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TheStreet Open House

Berkshire Hathaway Subsidiaries Accused Of Denying, Delaying Payments

Stocks in this article: SSP

WASHINGTON, Oct. 7, 2013 /PRNewswire/ -- For 21 years, Charles Lute worked in Kansas City's BMA tower, never realizing he was inhaling asbestos fibers. After decades as a maintenance engineer, Lute and two co-workers sued the building's owners to cover medical bills and lost wages. What he didn't realize was that his suit would eventually pit him against the empire built by acclaimed investor and philanthropist Warren Buffett.

A Scripps News national investigation, Risky Business, reveals:

  • Dozens of lawsuits allege the Berkshire-owned companies wrongfully delay or deny compensation to cancer victims and others to boost Berkshire's profits.
  • Exclusively obtained video testimony of a former claims executive says the entire operation was driven by financial targets, not the merit of the claims.
  • Multiple rulings of "bad faith" against Berkshire subsidiary Resolute Management Inc. say the company intentionally deceived policy-holders or acted unfairly.

Buffett's Berkshire Hathaway Inc. of Omaha, Neb., has become one of the most powerful forces in asbestos and pollution litigation in the world. Insurers such as American Insurance Group, CNA Financial Corp. and Lloyd's of London have paid Berkshire to assume their risk for tens of billions of dollars in future asbestos and pollution claims. That money, known as "float," has proven to be a great source of investment income for Berkshire. But instead of paying people like Charles Lute, Berkshire subsidiaries are accused in lawsuits across the country of delaying or denying payments. Rather than paying victims, the suits claim, Berkshire is holding onto the cash, the float, to keep its money invested. 

"They wanted to hit the projected numbers in the books of business so they could maximize their return on investment," said one former claims executive under oath.

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