[Senate Hearing 109-817]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 109-817
 
             THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 11, 2005

                               __________

                          Serial No. J-109-2A

                               __________

         Printed for the use of the Committee on the Judiciary



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                       COMMITTEE ON THE JUDICIARY

                 ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah                 PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa            EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas                   CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas                RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
                       David Brog, Staff Director
                     Michael O'Neill, Chief Counsel
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                       TUESDAY, JANUARY 11, 2005

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas........     5
    prepared statement...........................................    93
Kennedy, Hon. Edward M., a U.S. Senator from the State of 
  Massachusetts, prepared statement..............................   117
Leahy, Hon. Patrick, a U.S. Senator from the State of Vermont....     3
    prepared statement...........................................   128
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1

                               WITNESSES

Becker, Edward R., Judge, U.S. Court of Appeals for the Third 
  Circuit, Philadelphia, Pennsylvania............................     6
Berrington, Craig A., Senior Vice President and General Counsel, 
  American Insurance Association, Washington, D.C................    35
Engler, John M., President and Chief Executive Officer, National 
  Association of Manufacturers, Washington, D.C..................    29
Forscey, Michael, Partner, Forscey and Stinson, Washington, D.C..    38
Keener, Mary Lou, McLean, Virginia...............................    41
Robinson, Jeffrey D., Baach Robinson & Lewis PLLC, Washington, 
  D.C............................................................    45
Seminario, Margaret, Director, Safety and Health Department, AFL-
  CIO, Washington, D.C...........................................    32
Speicher, Billie, Ontario, California............................    43

                         QUESTIONS AND ANSWERS

Responses of John M. Engler to questions submitted by Senator 
  Leahy..........................................................    56
Responses of Craig A. Berrington to questions submitted by 
  Senator Leahy..................................................    58
Responses of Jeffrey D. Robinson to questions submitted by 
  Senator Leahy..................................................    60
Questions submitted by Senator Leahy to Margaret Seminario (Note: 
  Responses to questions were not received at the time of 
  printing, March 13, 2007)......................................    62

                       SUBMISSIONS FOR THE RECORD

American Thoracic Society, New York, New York, statement.........    63
Berrington, Craig A., Senior Vice President and General Counsel, 
  American Insurance Association, Washington, D.C., prepared 
  statement......................................................    88
Engler, John M., President and Chief Executive Officer, National 
  Association of Manufacturers, Washington, D.C., prepared 
  statement......................................................    95
Forscey, Michael, Partner, Forscey and Stinson, Washington, D.C., 
  prepared statement.............................................   107
Gelman, Jon L., Attorney at Law, Wayne, New Jersey, prepared 
  statement......................................................   113
Keener, Mary Lou, McLean, Virginia, prepared statement...........   122
Reinstein, Linda, Executive Director, Asbestos Disease Awareness 
  Organization, prepared statement...............................   130
Robinson, Jeffrey D., Baach Robinson & Lewis PLLC, Washington, 
  D.C., prepared statement.......................................   132
Seminario, Margaret, Director, Safety and Health Department, AFL-
  CIO, Washington, D.C., prepared statement......................   141
Speicher, Billie, Ontario, California, prepared statement........   152
Wallace, Mona Lisa, Attorney at Law, Wallace and Graham, P.A., 
  Salisbury, North Carolina, letter and attachment...............   157


             THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT

                              ----------                              


                       TUESDAY, JANUARY 11, 2005

                              United States Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room SH-216, Hart Senate Office Building, Hon. Arlen Specter, 
Chairman of the Committee, presiding.
    Present: Senators Specter, Cornyn, Leahy, and Carper (ex 
officio).

