's, or a car's) asbestos-containing

systems.” Petitioners’ Br. 33.

Petitioners stretch their mistaken premise to

ridiculous lengths. “The home chef who buys a

butcher’s knife would hardly expect a warning about

the dangers of other products—undercooked meat,

for example.” Petitioners’ Br 20. Similarly, Petitioners invite us to laugh at the notion that a maker of

hockey skates would owe a duty to warn of the importance of a secure helmet or that a swimsuit

maker should warn of the importance of checking

the pool’s depth before diving. Id. ATRA adds that

the sellers of tools that could be used with asbestoscontaining materials “such as power saws, sanders,

drills, hammers, or chisels, also could face liability.”

ATRA Br. 17. Indeed, manufacturers might require

“research facilities to identify potential dangers with

respect to all products that may be used in

19

conjunction with or in the vicinity of their own products.” Id. at 20.

The asbestos insulation and internal parts

that killed the Navy personnel in this case were not

simply products that happened to be used near Petitioners’ machinery. Indeed, the after-installed asbestos was not at all a stranger to the Petitioners’

“chain of distribution.” The defense contractors

knew in great detail the Navy’s specifications for the

turbines, compressors, valves, and other equipment

the Navy was buying from them. Petitioners knew

that the Navy would not use these machines until

vital asbestos insulation and packing were in place.

They knew that asbestos components would require

replacement many times, generating airborne fibers

that threatened the Navy sailors on board with

deadly cancer, unless stringent precautions were

taken. Complete immunity from accountability

would invite arrangements in which major military

contractors seek out lucrative contracts to deliver

equipment that is slightly unfinished, with known

hazardous material added by small, thinly insured

subcontractors. It would offer no incentive for suppliers to warn the military personnel of dangers

lurking in their equipment.

But Petitioners and supporting amici focus

their firepower on the an open-ended “pure foreseeability” test that the Third Circuit did not adopt.

20

2.

Attempts to Focus on the Role of the United

States Navy are Not Relevant to the Duty

Question.

Petitioners emphasize that the Navy “controls

what goes on its ships” and “exercised that control to

require the use of asbestos,”, even though the Navy

“knew that asbestos could be dangerous” and as

early as 1922 was aware of precautions for working

with it. Petitioners’ Br. 3-4. Respondent General

Electric in particular argues that “the Navy alone

was in charge of deciding the appropriate form of insulation on its ships,” GE Br. 3, that asbestos insulation of its machinery was applied initially by the

shipbuilder, and later upon maintenance or overhaul, by the Navy itself or shipyard/repair facility

“in accordance with Navy specifications.” Id. at 5.

Imposing liability on GE “would be especially improper in the military setting, where the Navy exercised plenary authority over the use and control of

asbestos for its warships.” Id. at 22.

It comes with ill grace that Petitioners seek to

shift attention in this way to the Navy’s responsibility for the deaths of its sailors who ultimately perished not in wartime, but due to their service time

on toxic ships. The government is itself immune

from suit with respect to any negligence on its part.

Feres v. United States, 340 U.S. 135 (1950). It is an

immunity that is overdue to be cast aside. See Brief

of Amicus Curiae American Association for Justice

in Support of the Petition for a Writ of Certiorari,

Read v. United States, 571 U.S. 1095 (2013) (No. 13505), 2013 WL 6174913 (2013) (supporting Petition

21

seeking to overturn Feres rule); Brief of Amicus Curiae American Association for Justice in Support of

Petition for a Writ of Certiorari, Witt v. United

States, 564 U.S. 1037 (No. 10-885), 2011 WL 493955

(2011) (same); Brief of Amici Curiae Association of

Trial Lawyers of America, et al., Sonnenberg v.

United States, 498 U.S. 1067 (No. 90-539) (1991)

(same).

However, the government’s Feres immunity

provides no support for extending immunity to private contractors.

3.

Attempts to Divert Attention to the Asbestos

Trusts are Not Relevant.

Another straw man argument erected by Petitioners proposes that the victims of asbestos exposure file claims with “asbestos trusts” rather than

assert their failure to warn claims against solvent

defendants like Petitioners. See Petitioners’ Br. 37;

see also ATRA Br. 23-27 (“Billions of dollars are

available in trusts to pay asbestos claimants.”) (emphasis in original).

