WELDING FUME

LIABILITIES:

Presented by

STRATEGIES TO MAXIMIZE
YOUR COMPANYS INSURANCE
AND OTHER CORPORATE ASSETS

Overview

Health Effects Allegedly Associated with Welding

Fumes
Some Plaintiffs Lawyers Believe that Welding
Fume Litigation Could Become the Next
Asbestos
Welding Fume Litigation Before Elam:
Defendants Prevailed
Plaintiffs Lawyers Cite 2001 Racette Study
Alleging Potential Link Between Welding Fumes
and Parkinsons Disease
Plaintiffs Lawyers Predict That The Tide Turned
with Elam
Pending Welding Fume Litigation

Overview (contd)

What Should Your Company Do In Light

of Potential Welding Fume Liability
After 2001 Racette Study and Elam?
Protect Your Companys Assets

Marshall Your Companys Insurance Assets

Protect Your Companys Other Corporate
Assets

HEALTH EFFECTS
ALLEGEDLY ASSOCIATED
WITH WELDING FUMES

Manganese

12th most common element in the

earths crust
Essential element for human health
Deficiencies in diet can lead to
birth defects, reproductive failure,
and defects in muscular
coordination

Manganese

Used to manufacture glass during

Egyptian and Roman times
Discovered in 1771
Key component in welding
90% of manganese produced is
used for manufacturing steel

Adverse Health Effects

Allegedly Arise From
Exposure to Manganese in
Welding Fumes

Welding and Manganese

Welding produces fumes that contain

manganese (mild steel welding fumes
contain less than 5% manganese)
Tiny particles of manganese become
airborne during welding
Plaintiffs allege that welders and
bystanders inhale these particles and
that the particles cause Manganism
or Parkinsons disease

Parkinsons Disease

Idiopathic Parkinsons disease

occurs in approximately 150
persons per 100,000 in the general
population
Sharp increase in incidence after
age 50

Some Plaintiffs Lawyers

Believe That Welding
Fume Litigation Could
Become the Next
Asbestos

Current State of Asbestos

Litigation

More than 600,000 Claims

Against More than 8,000 Defendants
Claims Exceed $20 Billion
Massive Verdicts
First and Second Tier Asbestos
Defendants Filing Bankruptcies
Congress is Considering Asbestos
Legislation

Plaintiffs Law Firms Seeking

New Mass Tort to Replace
Asbestos

Plaintiffs Lawyers Have Made

Billions of Dollars on Asbestos
Plaintiffs Lawyers Now Seeking
Other Mass Torts
Plaintiffs Lawyers Examining
Welding Rods as Potential
Replacement for Asbestos

Similarities between
Asbestos and Welding Fumes

Asbestos widely used in

industrial through the early
1970s.
Asbestos is naturally
occurring.

Dr. Irving Selikoff issued

groundbreaking study in 1964;
leading reference on asbestos
in 1982.
Asbestos manufacturers
allegedly failed to warn of risks
of injury and allegedly failed to
provide adequate protection.

Manganese widely used in

soft and hard steel welding
and still widely used today.
Manganese is naturally
occurring.
Dr. Racette issued study in
2001 connecting welding
fumes to Parkinsons disease.
Welding defendants allegedly
failed to warn of risks of
injury and allegedly failed to
provide adequate protection.

As with Asbestos, Plaintiffs

Lawyers Claim that Industry
Hid Dangers of Welding Fumes

Deposed more than 50 industry personnel since

1994
Claim a concerted industry-wide cover-up of
permanent and irreversible health effects known
to corporate executives in the 1930s
Cite minutes from the 1930s
Cite U.S. Public Health Service documents from
the 1940s reporting on dangers of manganese
Claim that welders permanent neurological
injuries were secretly discussed at internal
industry committee meetings

Plaintiffs Lawyers Dismiss

Industry Warnings as
Inadequate

1967 Warning

Caution: Welding may produce a

concentration of fumes and gases
hazardous to health. Avoid breathing
concentrations of these fumes and
gases. Use adequate ventilation
when welding.