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Chairman Specter. The Senate Committee on the Judiciary 
will now proceed with a hearing on a discussion draft seeking 
to solve the asbestos crisis which confronts America at the 
present time.
    I first saw the asbestos issue back in 1984, more than 20 
years ago, when then-Senator Gary Hart of Colorado brought in 
Johns-Manville. And this very tough issue has been very elusive 
for more than two decades, and it has mounted in problems, 
reaching a situation where we now have some 74 companies which 
have gone into bankruptcy, thousands of individuals who have 
been exposed to asbestos, with deadly diseases--mesothelioma 
and cancer--and who are not being compensated. And about two-
thirds of the claims, oddly enough, are being filed by people 
who are unimpaired.
    The number of asbestos defendants has risen sharply from 
about 300 in the 1980s to more than 8,400 today, and most are 
users of the product. It spans some 85 percent of the U.S. 
economy. Some 60,000 workers have lost their jobs. Employees' 
retirement funds are said to have shrunken by some 25 percent. 
And beyond any question, the issue is one of catastrophic 
proportions.
    The concept of a trust fund was incorporated by Senator 
Hatch and Senator Leahy in legislation which was introduced in 
the last Congress. And after an extensive markup in July of 
2003, the bill was passed out, largely along party lines, 
obviously filled with a great many problems. I supported it in 
the interest of moving the issue along.
    At that time I enlisted the aid of Circuit Judge Edward R. 
Becker, who had shortly before taken senior status, having been 
Chief Judge of the Court of Appeals for the Third Circuit and 
having written the landmark opinion on asbestos on class 
certification, which was upheld by the Supreme Court of the 
United States. And Judge Becker's aid was enlisted to assist on 
an analysis and efforts to find common ground.
    In August of 2003, for two days in Judge Becker's chambers 
in Philadelphia, meetings were held with what we call ``the 
stakeholders''--the manufacturers, labor, AFL-CIO, the 
insurers, the trial lawyers--to see what areas there might be 
for common ground. And we have since held some 35 meetings in 
my conference room, the most recent one of which was held just 
yesterday.
    A major effort was made to try to get legislation through 
at the end of last year. And, of course, if you want 
legislation passed in the last days of a Congress, it is 
something that has to be done by consensus, because any single 
Senator can block legislation at the very end of the term. And 
we were not successful.
    But we have continued, and there have been areas of pretty 
much agreement. I am reluctant to use the word ``agreement'' 
because there is always some strand, somebody who has concerns, 
but I think that is an accurate statement on quite a number of 
matters, like the streamlining of the administrative process 
and the early start-up and the definitive and exigent health 
claims and judicial review.
    The area of the amount of the trust fund has not been put 
in the discussion draft because it is very, very contentious, 
and it seemed to me that it was better to have this hearing, 
which is largely an educational hearing, so that we may explore 
the parameters of the bill and to see where are the areas of 
agreement and where are the areas of disagreement.
    It is very easy to criticize and find fault with any 
legislative proposal in this field. It is so vast and there are 
so many complex and competing interests. But it would be my 
hope that the critics would hold their fire until there has 
been an analysis of the bill, and to the extent that there are 
criticisms, that there are objections, bring them to the 
Committee, bring them to our working group, and we will address 
them.
    This may well be the last best chance to deal with this 
issue in the foreseeable future, and the effort has been 
really, really herculean. Judge Becker received the Devitt 
Award as the outstanding Federal judge of more than 1,000 
judges in the Federal court system and has devoted himself 
very, very substantially. He still has some judicial duties as 
a senior judge, but very, very substantially. And we are 
looking for more than 60 votes to avoid cloture. I think if 
this bill is to be passed, it is going to have to be passed 
with big numbers. We passed the National Intelligence Director 
by 96-2 when we barely got it through conference. And in the 
last Congress, we had a Patient's Bill of Rights that passed 
both Houses, and it failed in the conference. So that it has to 
be worked through very, very carefully.
    Senator Feinstein had wanted to be here today, but I talked 
to her yesterday afternoon, and she is under the weather, so to 
speak. She has been a major contributor and has proposed 
legislation in the field. And there have been many 
contributors. Senator Frist and Senator Daschle last year 
worked on this issue very assiduously, and they came to a 
figure for the trust fund of $140 billion. And their 
consideration, especially the quasi-adversarial relationship, 
makes that figure entitled to weight. But that is one where it 
is my view that we need to confer. Senator Leahy and I, members 
of the Committee; Senator Cornyn, who has joined us here today, 
has been asked by Senator Frist to take a special look at the 
case.
    This is not the best day of all days to have a hearing when 
the Senate is not in session, but there really is no good day 
to have a hearing, and three Senators, not a bad showing for a 
hearing on any day. But if we did not proceed today, we would 
be on into late January, and once the Senate goes into session, 
it is going to be very difficult to find floor time.
    I have said that I would like to see a bill presented to 
the Majority Leader by early February, and that timetable has 
been labeled as unrealistic. Well, I believe in unrealistic 
timetables. If you have an unrealistic timetable, you are 
likely to get it done sooner. But there has been a full-court 
press on this issue because of the importance of it. And 
illustrative of that, one of the company representatives at a 
meeting a couple of weeks ago, talking about getting a bill 
done by July--which, candidly, through conference and on the 
President's desk, would be early on an expedited basis--said to 
me, ``July is too late for my company.''
    Again, let me pay tribute to Senator Hatch, the Chairman 
last year, for the trust fund concept, and to Senator Leahy, 
who has been working at our side through this entire complex 
process. And I will yield to Senator Leahy for an opening 
statement.

