Federal Judge Denies BNSF’s Attempt to Dismiss Bad Faith Claims, Exposes Alleged “Investment Strategy” of Delaying Payments to Dying Mesothelioma Victims
In a significant win for asbestos victims, Chief U.S. District Judge Brian Morris denied BNSF Railway Company’s motion to dismiss bad faith insurance claims brought by the families of two deceased mesothelioma victims who died after exposure to asbestos at BNSF’s Libby, Montana railyard.
Background: A Jury Already Found BNSF Strictly Liable
After a 10-day trial in April 2024, a jury awarded $4 million in compensatory damages to each victim, finding BNSF strictly liable for causing the mesotheliomas that killed Thomas Wells and Joyce Walder. The victims were exposed to deadly amphibole asbestos dust at BNSF’s Libby railyard.
Rather than promptly paying these dying victims, BNSF appealed and continued fighting—leading to this second lawsuit alleging violations of Montana’s Unfair Trade Practices Act (UTPA).
The Explosive Allegations: BNSF's "Insurance Investment Strategy"
The plaintiffs allege that BNSF engaged in a calculated scheme to profit from victims’ suffering:
- BNSF “bought back” its own insurance policies covering Libby asbestos claims, receiving money in exchange for assuming all insurance obligations
- Instead of offering any settlement, BNSF deliberately prolonged litigation to maximize investment returns on the money it received from insurers
- BNSF allegedly makes more in interest on withheld funds than it eventually pays when judgments become due
- This constituted a “nationwide policy” of bad faith claim handling designed to enrich BNSF at victims’ expense
Court Rejects BNSF's Defenses One by One
Main Arguments by BNSF:
- BNSF’s Insurer Status: BNSF argued it shouldn’t be considered an “insurer” subject to insurance bad faith laws
- Victims’ Legal Standing: BNSF contended the victims had no right to sue
- Reasonable Basis for Contesting Liability: BNSF claimed it had reasonable grounds to challenge liability
- Statute of Limitations: BNSF argued the claims were filed too late
- Limiting Remedies: BNSF tried to restrict victims to only compensatory damages
Court’s Rejection of BNSF’s Defenses:
- Insurer Status: The court rejected BNSF’s argument that it could avoid bad faith laws by buying back its insurance policies, stating it effectively acted as an insurer and must be held to the same standards
- Victims’ Legal Standing: The court ruled the victims could sue because, if BNSF was acting as an insurer, they had the legal right to challenge its handling of their claims
- Reasonable Basis for Contesting Liability: The court found BNSF’s claim of reasonable grounds to contest liability unfounded, pointing out that a jury had already found BNSF liable and that disputes over liability didn’t justify denying all claims
- Statute of Limitations: The court ruled the statute of limitations issue wasn’t clear-cut and required further discovery to determine when BNSF’s bad faith obligations began
- Limiting Remedies: The court allowed claims for equitable remedies like disgorgement, stating that BNSF may have unfairly profited, and such claims were consistent with Montana law
“What stands out legally is the court’s refusal to create a loophole in Montana’s Unfair Trade Practices Act. If a defendant assumes the duties of an insurer through contractual buybacks, it cannot evade statutory obligations by labels alone. That reasoning aligns with both statutory purpose and Montana Supreme Court authority.” – Kevin Parker, Managing Attorney, Issues & Appeals
What This Means for Asbestos Victims
This ruling exposes an alleged corporate strategy of profiting from dying victims’ desperation.
Key takeaways:
- Corporations cannot buy their way out of insurance regulations by purchasing their own policies
- Investment strategies that profit from delaying payments to dying victims may constitute bad faith
- Federal courts will scrutinize defenses that appear designed to maximize litigation costs and delay
- Victims may recover not just their damages, but profits corporations made by withholding payments
“Asbestos cases are unlike most other types of cases —time is something these families don’t have. This ruling acknowledges reality and ensures that victims are not penalized for corporate strategies designed to delay, deny, and outlast them. It restores balance to a system that too often favors those with the deepest pockets.” – Sam Taylor, Senior Attorney, Litigation Counsel
The Path Forward
The court denied BNSF’s motion to dismiss entirely, allowing the case to proceed to discovery. Critically, the court noted that discovery will reveal:
- The full scope and content of BNSF’s “buyback agreements” with its insurers
- Evidence of BNSF’s alleged investment strategy
- When BNSF’s bad faith conduct began
- Whether BNSF’s legal defenses were pretextual excuses for a profit-maximizing delay strategy
Quote from the Montana Supreme Court:
“Discovery on the matter seems necessary to determine the scope and content of the alleged buyback agreements between BNSF and its previous insurers. Those alleged buyback agreements may illuminate the record and provide valuable details concerning whether BNSF properly should be considered an ‘insurer’ under the UTPA.”