Congress in 1994 amended the Bankruptcy

Code to allow companies to get out from under massive liabilities arising out of their manufacture and

distribution of asbestos products while ensuring

some measure of compensation would be available to

victims and their families. See 11 U.S.C. § 524(g).

Companies could obtain special treatment in reorganization by establishing a trust under state law to

pay the present and future claims of those who can

22

establish exposure to the bankrupt’s asbestos products. See generally Lloyd Dixon et al., RAND Inst.

for Civil Justice, Asbestos Bankruptcy Trusts: An

Overview of Trust Structure and Activity with Detailed Reports on the Largest Trusts, 5-10 (2010),

available at http://www.rand.org/pubs/technical_reports/TR872.html.

It is not known whether Respondents could

establish eligibility for claims payments from any of

the asbestos trusts. What is known is that those

trusts are woefully underfunded in view of the multitude of severely injured individuals and families of

those killed by asbestos. In fact, RAND’s in-depth investigation of claims paid out by the trusts found

that claimants often receive only “pennies on the dollar” in comparison with payments of claims in litigation. Stephen J. Carroll et al., RAND Inst. for Civil

Justice, Asbestos Litigation, 102 (2005), available at

http://www.rand.org/pubs/monographs/MG162.

Moreover, to preserve assets for future claims, funds

available for current claimants have been steadily

reduced. Id. Asbestos trust funds do not represent

any realistic alternative source of compensation for

Respondents.

What is also known is that solvent defendants

such as Petitioners have not contributed to any asbestos trust fund. Nevertheless, defendants who are

found liable for asbestos injury are generally entitled under state law to a set-off for amounts plaintiffs have received from an asbestos trust, though

the amounts and the procedures for calculating it

vary widely among the states. See Lloyd Dixon &

23

Geoffrey McGovern, RAND Inst. for Civil Justice,

Asbestos Bankruptcy Trusts and Tort Compensation,

xiii-xvi (2011), available at http://www.rand.org/

pubs/monographs/MG1104.html.

Essentially Petitioners and supporting amici

propose to this Court that Petitioners be gifted with

immunity from any accountability for negligence

and that, instead, injured victims and families be directed into a compensation regime that was not

funded by solvent entities like Petitioners, that can

pay only a tiny fraction of the value of victims’ losses,

and that must make such payments at the expense

of future asbestos victims.

II.

THE AVAILABILITY OF INSURANCE

COVERING LIABILITY FOR ASBESTOS

CAUSED HARM, INCLUDING HARM

CAUSED BY LONG-AGO EXPOSURE,

SUPPORTS RECOGNITION OF THE

MANUFACTURER’S DUTY TO WARN OF

DANGERS OF ASBESTOS COMPONENTS.

A.

Insurability of Loss Due to Negligence Is

Not Essential to Duty to Exercise Due

Care.

One rationale Petitioners proffer to justify

their desired immunity in this case is that liability

insurance cannot be obtained for such long-ago asbestos exposure. Petitioners contend, “it is far from

clear that insurance will be available . . . given the

uncertainty of the risk.” Petitioners’ Br. 47. See also

24

PLAC Br. 7 (The proposition that manufacturers

should be subject to product liability only where the

manufacturer can insure against risks, “is foundational.”); id. at 8-9 (A purpose of products liability is

to spread the risk of harm through manufacturer’s

insurance.).

However, courts have observed that not only

is insurance available to indemnity liability for negligent failure to warn in cases such as this, but that

“the availability of insurance counsels in favor of imposing a duty.” May, 129 A.3d at 994. In fact, the

court in that case observed that the bare-metal manufacturers “implicitly acknowledge in their brief

that they have some pre–1986 insurance coverage

available to them.” Id. Similarly, in In re N.Y.C., 59

N.E.3d at 473, the New York Court of Appeals disagreed that liability for failure to warn regarding asbestos components would “saddle manufacturers

with an untenable financial burden, especially given

that they can obtain insurance coverage for this type

of liability.”