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Leahy. Well, thank you, Mr. Chairman.
    I would mention to those who are here, I recall in grade 
school a nun who used to say, ``Many are called, few are 
chosen.'' She did add, however, that those who showed up late 
would be chosen to go to the principal's office, so the fact 
that it is a time we have some of our colleagues overseas and 
elsewhere, but there has been great interest in this. And I 
think that Chairman Specter deserves an enormous amount of 
praise from both Republicans and Democrats in the Senate for 
holding this hearing.
    My message is a simple one. We have to see our efforts 
through until we have a balanced and effective national trust 
fund that fairly compensates victims of asbestos-related 
disease. If you are going to reach that goal, you have got to 
work with the various stakeholders. You have to work with 
Senators, both Democratic and Republican Senators, until we 
settle the outstanding details on fair resolution for all those 
who are concerned.
    I remember back in September 2002 I chaired the first 
Senate Judiciary Committee hearing on asbestos litigation. I 
said at that time I was in for the long run, the long haul. I 
have got to admit candidly I did not know the long haul was 
going to be quite this long a haul. But I am still here, and I 
am here because we have made some real progress in finding 
common ground around a national trust fund, even there have 
been some fits and starts along the way.
    In the last Congress, we painstakingly built two of the 
four pillars of a successful trust fund: appropriate medical 
standards to determine who should receive quick compensation, 
and an efficient, expedited system for processing claims. With 
the unanimous adoption--unanimous adoption--of the Leahy-Hatch 
medical criteria amendment, this Committee reached consensus on 
the proper standards for determining legitimate victims.
    Meanwhile, Senator Specter and Judge Becker worked hand in 
hand with the stakeholders. They have achieved consensus for a 
no-fault administrative system to be housed at the Department 
of Labor.
    Now, let me just make a personal note. We have people of 
varying views of what should be done here. You ought to all be 
thankful that Arlen Specter and Judge Edward Becker worked so 
hard on this. I have been in some of those meetings. I know how 
hard they worked. Senator Specter and I met a number of times 
in December. He has kept me fully apprised and my staff has 
been fully apprised of what is going on. Our input has been 
sought. This has been acting as a Senator should, seeking a 
consensus on an enormously complex piece of legislation.
    And, Judge Becker, we owe you an enormous thanks because, 
you know, you are in a position in your life and career, one of 
the most distinguished of all appellate judges, where you could 
just say, Hey, guys, I have got other things to do, I do not 
have to take on something this complex. You have done it. You 
have done it with competence, skill, and dignity, and I applaud 
you for that.
    Now, we have not reached consensus on the other two pillars 
of a successful trust fund: fair award values for asbestos 
victims and adequate funding to pay for their claims. And we 
know that if the award values are too low or subject to liens 
or reduce or exhaust recovery for victims, the bill will not go 
through. There are about 600,000 legal cases currently pending 
in the system, so you have to have adequate funding at the 
inception. Direct contributions from defendants and insurers 
and borrowing authority are going to be necessary to 
accommodate the inevitable, that is, thousands of these pending 
claims coming in on the very first day of the trust fund. It is 
a good news/bad news sort of thing for those who want to clean 
this up.
    The negotiations between Senator Frist and Senator Daschle 
in the waning days of the last Congress narrowed the 
differences on many compensation funding provisions. We should 
build on that. Our undertaking is challenges. It is 
unprecedented. It will not be easy to hammer out the details 
necessary for enacting a bipartisan bill into law. But the 
stakes are so high, so much has already been accomplished, we 
fail if we leave the field before we try our utmost to complete 
this very difficult task.
    Creating a national trust fund to compensate the victims is 
one of the most complex legislative undertakings I have seen in 
now beginning my 31st year in the Senate. This national trust 
fund is kind of like a Rubik's Cube, and that is why you have 
to have consensus, because it would be very easy for those who 
oppose the legislation to stop it, where it is going to be very 
difficult for those of us who want legislation to move it 
forward. It cannot be a stacked trust fund approach, an attempt 
to shoot the moon for one side or the other. It has got to be 
balanced.
    You know, as I look at this, both of my grandfathers, my 
Irish grandfather and my Italian grandfather, were stone 
cutters in Vermont. One immigrated to this country unable to 
even speak the language. My paternal grandfather died in his 
mid-thirties from silicosis of the lungs. I never knew him. I 
visit his grave periodically in Barre, Vermont, where it says 
Patrick J. Leahy, which kind of sends a shiver. And my other 
grandfather eventually died of silicosis of the lungs. I think 
of them, I think of what they went through, and I think of the 
hundreds of thousands of present and future asbestos victims.
    I want to have a balanced bill, and I will work very much--
I commend all of you, all of the major stakeholders who have 
worked so hard on this. But I want to thank you, Mr. Chairman, 
Judge Becker, and the representatives from organized labor, the 
trial bar, and the industry who have worked so hard to do it. I 
think it can be done. As I said, I was in it for the long run. 
I would not still be in it if I did not think it could be done.
    So, Mr. Chairman, thank you for moving forward, even though 
you must feel a little bit like Sisyphus at times, but it is a 
rock worth rolling.
    Chairman Specter. Thank you very much, Senator Leahy. 
Sisyphus would be a good example for the total work of the 
Congress. I am a little more optimistic on this one.
    Senator Cornyn, we will turn to you for an opening 
statement.

