Some products and plant problems that have exposed companies to major damage claims.

1974. Asbestos. An early case won by a worker who contracted asbestosis and later lung cancer; a federal appeals court rules manufacturers had known of the dangers since the 1930s.

1978. Ford Pinto. A record $125 million in punitive damages awarded in the case of a 13-year-old boy severely burned in a rear-end collision.

1979. Three Mile Island. A Pennsylvania nuclear- plant accident causes a panic.

1980. Flammable pajamas. A $1 million punitive award in the case of a 4-year-old girl who was burned when her pajamas caught fire leads the manufacturer to stop making the garments.

1982. Tylenol scare. Johnson & Johnson designs tamper- proof package after a national scare involving poisoned pain reliever.

1982. "Illusory Park" defect. Ford redesigns transmissions after two verdicts, one with $4 million in punitive damages, show that cars that appeared to be safely in park could lurch into reverse.

1987. Dalkon Shield. A.H. Robins recalls its intrauterine birth-control devices after eight separate punitive- damage awards.

1988. Toxic Shock Syndrome. Playtex, hit with a $10 million punitive award in the case of a Kansas fatality, removes certain types of tampons from the market.

1989. Exxon Valdez. Oil-tanker spill ravages wildlife and leads to major cleanup of Alaskan coastline.

1993. Tainted hamburgers. A two-year-old child who ate at Jack in the Box restaurants dies of E-coli poisoning; others become ill.

1998. Tainted hot dogs. Food poisonings caused by a Sara Lee unit's meat kills 15 people; leads to a costly recall.

1999. Chevy Malibu. General Motors hit with $4.8 billion punitive award in the catastrophic fuel-tank case.

1999. Ford Bronco. Fatal rollover case leads to $295 million punitive verdict in California.

Sources: American Trial Lawyers Association; press accounts

What If States Oppose Punitive Insurance?

Ignore it. Offshore policies appear exempt.

Can companies insure against punitive damages in states that oppose such coverage? Definitely, according to Chubb Atlantic Indemnity Ltd., a Bermuda- based firm that operates independently of Chubb Cos.

One of several insurance companies that market this type of insurance, along with the Star Excess unit of American International Group, Chubb Atlantic got the positive word from a legal opinion it sought from McCullough, Campbell & Lane, a Chicago-based law firm. "No single rule applies to every circumstance," warns attorney Richard Ryan, who helped write the opinion.

Before buying this type of insurance, each company should examine its own situation carefully. Generally, however, restrictions that exist in five states do not rule out the purchase of insurance. Instead, they strip companies of a state's legal protection in cases in which insurers become insolvent or refuse to pay.

For companies comfortable with their insurers, the law firm's extensive review of existing legal decisions, state insurance codes, statutes, and administrative opinions uncovered "no adverse legal consequences" from obtaining punitive-damage insurance from offshore insurance companies.

In most cases, these conditions must be met for the insurance to be valid, however:

• The offshore insurance company must not be subject to U.S. insurance regulations.
• All aspects of the marketing, solicitation, negotiation, and binding of the punitive-damages insurance must take place offshore, and the policy must be issued and delivered offshore. McCullough, Campbell cautions that involvement by a U.S. insurer or broker might hamper enforcement of a policy insuring punitive damages.
• The policy must contain an arbitration clause selecting an offshore site for any arbitration proceeding.
• The policy needs to contain an offshore choice-of-law clause, with a reasonable relation to at least one of the parties or the transaction.
• The U.S.-based insurance buyer must not be subject to any applicable statute or regulation directly prohibiting a U.S.-based insurance buyer from purchasing damage coverage. Although McCullough, Campbell uncovered no such existing regulations or statutes, it noted that states can introduce them at any time.

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