Plaintiffs Lawyers Dismiss

Industry Warnings as
Inadequate

1972 OSHA Warning

Welding may produce fumes and

gases hazardous to health. Avoid
breathing these fumes and gases.
Use adequate ventilation.

Similarities Between
Asbestos and Welding Fumes

Like Asbestos, Welding Fume

Claims Involve Multiple Layers of
Defendants

Manufacturers
Distributors
Industrial Consumers (manufacturers
of welded products)

Similarities Between
Asbestos and Welding Fumes

Large Potential Plaintiff Pool

Estimated 700,000 to 800,000 current and former

welders in the United States
Bystanders (such as Mr. Elam)

Large Potential Defendant Pool

Manufacturers
Suppliers
Companies that owned work sites where welding
occurred
Contractors who welded
Companies that sold welding equipment
Companies that manufactured or sold welding safety
equipment
Welding associations

Investment Bank HSBC 2003 Report

Warns of Litigation Exposure

Forecasts $35 to $70 billion in

welding rod exposure

Forecasts $140 billion in total

liability

Forecasts at least $7 billion in

liability if only 1% of claimants
achieve $1 million settlements

Forbes
Magazine
Recognizes
Potential
Liability

Insurers Recognize Welding Rod

Liability

Insurers Recognize Welding Rod

Liability
While litigation against manufacturers
of welding rods is only now beginning to
mount, insurers should at least be aware
of the potential liabilities and review
their book
of business for past and future
exposures.
Hazardous Times, April 2003, Personal Injury
Litigation Against Welding Rod Manufacturers

Plaintiffs Lawyers
Aggressively Seeking
Welding Fume Plaintiffs

The National Law Journal named him one of the

100 most powerful lawyers in the United States

The type of elements contained in the fume make it highly toxic.

Manganese is toxic.

Welding Fume
Litigation B.E. (Before
Elam)
Defendants Prevailed

Defendants Prevailed Before

Elam

Previous attempts to impute liability to

manufacturers and distributors failed.

Vaughan Cascino Law Offices in Chicago lost 4

product liability claims against welding product
manufacturers between 1993 and 1997

Walker v. Hobart Brothers: Plaintiff developed

neurological condition in his 40s with mild to
moderate arm tremor and some gait problems.
Defendants prevailed, apparently because
plaintiff failed to establish causation.

Plaintiffs Lawyers Cite

2001 Racette Study
Alleging Potential Link
Between Welding and
Parkinsons Disease

2001
Racette Study

Brad A. Racette, M.D.

Washington
University School of
Medicine in St. Louis,
Missouri
Compared 15 welders
with Parkinsonism
with two groups of
people with
Parkinsons Disease.
Welding May Be a
Risk Factor for
Parkinsons Disease.
Welding Parkinsons is
only distinguished by
younger age of onset.

Plaintiffs Lawyers
Predict That The
Tide Turned with Elam

Elam

Not a welder
Power plant maintenance worker at Union Electric
Diagnosed with idiopathic Parkinsons disease in 1996 at
the age of 56
Legal theories: failure to warn, failure to provide adequate
safety instructions, failure to investigate health hazards
Medical doctors, toxicologists and industrial hygienists
testified
Defendants contested causation
Defendants distinguished between manganese poisoning
and idiopathic Parkinsons disease
Jury concluded that manganese in welding fumes caused
Mr. Elams Parkinsons disease

The Elam
Verdict

Plaintiffs tout
2003 verdict as
a landmark
decision

Elam: Court Refuses to

Vacate Verdict

Court rejected defendants

arguments that:

Mr. Elam failed to show that manganese

welding fumes causes his illness
Mr. Elam did not show overexposure to
manganese fumes
Mr. Elam admitted that he did not read
the warnings