STATEMENT OF HON. JOHN CORNYN, A U.S. SENATOR FROM THE STATE OF 
                             TEXAS

    Senator Cornyn. Thank you, Mr. Chairman. I have a more 
extensive statement which I would like to make part of the 
record.
    Chairman Specter. Without objection, the full statement 
will be made part of the record.
    Senator Cornyn. Let me just say briefly, so as not to delay 
hearing from Judge Becker too long, how much I appreciate the 
good work that you have done and Ranking Member Leahy, but 
particularly the volunteer effort of Judge Becker. We get 
elected and paid to do what we do. He is a volunteer and 
someone who no doubt has carved out a special place in the 
hereafter as a result of his generous contributions towards 
solving this true problem.
    Some have said this is not so much tort reform as scandal 
reform, where unimpaired claimants get to the head of the line 
and leave bankrupt companies in their wake that can only pay 
pennies on the dollar to people who have certifiably genuine 
asbestos-related disease. And that is something that has caused 
all three branches of Government--the President as recently as 
the last couple of days, the United States Supreme Court in 
uncharacteristic fashion has called out numerous times for 
reform, legislative reform; and, of course, you have already 
cited the efforts made in the last Congress. So I congratulate 
you, Mr. Chairman, for taking this on so early in the 109th 
Congress. I do not think we have a minute to waste, and I look 
forward to being one of those Senators who helps contribute to 
the ultimate success of this bill. There is just too much at 
stake on the part of the victims, on the part of the companies 
that provide pension plans and employment to people who have 
been put out of work. And to a country that calls itself a 
nation of laws and believes in equal justice under the law, 
this situation cries out for reform and for a solution. And I 
look forward to working with you on that.
    Thank you.
    [The prepared statement of Senator Cornyn appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Senator Cornyn.
    We turn now to Judge Becker, whom I first met in the fall 
of 1950 on the Frankford Elevated going to the University of 
Pennsylvania. He was a freshman and I was a senior, and we have 
been close friends ever since, having gone to Penn together and 
Yale Law School together. Judge Becker was a very successful 
practicing lawyer. He became a United States district judge in 
1970 at the age of 37. He was elevated to the court of appeals 
in 1982, became chief judge in 1998. He has a long resume of 
awards, having been asked by the Supreme Court to take on some 
of the most challenging jobs facing the Federal judiciary. 
Within the past week, he traveled to California for one job, 
and he is on his way to San Juan for another job, and he is a 
prodigious worker.
    When we were trying to get this bill finished before the 
last session of Congress ended, it was on a consensus basis. It 
is obvious that we are not going to have consensus on all the 
points, but we have eliminated many, many areas of contention, 
and now the decisions on the remaining issues will have to be 
made by the Congress. The Senate will have a markup, and we 
will proceed with the legislative process.
    This bill is 273 pages in duration. It is a discussion 
draft, and when it has legislative form and is introduced, I 
will formally at that point call it ``the Becker bill.''
    We will have 10-minute rounds for all of the witnesses 
except for Judge Becker, who will speak at length to describe 
the bill, the areas of agreement, the remaining areas of 
disagreement. And I am glad we have the staffs here of all of 
the Judiciary Committee members. And we had alerted the other 
Senators who had been especially interested. And this I think 
will advance the knowledge of the bill and I hope will enable 
us to narrow the differences even further. And then on the 
remaining issues, we will be consulting, Senator Leahy and I, 
Senator Cornyn, Senator Feinstein, and those not on the 
Committee--Senator Carper has been especially interested in 
this legislation, as have been the Michigan Senators, Senator 
Levin and Senator Stabenow, and the Arkansas Senators.
    This is a matter where we have been besieged on all sides, 
from people who are suffering from mesothelioma, a deadly 
disease, and from companies which are on the verge of 
bankruptcy, to try to find some relief in the immediate future.
    Thank you again, Judge Becker, and the floor is yours.