Spreading the risk of harm through manufacturer’s liability insurance is most frequently advanced as a rationale supporting strict liability without fault. See, e.g., Restatement (Second) of Torts §

402A, comment c. (“[T]he justification for the strict

liability has been said to be that . . . the burden of

accidental injuries caused by products intended for

consumption be placed upon those who market

them, and be treated as a cost of production against

which liability insurance can be obtained.”). The

source of this rationale is Justice Traynor’s

25

concurrence in Escola v. Coca Cola Bottling Co. of

Fresno, 150 P.2d 436, 441 (Cal. 1944) (Traynor, J.,

concurring): “[T]he risk of injury can be insured by

the manufacturer and distributed among the public

as a cost of doing business.” Similarly, liability for

negligent failure to warn of dangers of an asbestoscontaining component not within the manufacturer’s chain of distribution would be justified by the

fact that liability insurance is available. In re

N.Y.C., 59 N.E. 3d at 473.

Is such insurance available to indemnify liability arising from failure to warn and asbestos exposure occurring decades ago? The May court raised

this question as well, asking whether consideration

of the availability of insurance, as a factor to be

weighed in determining whether to impose a duty,

should be “forward-looking” only. The court answered, No. May, 129 A.3d at 994.

B.

Liability Insurance for Harm Caused by

Long-Ago Asbestos Exposure.

1.

Coverage under Commercial General Liability

policies covers claims against manufacturers

of bare-metal equipment for harm caused by

subsequently-installed asbestos.

In fact, insurance for asbestos-related liability is available. Absent exclusion, Commercial General Liability policies cover indemnity for asbestoscaused disease. Such policies have covered suppliers

of “bare-metal” machinery that was subsequently insulated with asbestos-containing insulation from

26

other suppliers. Appalachian Ins. Co. v. Gen. Elec.

Co., 863 N.E.2d 994 (N.Y. 2007). In that case, the

New York high court observed that following the industry shift “from ‘accident’ to ‘occurrence’ based”

coverage in 1966, such “gradually occurring losses

would be covered so long as they were not intentional.” Id. at 1000 (quoting Continental Cas. Co. v.

Rapid–American Corp., 609 N.E.2d 506 (N.Y.1993)).

That included coverage of “liability arising from asbestos exposure or contamination.” Id. The court determined that both primary and excess coverage was

available at that time for claims against suppliers of

bare-metal equipment, like GE, for harm due to installation of “asbestos-containing products manufactured by others.” Id. at 995.

2.

Retroactive insurance is available to manufacturers of equipment who may be subject to asbestos-related claims.

Understandably, Petitioners and other “baremetal” equipment suppliers might not have anticipated that they might be liable many years in the

future for asbestos-related harm or obtained sufficient insurance to cover such eventualities. However, “retroactive” insurance coverage for future liability arising out of past conduct is available, including for asbestos injury.

On the morning of Friday, November 21,

1980, a fire broke out in the delicatessen at the MGM

Grand Hotel and Casino in Las Vegas. The fire,

caused by faulty wiring, spread through the casino

and caused thick smoke and toxic gas to fill the 26-

27

story high-rise where 3,400 people were registered

as guests. Eighty-four people died, and over 1,000

persons suffered injuries due to smoke inhalation

and injuries suffered in trying to escape the fire. In

re MGM Grand Hotel Fire Litig., 570 F. Supp. 913,

915–16 (D. Nev. 1983). “After the fire, safety specialists discovered significant building and fire code violations that may have contributed substantially to

the fire.” Deborah R. Hensler & Mark A. Peterson,

Understanding Mass Personal Injury Litigation: A

Socio-Legal Analysis, 59 Brook. L. Rev. 961, 974

(1993).

The legal fallout included more than 3,000 liability claims for wrongful death, personal injury

and property damage. At the time of the fire, MGM

Grand Hotels, Inc. carried an inadequate $30 million

of liability insurance coverage written on a layered

basis by four different insurance companies. For a

premium of $38.3 million, insurance services company Frank B. Hall Inc. underwrote up to $170 million in claims from the fire’s victims. Hall then

placed the first $35 million of coverage with its own

subsidiary, the Union International Insurance Company. The notion of obtaining insurance on one’s hotel after it had burned down attracted the attention

of popular press. See, e.g., Tamar Lewin Insurance

for Past Risks, N.Y. Times, April 6, 1982, at D2.

Ultimately, the courts approved MGM’s $75

million settlement with the fire victims in January

1983, and Union finally settled in April, 1984, paying MGM $75.9 million. Am. Excess Ins. Co. v. MGM

Grand Hotels, Inc., 729 P.2d 1352, 1353 (Nev. 1986).