Pending Welding Rod

Litigation

Multi-District Litigation

3,200 cases transferred to Judge Kathleen OMalley in Northern Ohio

Numerous Motions Pending

Removal and Remand

Distributor Defendant Industrial Welding moved to dismission ground

that the Federal Hazardous Communications Standard pre-empts state
law claim for failure to warn
Consumer Defendants led by Caterpillar and General Electric moved for
judgment on the pleadings on the ground that none of the complaints
allege that Caterpillar or General Electric produced or sold any welding
rod products to which plaintiffs claim exposure
Removal based on government contractor defense, bankruptcy
jurisdiction, and diversity and fraudulent joinder
Numerous remand motions pending
Judge OMalley remanded 10 cases to Mississippi because defendants did
not timely file notices of removal to federal court

MDL Website: www.welding-rod-litigation.com

Key Plaintiffs Lawyers

Involved in Multi-District
Litigation

Plaintiffs Lead Counsel

Richard F. Scruggs of The Scruggs Law

Firm in Pascagoula, Mississippi
Don Barrett of The Barrett Law Firm in
Lexington, Mississippi

Plaintiffs Liaison Counsel

John R. Climaco of Climaco, Lefkowitz,

Peca, Wilcox & Garofoli in Cleveland, Ohio

Key Plaintiffs Lawyers

Involved in Multi-District
Litigation

Plaintiffs Executive Committee

Drew Ranier of Ranier, Gayle & Elliot in Lake Charles,

Louisiana

Joseph F. Rice of Motley Rice in Mt. Pleasant, South

Carolina

Walter Umphrey of Provost & Umphrey in Beaumont, Texas

Daniel E. Becnel Jr. in Reserve, Louisiana

J. Michael Papantonio of Morgan, Colling & Gilbert in

Pensacola, Florida

John E. Williams, Jr. of Williams Bailey in Houston, Texas

Richard Heimann of Leiff, Cabraser, Heimann & Bernstein

in San Francisco, California

WHAT SHOULD YOUR

COMPANY DO IN LIGHT OF
POTENTIAL WELDING
FUME LIABILITY AFTER
2001 RACETTE STUDY

1.PROTECT YOUR
COMPANYS ASSETS

Protect Your Companys

Insurance Assets
Protect Your Companys
Other Corporate Assets

Protect Your Companys

Insurance Assets
1. Preserve Historic and Existing
Policies
2. Notify Insurers of Claims
3. Undertake Joint Insurance Strategy

1. Preserve Historic and

Existing Insurance Policies

Occurrence-Based Policies Insure Your

Company for All Liability Arising Out of a
Covered Occurrence Regardless of When
Plaintiff Brings Claim

Many Historic Policies are OccurrenceBased Policies

Preserve All Insurance Policies

Check with Your Broker for Historic Policies

2. Notify Insurers of Claims

Standard Form CGL Notice

Clause Requires Notice as
Soon as Practicable

Other Insurance Policies May

Contain Stricter Notice
Provisions

Some policies require notice in a

number of weeks or months
Other policies require notice
immediately
Courts have found even a few weeks
delay sufficient to bar coverage

Notice is Critical
Consult with counsel to ensure that your
company gives notice on all potentially
responsive insurance policies, including
historic insurance policies

3.Undertake Joint
Insurance Strategy

Be Proactive -- Not Reactive

Insurers will litigate key coverage

issues

in states most favorable to their

positions
against policyholders least able to
defend their coverage

Insurers will obtain coverage

decisions on key issues

Insurers Are Already

Implementing Strategy
to Defeat Coverage by
Using the Pollution
Exclusion

Pollution Exclusion
Has Barred Coverage

National Electrical Manufacturers

Association v. Gulf Underwriters
Insurance Co. (4th Cir. 1998)
Absolute pollution exclusion applied
to duty to defend
Pollutant includes fumes

Pollution Exclusion
Has Barred Coverage

Bechtel Petroleum Operations, Inc. v.