STATEMENT OF EDWARD R. BECKER, JUDGE, U.S. COURT OF APPEALS FOR 
         THE THIRD CIRCUIT, PHILADELPHIA, PENNSYLVANIA

    Judge Becker. Thank you, Senator Specter, Senator Leahy, 
Senator Cornyn. I am very grateful for your very generous 
remarks. It has been a privilege for me to do what I have been 
doing here.
    Although, Senator Specter, you very kindly talk about this 
as the Becker bill or the Specter-Becker bill, it is really 
just as much the Hatch-Leahy bill because of the magnificent 
breakthrough in getting the medical criteria which came out of 
1125, and the Frist-Daschle bill because of the major strides 
that the two leaders made during the last Congress.
    I think, as you suggest, that I can be most useful in 
describing the bill. You have described this as an educational 
section, and what I would like to do--it is an enormously 
complex bill. But what I would like to do is go through each 
important section of the bill and lay it out so that there is 
full understanding. While it may take some time because of the 
length and complexity of the bill, I think it will kind of tee 
it up for the other speakers and facilitate their presentation.
    Before I do, I do think it important to state on the 
record--and I will do so very briefly because it is so unusual 
for an Article III judge to be involved in the legislative 
process in this way--that I needed to and I did satisfy myself 
before embarking on this project as to the propriety of doing 
so. I sought advice and was advised certainly that were four 
factors that had to be satisfied:
    Number one, that the efforts had to be bipartisan, and that 
has been satisfied because Senator Hatch and Senator Leahy 
initially blessed my participation, and then for 6 days last 
spring I was a personal delegate of Senator Frist and Senator 
Daschle. So it certainly has been bipartisan.
    Secondly, inasmuch as I do not represent, cannot represent 
the Judicial Conference of the United States, I thought it 
important to note that I would not charge the Government for 
this. So I paid my way down here yesterday and paid my hotel 
bill, with the two exceptions of 2 days when I was otherwise 
here on Federal judicial business over the last--this has gone 
on 17 months. I have paid for all of these trips, I guess 33 
trips, actually more than that, and my hotel bills, I paid them 
out of my own pocket, which I consider a privilege as a citizen 
if I can contribute to solving this crisis, which in my 
Georgine opinion, which Senator Specter pointed out, was 
affirmed by the Supreme Court in which I said it cried out for 
a legislative solution because it was beyond the competence of 
the courts. So, in a sense, not only is this a labor of labor 
for me, but it is my penance for having interred the class 
action solution to asbestos.
    Thirdly, I had to satisfy myself that I had no conflicts 
with any stock, and I did that. And even though, as Senator 
Specter pointed out, as a senior judge I am not obliged to 
perform extensive judicial duties, I do, and last year I did 
more opinions than anybody on my court and continue to do so. 
So it has not interfered with my judicial duties.
    Let me turn then to the Act and lay it out. Insofar as the 
statement of legislative findings and purpose, the members of 
the Committee have essentially set forth what is in the 
legislative findings and purpose, that the asbestos litigation 
system is broken in the tort system; the wrong people are 
getting paid; many of the people who were entitled to get paid, 
the really sick, are not getting paid because of the rash of 
bankruptcies.
    This has been in my experience the greatest litigation 
crisis in the history of the American court system. And, 
indeed, one additional factor which is mentioned in the 
proposed bill is that it has had an enormous toll on the 
Federal bankruptcy courts. The Federal bankruptcy courts have 
been overwhelmed and inundated, and the transaction costs in 
the bankruptcy courts have been huge. And the purpose, of 
course, is to find a fair and efficient means of dealing with 
the problem. The legislation is called ``Fairness in Asbestos 
Injury,'' that is where the ``fair'' comes from, reform 
legislation.
    Now, obviously as you pointed out, Senator Specter, and you 
as well, Senator Leahy, the big issue up front is the amount of 
the fund. The parties have not agreed, the stakeholders, on the 
amount of the fund. The business folks, as I understand it, 
think that the $140.25 billion figure which was negotiated by 
Senator Frist and Senator Daschle is adequate. The labor 
interests feel that it is not. And it is not yet in the bill. 
Ultimately, some figure will have to go in the bill, but I 
think it important, taking that as where we are now to describe 