28

“Retroactive liability insurance” had found a place in

the property/casualty insurance market. See Stephen P. Baginski et al., Catastrophic Events and

Retroactive Liability Insurance: The Case of the

MGM Grand Fire, 58 Journal of Risk and Insurance

247 (1991); Michael L. Smith & Robert C. Witt, An

Economic Analysis of Retroactive Liability Insurance, 52 Journal of Risk and Insurance 379 (1985).

Obviously, this type of coverage is most profitable for insurers in circumstances that provide

time for premium investment to grow. Diseases

caused by asbestos, for example, may remain latent

for 40 years following exposure. See Norfolk & W. Ry.

Co. v. Ayers, 538 U.S. 135, 168 (2003) (Kennedy, J.,

dissenting in part). During that time, the insurer is

able to invest the premiums it has collected. Indeed,

asbestos producer Johns-Manville Corp. suggested

the purchase of such insurance to guarantee payment of claims under its reorganization plan. Terry

Morehead Dworkin, Fear of Disease and Delayed

Manifestation Injuries: A Solution or A Pandora's

Box?, 53 Fordham L. Rev. 527, 574 (1984).

With respect to asbestos liability, “Retroactive insurance is thus a very attractive alternative.”

Id. Consequently, “retroactive reinsurance is still

available today, and it is gaining popularity as insurers seek creative ways to remove long-latent asbestos liabilities from their balance sheets without

dipping into policyholder surplus.” Joanne Wojcik,

Reinsurers writing retro cover for asbestos, Business

Insurance (June 23, 2002) available at http://www.

businessinsurance.com/article/20020623/STORY/10

29

0011210?template=printart. Indeed, as one observer

has stated that insurers covering asbestos liability

claims:

[H]ave weathered the financial aspect

of the asbestos storm quite well . . .

With all its faults, the asbestos mass

tort has significant traits tending to advantage insurers. Adjudication and

payment of the claims has extended

over decades, postponing payment.

This allows insurers to garner years of

investment income and to pay claims in

dollars whose real value has been substantially reduced by inflation.

Jeffrey W. Stempel, Assessing the Coverage Carnage:

Asbestos Liability and Insurance After Three Decades of Dispute, 12 Conn. Ins. L.J. 349, 350–51

(2006). See also id. at 354 (“Despite being required

to provide considerable asbestos coverage, general liability insurance as a whole has been a profitable

venture from 1943 to the present.”).

One company that has thrived on underwriting asbestos liability coverage, and retroactive liability coverage in particular, is Berkshire Hathaway,

Inc. Since 2000, many insurers have used “loss portfolio transfers” with Berkshire to rid themselves of

policies producing losses long after issuance

(i.e., policies with “long-tail” risk) – including policies producing costly asbestos liability. Laura A.

Foggan & Richard A. Ifft, Retroactive Reinsurance

and Loss Portfolio Transfers: Bad faith scheme or a

30

normal and healthy part of the insurance industry,

ABA Insurance Coverage Litigation Committee CLE

Seminar (Mar. 5-8, 2014).

One example is British insurer CGNU, which

paid Berkshire Hathaway’s subsidiary National Indemnity Co. (“NICO”) $1.25 billion for $2.5 billion in

retroactive reinsurance of liability for asbestos and

environmental claims on policies issued prior to

1987, with no time limit on payouts. A CGNU officer

explained that the hefty premium “was worth the

peace of mind it ensured” by removing the uncertain

claims from the company’s books and perhaps clearing a path for an acquisition. Wojcik, supra.

Berkshire Hathaway has relied on such transactions, using NICO and other insurance subsidiaries, to amass “the largest concentration of long-tail

risk in the industry and in history.” Jonathan Terrell, Berkshire Hathaway and Loss Portfolio Transfers: Do They Make Sense?, ABA Insurance Coverage

Litigation Committee CLE Seminar, p. 4 (Mar. 5-8,

2014).

Warren Buffett, Berkshire Hathaway’s Chairman and Chief Executive, in his report to shareholders, has explained his enthusiasm for what he calls

“the float”:

Insurers receive premiums upfront and

pay claims later . . . This collect-now,

pay-later model leaves us holding large

sums - money we call “float” – that will

eventually go to others. Meanwhile, we

31

get to invest this float for Berkshire's

benefit . . . . This . . . allows us to enjoy

the use of free money – and, better yet,

get paid for holding it.

Berkshire Hathaway, Inc., 2009 Annual Report to

Shareholders, p. 6, available at http://www.berkshirehathaway.com/2009ar/2009ar.pdf.

