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Is Nash Engineering the latest company to go bankrupt due to asbestos litigation? | Husch Blackwell LLP

Pump maker Nash Engineering Company appears to have recently become the latest victim in asbestos litigation. On October 19, 2021, Nash Engineering filed for Chapter 7 bankruptcy with the United States Bankruptcy Court for the District of Connecticut. If Nash Engineering’s repair request is approved, it will mark the end of the century-old company. Nash Engineering now joins a list of more than 60 other companies that have been forced to file for bankruptcy due to the burden of their asbestos-related responsibilities.

Mass litigation and bankruptcies

Companies faced with insurmountable liabilities resulting from mass tort litigation usually have two options available: file for bankruptcy and restructure without liability or sell their assets and close their doors. By far the most common approach is Chapter 11 bankruptcy, which allows the company to pay off debts, restructure, and get out on the other side. In the context of asbestos litigation, Chapter 11 bankruptcy is often accomplished by creating an “asbestos bankruptcy trust”. To effectively meet its asbestos-related obligations, the restructuring company places the cash and shares of the new company in a trust that is used to pay asbestos claimants predetermined amounts through a simplified administrative system rather than through litigation.

In contrast, Chapter 7 bankruptcy involves the complete liquidation of the affected business and all of the assets of the business are sold for the benefit of its creditors. Thus, Chapter 7 bankruptcy is a much more drastic step that is only taken under the most extreme circumstances.

Why did Nash Engineering file for bankruptcy protection?

While Nash Engineering has not made any public statements explaining its impending disbandment, there are signs that the settlement and defense costs associated with its ongoing asbestos litigation play a significant role. As NERA Economic Consulting reported, the average cost for a defendant to settle an asbestos claim continues to increase year on year. and the list of creditors filed by Nash Engineering is replete with businesses of asbestos claimants, indicating that the lion’s share of the company’s debts come from asbestos-related litigation.

While Nash Engineering’s decision may seem sudden, it’s not the first sign of trouble on the company’s part. April 20, 2020, Nash Engineering filed a notice of dissolution with the state of Connecticut, but it did not file for bankruptcy at that time and continued to actively participate in asbestos-related litigation. Then, in August 2021, several of the Nash Engineering teams insurers filed suit in Connecticut federal court claiming that they were not obligated to provide coverage under their respective master policies due to Nash Engineering’s failure to adhere to certain expense payment protocols related to its asbestos litigation. Nash Engineering declared bankruptcy two months after the case was filed and before a final decision was made.

All pending asbestos-related litigation against Nash Engineering will automatically be put on hold pending the bankruptcy court ruling. The effects of this bankruptcy will be felt by the remaining viable defendants, who will be advised that they must now cover the portion of any settlement that would previously have been paid by Nash Engineering.

The Nash Engineering Company is represented by James Berman of Zeisler & Zeisler, PC

The case is In re: The Nash Engineering Company, Case Number 21-50644, in the U.S. Connecticut District Bankruptcy Court.

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