Continental Insurance Co. (Cal.
Appeals 2002)
Pollution exclusion eliminated duty to
defend
Court find that claims arose out of
exposure to toxic chemicals and
pollutants

Insurers Now Suing

Policyholders Over Pollution
Exclusion

United States Fire Insurance Co. v.

Clendenin Brothers, Inc. (D. Md.)
U.S. Fire suing policyholder
No duty to defend or indemnify
policyholder based on pollution
exclusion
March 12, 2004: Insurer filed First
Amended Complaint

Insurers Will Select Venue

and Defendants Designed
to Minimize Coverage

Insurers will file coverage actions in

jurisdictions friendly to them
Insurers will sue small companies
that lack the resources to defend
against coverage claims
Insurers will select issues that benefit
them

Insurers Will Continue to Implement

Litigation Strategy on Key Insurance
Issues

Notice

Number of occurrences

Allocation

All Sums

Pro Rata

Trigger: When must insurance policy respond?

Nature of Liability: Does it arise from operations or from products?

Expected/Intended

Pollution Exclusions

Other Exclusions Barring Coverage

SIRs/Deductibles

Undertake Joint Insurance

Strategy Now

Benefits of Joint Insurance

Strategy

Saves Costs
Reduces Duplication
Pools Knowledge
Helps Ensure that Industry Takes Consistent Positions
Against the Insurance Carriers
Keeps Insurance Companies Apprised of Important
Developments
Assists Companies to Respond Efficiently to Insurers
Requests for Information
Allows Industry to Formulate Litigation, Settlement,
and Legislative Strategy

PROTECT YOUR
COMPANYS OTHER
CORPORATE ASSETS

Company Strategy to
Preserve Corporate Assets

Joint Defense Strategy

Indemnity Agreements
Add Your Company as Additional
Insured on Other Relevant Policies
Asset Protection Strategies

Protecting Corporate Assets

Overview of Asset Protection Issues

Requires careful business and legal planning

Do not wait for situation to develop
Multiple strategies are available

Plaintiffs Take the Path of Least

Resistance

Driven by same risk vs. benefits analysis

that any successful investor would use
Legal liability vs. ability to collect

Protecting Corporate Assets

Veil Piercing Liability Issues

Parents can create liability for subsidiaries by

ignoring corporate formalities
Management and commingling of assets
Overlapping personnel
Funding of liabilities of subsidiaries can
create parent liability
Liability potential can be minimized by
careful planning and monitoring and possible
re-structuring

Protecting Corporate Assets

Fraudulent Conveyances

Most states have statutes that create liability

in situations when assets are transferred for
less than fair value
May be important in context of an overall asset
protection strategy

Risk can be mitigated by independent valuations of

potential liabilities
Timing is critical

Statute of limitations vary among state

jurisdictions

Protecting Corporate Assets

Ring-fencing Strategies

No one size fits all

Size and scope of the business are
key variables
More options for private companies

Protecting Corporate Assets

Ring-fencing Strategies
May involve multiple components

Separating liabilities from working assets through one

or more transactions with adequate funding for future
liabilities via insurance and other assets
Layering of ownership
Offshore possibilities
Complex tax and reporting obligations
Transaction and management costs can be significant

Many plaintiffs lawyers will focus on the

most easily accessible members of the
industry

Joint Defense Strategy

Just as your company needs a joint insurance

strategy to protect its insurance assets, it
should engage in a joint defense strategy to
respond to the plaintiffs law firms new welding
fume strategy
Dont let the plaintiffs select the most favorable
jurisdictions, like Madison County, to bring their
claims
Dont let the plaintiffs develop good law by
litigating against the weakest members of the
industry

Summary of Steps Your

Company Should Take

Protect Your Insurance Assets

1. Preserve Historic and Existing Policies

2. Notify Insurers of Claims
3. Undertake Joint Insurance Strategy
with Others in the Industry

Protect Your Non-Insurance Assets

For more info visit

www.DicksteinShapiro.com

2101 L St NW
Washington, DC 20037
202-785-9700