A recent news story examines how insurance companies controlled by Berkshire Hathaway pay claims, and found what appears to be a pattern of delay. While delay is a business practice that nets Berkshire Hathaway extra time to earn money on premiums policyholders have paid, it costs asbestos victims the one they do not have, time.
The article details how one woman developed mesothelioma, the deadly lung cancer caused by exposure to asbestos fibers. She had worked in, ironically, a courthouse. In the early 1980s, renovations were being made to the old courthouse building, where she worked as an administrative assistant. She came in to the office to find “white flakes” on her desk, the result of work over the weekend on the building. She cleaned up the dust, brushing it into the air, and unknowingly, into her lungs.
The white flakes contained asbestos fibers and those fibers sat deep in her lungs. In 2009, she was diagnosed with mesothelioma. She had 18 months to live. Her lawsuit would eventually lead to a Berkshire-owned insurance company Resolute Management Inc., and they would live up to their name, resolutely not paying her claim as she died from the mesothelioma. Her survivors finally obtained payment a year after her death.
The problem for asbestos victims is that Berkshire has the “largest single exposure” to asbestos claims of any company. This provides an immense amount of “float,” the insurance term for the time between the payment of a premium and the payment of a claim. The longer the float time, the greater the return on that investment. For Berkshire in 2012, their float was $73 billion.
Berkshire appears to have concentrated in this area because of the long-term float, because, as with the administrative assistant in the courthouse, it took almost 30 years for the disease to manifest itself. The danger here is that a company can become fixated on its own profits and delay payments improperly, only so it can generate higher earnings.
10news.com, “Berkshire Hathaway subsidiaries deny, delay asbestos, hazard claims, suits, insiders allege,” Mark Greenblatt, Scripps News, October 6, 2013