By 2015, Warrant Buffet was able to announce to shareholders: “Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2015 – that makes 13 years in a row.

. . . During those years, our float – money that

doesn’t belong to us but that we can invest for Berkshire’s benefit – grew from $41 billion to $88 billion.”

Berkshire Hathaway, Inc., 2015 Annual Report to

Shareholders, p. 5, available at http://www.berkshirehathaway.com/2015ar/2015ar.pdf.

In the latest Annual Report, Buffett clearly

states to shareholders that the company intends to

remain an underwriter of asbestos liability insurance for the foreseeable future:

Berkshire has been a leader in long-tail

business for many years. In particular,

we have specialized in jumbo reinsurance policies that leave us assuming

long-tail losses already incurred by

other p/c insurers. As a result of our

emphasizing that sort of business,

Berkshire’s growth in float has been extraordinary.

32

Berkshire Hathaway, Inc., 2017 Annual Report to

Shareholders, p. 7, available at http://www.berkshirehathaway.com/2017ar/2017ar.pdf.

Clearly, the largest players in the market of

long-tail asbestos liability insurance and reinsurance have found the incentives that suggest such

coverage will be available and prevalent for the foreseeable future. Concerns regarding the insurability

of claims do not warrant denial of this failure-towarn cause of action to asbestos victims and their

families.

The darker side of such incentives, however,

raises separate concerns. Insurers who profit from

investing the “float” during time until claims are

payable have an obvious financial incentive to deny

claims and delay payments for as long as possible.

Journalists and industry insiders have inquired into cases where Berkshire Hathaway and

other asbestos claims insurers have been accused of

pursuing a deny-delay strategy. See, e.g., Mark

Greenblatt, Berkshire Hathaway subsidiaries deny,

delay asbestos, hazard claims, suits, insiders allege,

Scripps News (Oct. 6, 2013), available at

http://www.wptv.com/news/local-news/investigation

s/berkshire-hathaway-subsidiaries-deny-delay-asbe

stos-hazard-claims-suits-insiders-allege_201401022

30128180; Terrell, supra, at 5; John Sylvester, Policyholder Litigation Involving Claims Handling by

Resolute Management Inc., ABA Insurance Coverage Litigation Committee CLE Seminar (March 5-8,

33

2014) (focusing on allegations against practices of

Berkshire’s claims management subsidiary); John

M. Sylvester & Max Louik, Policyholder Litigation

Involving Claims Handling by Resolute Management Inc. 2015 Update, ABA Insurance Coverage

Litigation Committee CLE Seminar (March 5-7,

2015), available at http://www.americanbar.org/content/dam/aba/administrative/litigation/materials/20

15/2015_inscle_materials/written_materials/5_3_po

licyholder_litigation_involving_claims_handling_by

_resolute_management.authcheckdam.pdf (collecting additional cases); Dean Starkman, AIG’s Other

Reputation: Some Customers Say the Insurance Giant Is Too Reluctant to Pay Up, Wash. Post (Aug. 21,

2005), available at http://www.washingtonpost.

com/wp-dyn/content/article/2005/08/20/AR2005082

000179.html [http://perma.cc/V4AF-W36K] (reporting on allegations against AIG, which subsequently

reinsured much of its asbestos coverage with Berkshire).

Reversal by this Court and denial of the failure to warn cause of action to asbestos victims would

represent a windfall to reinsurers who have already

collected premiums to cover such claims and have

made substantial investment profits.

III.

THIS COURT HAS HISTORICALLY AND

CONSISTENTLY SHOWN SPECIAL SOLICITUDE FOR THE RIGHTS OF SEAMEN.

Petitioners place heavy emphasis on the notion that maritime law favors simple and uniform

34

rules. See Petitioners’ Br. 15; GE Br. 16. The court

below upheld a uniform rule that mirrors the common law duty to take reasonable steps to warn seamen of hazards posed by components that will be

added to a manufacturer’s equipment. Petitioners’

proposed rule – no liability, ever – may have the advantage of greater simplicity, but lacks both compassion and justice. Petitioners further emphasize that

the purpose of maritime law is the “protection of

maritime commerce.” See Petitioners’ Br. 34; GE Br.

16. It is difficult to discern how this purpose is furthered by shielding companies who furnish the

equipment needed to move commerce from any incentive to advise seamen how to safely install and

maintain that equipment.