where the funding comes from and how it works.
    The fund under the Frist proposal will be funded by three--
and in the previous incarnations of the bill will be funded by 
three principal sources. The defendants--that is, the 
manufacturers or those who have manufactured asbestos-
containing products--I do not think we have had any asbestos 
manufacturers for a long time, but there are those--but, of 
course, as you pointed out, Senator Specter, the latency period 
is 30 to 40 years. Someone can have been exposed to asbestos 
30, 35 years ago and 35 years later come up with lung cancer, 
mesothelioma, or asbestosis, or some asbestos-related disease.
    So the defendants are responsible for $90 billion under 
this formula, the insurers for $46.02 billion, and the existing 
trusts--that is, the Manville Trust, the Fuller-Austin Trust--
these are the companies which have gone into bankruptcy and 
have confirmed trusts under 524(g) of the Bankruptcy Act or the 
congressionally approved equivalent, which is the Manville 
Trust, to relieve them of asbestos liabilities. So the existing 
trusts are in for $4 billion. These defendants are companies 
named as defendants in asbestos lawsuits and which have 
incurred at least $1 million of cumulative asbestos liability. 
They are placed in seven different tiers. The Act is structured 
on the basis of tiers--t-i-e-r-s, tiers--based upon the amount 
that they have expended in asbestos liability, having in mind 
that small businesses, as defined under Section 3 of the Small 
Business Act, are exempt from the bill. And also included in 
the defendants' contribution is $1.4 billion from the Owens-
Corning Fiber Board Trust, which is the functional equivalent 
of a 524(g), and that is due to be transferred within 60 days 
after enactment. Under the Frist proposal, and, of course, in 
the bill, when finally drafted, the formula for the different 
tiers will have to be set forth. The financial calculations 
that I have seen are to the effect that the amount set forth in 
2290 will have to be increased by approximately 9.3 percent for 
each tier in order to reach the Frist $140.25 billion.
    Under the Frist proposal, the payout is over 30 years, 
minimum of $3 billion a year, net of hardship and inequity 
allowance. I do not want to spend too much time on that, but 
there are provisions that a company that can demonstrate 
extreme hardship or a demonstrated inequity based on a showing 
that the defendants' allocation is exceptionally inequitable 
when measured against its likely costs net of insurance of its 
future participation in the tort system.
    There are hardship and equity allowances for individual 
companies which are subject to judicial review, but the figure 
is net of those hardship and equity sums. Now the insurers, 
under the first proposal, would pay according to a 28-year 
schedule. The allocation would be determined by the Asbestos 
Insurance Commission, although with respect to the businesses, 
the respective contribution of the individual defendants is set 
forth on the basis of what tier they fit in. The responsibility 
of the insurers either has to be agreed to by the insurers or 
determined by an asbestos insurance commission, which I will 
describe a little bit later in my remarks.
    The RAND study has estimated that there are approximately 
8,400 companies--that is a lot of companies--that have been 
named in asbestos lawsuits. There are two senses. John Mesher, 
General Counsel of Saint-Gobain, who is here, did a survey 
where he analyzed all of the companies that were sued I think 
in Mississippi or Louisiana. I think there were 2,000 companies 
that were sued. And then the RAND did others. So it is not 
possible to predict exactly where the companies will fall 
within the tiers, but the significant factor from the point of 
view of the solvency of the fund is that the big companies, 100 
big companies, will be in one of the two highest non-debtor 
tiers. By non-debtor I mean the companies that are solvent and 
are not in bankruptcy. The formula is in the bill. Tier I is 
the Chapter 11 companies, the companies that are in bankruptcy. 
Tier II is the companies with 75 million or more, Tier III with 
50 to 75 million, and so it goes.
    But the significant thing, even though in terms of 
transparency we cannot say for sure at this moment which 
companies are in which tiers, we do know that the big companies 
are all going to be in the top two tiers, and the big 
companies, the defendants as a whole, guarantee--the way the 
bill is drafted, if the payments from the defendant companies 
are less than the statutory minimum in any particular year and 
the defendant has guaranteed payment account, cannot make up 
the difference, the administrator has the right to seek payment 
