Insurers may bear brunt of tobacco compensation costs
Saturday 31 January 1998
Shares in BAT gained 11p to 558p yesterday after Paul Hodges at Schroder Securities issued a note warning that Commercial Union and Royal Sun Alliance would have to shoulder the costs of successful claims from former smokers, if - as seems increasingly likely - the tobacco companies fail to secure the support of Congress for their attempts to limit their liabilities by paying specific sums into court in individual US states.
But Commercial Union said its liability was minimal because of its insurance portfolio and because the exclusion clauses strictly limited liability in policies written since the late 1960s, when the risks of smoking became more generally known.
Royal & Sun Alliance said tobacco manufacturers had themselves written in health exclusion clauses to their general insurance policies in order to avoid having to disclose details of their own medical research into the link between smoking and cancer, and that any failure to disclose knowledge of the risk would automatically invalidate the insurance policies from that date. Claims relating to very old policies could also be invalidated because they were out of time, a spokesman said.
Tobacco manufacturers would also have no reason to seek recourse against their insurers if the settlements they have offered the states of Florida, Texas and Mississippi become generally accepted S&SA said. But Mr Hodges said there was insufficient support in the US Congress, where heads of the big tobacco firms have been testifying over the past week.
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