On Monday, the Ford Motor Co. made an announcement that it settled a lawsuit with National Indemnity Co., a Berkshire Hathaway Inc. subsidiary. They settled for the amount of $22.1 million, which is actually $2 million more than the lawmaker had sued for in regards to a dispute related to rollover deaths and unpaid claims.
“When you sue for $20 million in unpaid claims and you receive a settlement for $22.1 million, it’s a good day,” stated Scott Oostdyk, one of Ford’s attorneys. The case was set to go to trial later on in October in the Eastern District of Virginia United States District Court.
“We filed the complaint because we were experiencing no pay and slow pay,” said Oostdyk, while claiming that the Berkshire affiliate was intentionally delaying Ford’s payment claims as part of a much bigger pattern of wrongful conduct by the company.
A Scripps news national investigation was known to quote sworn testimony from one of the National Indemnity former claims executives. The former executive criticized Resolute Management Inc., the claims handling arm, as well as National Indemnity. The unidentified person’s criticisms were in regards to purposely denying or delaying claims to victims of cancer, as well as others.
Scripps also found out that National Indemnity has 25 deals in which they agreed to assume more than tens of billions of dollars of risk, “long-tail” insurance risk, from some of the major insurance players like OneBeacon Insurance Group and Lloyd’s of London.
These particular long-tail policies cover asbestos and other types of health hazards that could potentially take years, possibly even decades, to create an actual illness or a need for a covered claim.
When Berkshire Hathaway takes on this risk, they in turn ask the insurers to hand over what is known as “float,” which is the money the insurance company acquires between the time the insurance company is required to pay the claim and the time that they collect the premiums from customers.
Berkshire Hathaway is then able to invest this money before they have to pay out a claim.
Scripps looked over many dozens of these cases on a nationwide basis. For the most part when it came to settlements that involved Resolute and National Indemnity, the amount of the settlement was confidential.
For this particular instance, said Oostdyk, Ford was looking to send a message, and refused to settle this claim through negotiations until National Indemnity came to the agreement that they would announce the amount of the settlement publicly.
Joe Belluck, and asbestos attorney from New York, mentions that the Berkshire Hathaway business practices scrutiny that was leading up to the Scripps publication an investigation “likely played a part” in the settlement with Ford prior to a public trial taking place.
“Settling keeps any additional information from the public eye,” said Belluck.
J. Robert Hunter also agreed. He is the head of the Consumer Federation of America’s insurance division and also a former Texas insurance Commissioner.
“Even Buffett reacts to press coverage,” said Hunter. “Clearly, Buffett wanted to settle out while the (Scripps) story was imminent, knowing that the extra $2 million was required. After the story, it jumps much higher.”
Trey Sibley, a National Indemnity attorney, disputes the claim that Ford received more compensation during the settlement then they actually sued National Indemnity for.
“Ford made no specific claim for any sum in its complaint other than punitive and treble damages and attorney’s fees,” said Sibley. “The settlement was agreed to be confidential. So we do not believe any further comment about the case by either party to be appropriate. Ford apparently disagrees.”