Shaw Group, Liberty Mutual Reach $1.1M Settlement in Long-Running Dispute – 10/12 Industry Report

Shaw Group Inc., the energy services company founded by renowned Baton Rouge entrepreneur Jim Bernhard, has agreed to pay Liberty Mutual Fire Insurance Co. $1.1 million to resolve a long-running legal dispute stemming from alleged mercury exposure at its chlor-alkali plant in Muscle Shoals, Alabama.

According to documents filed in the United States District Court for the Middle District of Louisiana, the dispute arises from a series of lawsuits, although one of them — the “Abernathy lawsuit” — deserves particular attention.

In April 2012, Aretha Abernathy and 46 other named plaintiffs filed a complaint against Shaw and 11 other defendants in the District Court of Colbert County, Alabama. Abernathy’s deceased husband worked at the aforementioned chlor-alkali plant, owned by Occidental Petroleum Corp., which was decommissioned and dismantled by Shaw.

The plaintiffs in the Abernathy lawsuit alleged that they and/or their decedents were exposed to mercury during the course of their employment at the OxyChem plant and that this exposure was caused by activities undertaken while Shaw worked at that plant.

Shaw sued Abernathy for coverage under Liberty Mutual’s insurance policies. Liberty Mutual denied coverage, citing that the alleged “personal injuries” occurred outside the policy periods, the last of which expired in 2005. Shaw’s employment at the OxyChem plant began in 2008, after the policies were in effect.

Despite that denial, Liberty Mutual participated in Shaw’s defense from June 2015 to March 2020, incurring more than $1.6 million in defense costs in the process. A settlement was ultimately reached between Shaw and the plaintiffs in the Abernathy lawsuit, although the exact terms of that settlement are confidential.

Liberty Mutual billed Shaw for a total deductible of $1.25 million to cover costs incurred in defending Shaw — costs that Liberty Mutual said Shaw was contractually obligated to reimburse. Shaw paid only a small portion of that amount, and in December 2020, Liberty Mutual sued Shaw to use letters of credit obtained by Shaw to secure payment of the deductibles.

A final motion for consent to judgment filed June 25 reflects a mutual agreement to resolve the dispute. Shaw agreed to pay Liberty Mutual $1.1 million in two equal installments, and Liberty Mutual waived its rights to further claims or appeals.

Bernhard founded The Shaw Group in 1987 and served as its CEO for more than 25 years before founding Baton Rouge-based private equity firm Bernhard Capital Partners. Shaw was acquired by CB&I in February 2013, although CB&I filed for Chapter 11 bankruptcy in January 2020 amid asbestos litigation.