on a pro rata basis from the defendant companies for the 
remaining liability. So it is not tier-by-tier guarantee, but 
it is a total guarantee. And the guarantee, which is enforced 
by a charge by the administrator, means that unless American 
industry goes down the drain--and the big companies are the 
giants of American industry; you have GE and Pfizer and Viacom 
and GM and Saint-Gobain--well, that is a French company but 
with a big American presence--all of the giant companies are in 
the top two tiers, so they have to guarantee these payments. So 
there is, I believe, the way the bill is drafted, a guarantee 
of solvency.
    There is an issue with respect to the existing trust, the 
$4 billion that I reference. There is an interesting debate. 
Senator Specter, you referenced our attendance at the Yale Law 
School. The Harvard Law School is in the middle of this because 
there is one Harvard professor who says that the provision 
for--well, it is Professor Tribe, has given an opinion to the 
Committee as I recall--that the provision to transfer the 
amount of the $4 billion in the Manville and other trusts is 
constitutional. And another Harvard professor, Professor 
Fallon, has said that it is unconstitutional. So we have the 
warring opinions of these two Harvard Law professors as to the 
constitutionality of the transfer of the $4 billion, but I 
think that is something we need not be concerned about because 
under the first proposal, the companies, the big companies 
guarantee the $4 billion in the event that that portion of the 
bill is declared unconstitutional. So there is at least 140.025 
on the table.
    There is borrowing capacity. This is a big issue with 
respect to the up-front money. Under the first proposal there 
would be $40 billion up front in the first five years. Labor 
has expressed the view that that is inadequate, but the fact of 
the business is that with the borrowing capacity, at least as 
analyzed by the Goldman Sachs folks, there is $30 billion of 
borrowing capacity so that in the first five years the $40 
billion necessary for the start up--and there is concern that 
the fund would be overwhelmed in the early years--does go up to 
$60 billion. So there is $60 billion. The borrowing would 
provide liquidity through the life of the fund, and it provides 
greater comfort in the early years when the claims are believed 
to be greater, and of course, when the fund might lose the 
existing trust to a constitutional challenge.
    Will monies be out there? By virtue of the authority given 
to the administrator any borrowing would be senior to senior 
unsecured claims in a bankruptcy. There is plenty of diversity 
with the 8,400 companies that have been named. The experts--and 
I am not one of them--say that the fund could achieve an 
investment grade rating on its borrowing. In terms of the 
liquidity in the first five years, to quantify that, the $40 
billion would come $15 billion from the defendants, 20.6 
billion from the insurers. The insurers do put up more up-front 
money because of the nature of the industry, and as I said, $4 
billion from the existing trust. So as I have said there is, at 
least according to these folks, $60 billion of liquidity in the 
first five years.
    Will this funding be sufficient to pay the claims? Again, 
the stakeholders are not in entire agreement on that. Whether 
it is or is not is a function of two factors, claim values and 
the projections. The claim values are what are in the bill as 
to how much you get for each category. The projections, which 
the Lord only knows, is how many people are going to get sick, 
how many people are going to get asbestos-related disease. We 
do know, because of the latency period, that sometime in this 
decade a number of people suffering from asbestos-related 
disease will start going down, but we do not know by how much. 
In the last weeks I have had different projections as to 
whether it is going up, which labor says, and whether it is 
going down, which is what business says. It is acknowledged, 
there is no doubt the Manville Trust, which has the greatest 
experience, has reflected a significant decline in the number 
of claims, but the mere fact that the number of claims, that is 
undisputed, has gone down, that is not of course conclusive as 
to whether the incidence of asbestos-related disease after the 
long latency period has gone up.
    Now with respect to claim values, which are set forth in 
Section 131 of the bill, I think it is fair to say that there 
is agreement on most of the claim values. The most significant 
contribution of the bill--and again, Senator Hatch and Senator 
Leahy deserve so much credit for this--is that those who are, 
although they have pleural thickening, they have asbestosis, 
but are not functionally impaired, the ones who are not sick--