The Third Circuit weighed these policy matters, Pet. App. 13a-14a, but determined that maritime law’s “special solicitude for the safety and protection of sailors is dispositive.” Id. at 15a. Petitioners respond in this Court that the characterization

of sailors as a class needing “special solicitude” are

“disparaging,” “worse than outdated,” and “downright absurd.” Petitioners’ Br. 38.

This Court has consistently upheld and restated its rule according special solicitude to seamen

seeking justice in American courts. “Seamen from

the start were wards of admiralty.” U.S. Bulk Carriers, Inc. v. Arguelles, 400 U.S. 351, 355 (1971) (citing

Robertson v. Baldwin, 165 U.S. 275, 287 (1897).

Early in our nation's history, Justice Story declared:

“Every Court should watch with jealousy an encroachment upon the rights of a seaman . . . . Courts

35

of maritime law have been in the constant habit of

extending towards them a peculiar, protecting favor

and guardianship. They are emphatically the wards

of the admiralty.” Harden v. Gordon, 11 F. Cas. 480,

485 (C.C. Me. 1823). See also Ramsay v. Allegre, 25

U.S. 611, 620 (1827) (Johnson, J., concurring) (characterizing seamen as “emphatically the wards of the

Admiralty”). As such, “their rights, wrongs, and injuries” have long been “a special subject of the admiralty jurisdiction.” Bainbridge v. Merchants’ & Miners’ Transp. Co., 287 U.S. 278, 282 (1932). Indeed,

this Court has referred to seamen as the “wards of

admiralty” in at least 24 decisions. David W. Robertson, Punitive Damages in U.S. Maritime Law: Miles,

Baker, and Townsend, 70 La. L. Rev. 463, 499 n.107

(2010).

This Court’s special solicitude for the rights of

those who go down to sea in ships has been consistent. “From the earliest times maritime nations

have recognized that unique hazards, emphasized

by unusual tenure and control, attend the work of

seamen.” Aguilar v. Standard Oil Co. of New Jersey,

318 U.S. 724, 727 (1943). Moreover, “the restrictions

which accompany living aboard ship for long periods

at a time combine with the constant shuttling between unfamiliar ports to deprive the seaman of the

comforts and opportunities for leisure, essential for

living and working, that accompany most land occupations.” Id.

In Chandris, Inc. v. Latsis, 515 U.S. 347, 354

(1995), Justice O'Connor wrote for the Court that

Justice Story’s famous “wards of the Admiralty”

36

characterization served as the “animating purpose

behind the legal regime governing maritime injuries.” Judicial solicitude for seafarers stands as a

“feature of the maritime law compensating or offsetting the special hazards and disadvantages to which

they who go down to sea in ships are subjected.” Id.

at 355.

Most recently, in a case involving the scope of

damages recoverable under maritime law, the maritime industry urged this Court to cast aside “the inaccurate, outdated ‘wards of admiralty’ stereotype.”

Petitioners’ Reply Br. 19, Atlantic Sounding Co. v.

Townsend, 557 U.S. 404 (2009) (No. 08-214). The

vessel owner and employer there contended that

seamen today are educated, they have the benefit of

computers and modern communications devices,

and many belong to unions. Id. at 22-23. Thus, “no

basis exists in law or fact for the assumption that

seamen need special protections,” including the remedy of punitive damages. Id at 23.

This Court rejected that flawed reasoning and

reaffirmed that the Jones Act added to the preexisting remedies provided by maritime law “for the benefit and protection of seamen who are peculiarly the

wards of admiralty.” Atlantic Sounding Co. v. Townsend, 557 U.S. 404, 417 (2009) (quoting The Arizona

v. Anelich, 298 U.S. 110, 123 (1936)).

CONCLUSION

For the foregoing reasons, AAJ urges this

Court to affirm the judgment of the Third Circuit

Court of Appeals.

37

Respectfully submitted,

ELISE SANGUINETTI

President

AMERICAN ASSOCIATION

FOR JUSTICE

777 6th Street, NW #200

Washington, DC 20001

August 27, 2018

JEFFREY R. WHITE

Associate General Counsel

Counsel of Record

AMERICAN ASSOCIATION

FOR JUSTICE

777 6th Street, NW #200

Washington, DC 20001

(202) 944-2839

jeffrey.white@justice.org