Insurers "may repay tobacco giants' compensation"
LONDON, July 9 (Reuters) - European and U.S. insurance companies may be forced to reimburse tobacco companies paying out billions of dollars in settlements and compensation claims in the U.S., an industry analyst said on Thursday.
Paul Hodges of investment bank Schroders said in a report that many industry giants had provided insurance to tobacco manufacturers that either specifically covered, or did not fully exclude, the health liability risks associated with smoking.
The report named some of the companies involved as Royal & Sun Alliance (quote from Yahoo! UK & Ireland: RSA.L), CGU(quote from Yahoo! UK & Ireland: CGU.L), Lloyd's of London[LOL.CN], Zurich Financial Services(quote from Yahoo! UK & Ireland: ADZ.L), Liberty Mutual and The St Paul Companies(NYSE:SPC - news).
It said it was clearly in tobacco manufacturers' interests to seek reimbursement from their insurers as claims against them mount.
Tobacco companies may have to pay out as much as $500 billion over the next 25 years after four tobacco companies agreed in 1997 to pay more than $200 billion to 46 U.S. states, and class actions for compensation to individual smokers in other states are still under way.
On Thursday a Florida jury ruled that smoking causes diseases such as lung cancer and that tobacco companies that had hidden the risks would have to pay unspecified damages.
The defendants in the case included R.J. Reynolds Tobacco Co.(NYSE:RJR - news), Philip Morris Cos. Inc.(NYSE:MO - news), Loews Corp.'s Lorillard Tobacco Co. Inc.(NYSE:LTR - news), Brooke Group Ltd.'s Liggett Group Inc.(NYSE:BGL - news), and the Brown & Williamson unit of British American Tobacco Plc(quote from Yahoo! UK & Ireland: BATS.L)(AMEX:BTI - news).
Hodges said the 1997 settlement did not stop tobacco companies from recovering all settlement and compensation payment costs from their insurers.
The report said ''a large volume of comprehensive general liability insurance coverage was sold to North American tobacco manufacturers using exclusions of dubious efficacy,'' and older policies revealed ''an absence of relevant exclusions, poor definitions and ambiguous policy limits.''
In addition, the report said that a number of insurers sold explicit tobacco health liability coverage to tobacco companies between 1966 and 1996 -- after the introduction of health warnings on cigarette packets -- which, the report said, meant insurers recognised the health risk of tobacco and explicitly insured that risk.
It said there was compelling evidence of substantial insurance coverage for tobacco companies to claim against.
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