and these are the ones who Senator Cornyn has pointed out so 
graphically--have gotten huge awards in the tort system, 
accompanied by great transaction costs, these folks simply get 
medical monitoring. They do not get an award, but their 
condition is monitored. Every two years or every three years 
they get examinations and so forth to see if they get sick, and 
of course, if they do get sick, then they become eligible.
    But the lower levels, which are people Level II and Level 
III, there is basic agreement--and I am comparing here the 
first offer, the Daschle offer, Senator Feinstein's proposal, 
and Senator Specter's and my proposal--at Level II everybody is 
agreed on 35,000; at Level III everybody is agreed on 100,000; 
Level IV, severe asbestosis, everybody is agreed on 400,000; a 
disabling asbestos everybody is agreed on 850,000; and Level 
VI, other cancer--and I will talk about that in a few minutes--
everybody is agreed on 200,000.
    The disagreements are when you get to the lung cancers and 
the mesotheliomas. Working backward from the mesotheliomas, the 
bill provides--Senator Frist's offer was 1.050 million, Senator 
Daschle and Senator Feinstein said 1.1 million, Senator Specter 
and I cut the baby in half, and it is 1.075 million. Now, there 
are a lot of mesos, so the dollar figure is not insignificant, 
but the difference in terms of claim value is not that great.
    Working backwards, as I have said, lung cancer with 
asbestosis, there is essential agreement--well, I should point 
out that when you are dealing with the lung cancers, you have 
got three--and this is Level VII, VIII and IX--you have got 
three subgrades. The problem with the lung cancers is the 
complication of the impact of smoking. The companies have 
expressed a view that their concern is that this should not 
turn into a smoker's bill, and when smoking is in the picture, 
you have causation requirements. Now, administratively, the 
structure cannot work unless you have a schedule. You cannot 
have individual, you can only have a limited number of 
individual determinations. But, obviously, the folks who got 
lung cancer who were non-smokers, who never smoked, they need 
to get an awful lot more than the ones who remain smokers. Then 
you have the mid-level are the ones who are the ex-smokers. 
That is the ones who gave up smoking, in different incarnations 
it has been 12 or 15 years ago.
    In Level IX, as I said, working backward from the more 
serious ones, the lung cancer with asbestosis, there is 
virtually no difference in the claims values among the 
contending parties. They are virtually all at the 575 to 600 
thousand range for the smokers, 950,000 to a million for the 
ex-smokers and 1.5 to 1.1 for non-smokers. Senator Specter and 
I put them in as the same as the mesos, and we shaded them a 
little for the others.
    On Level VIII, once again, they are almost the same, indeed 
for the non-smokers they are exactly the same.
    The big issue relates to the so-called Level VIIs which I 
will have more to say about later. The Level VIIs, it is 
important to note, are the individuals who have lung cancer but 
no markers. That is, even though they have lung cancer and they 
have the requisite 15 years of exposure, they have no asbestos-
related symptoms, bringing the causation issue into play. 
Business has said, look, these fellows are smokers and we do 
not want to turn this into a smoker's bill. That is the one 
area where on the claims value there is a big disparity. 
Senator Frist's offer was 150,000. Senator Daschle's offer was 
500,000. Senator Feinstein's proposal was 250,000. Senator 
Specter and I did put that in at 200,000, thinking the lower 
number was the better measure because of the causation problems 
with respect to smoking, individuals who have cancer who have 
been smokers, but who have no markers of asbestos.
    The claims values in sum, except with respect to the Level 
VII smokers, the stakeholders are not that far apart on claims 
values. They have a bigger disagreement on projections, which 
as I have said, is something that the Lord has not let us in on 
in terms of how many people are going to get asbestos-related 
disease. I spent two days back in May with all the experts, Tom 
Florence, Fran Rabinowitz, Andy Kaiser from Goldman Sachs, and 
we went round and round and round, and at that point I had 
thought that the 139 billion worst case scenario based on the 
projections that was set forth by Goldman Sachs was realistic, 
but since then labor has given us some figures that said, no, 
epidemiologically there is data which shows a wider 
distribution of not cancers, but asbestosis and disabling lung 
disease. They say there are more mesos. Business says no, mesos 
are going down. I think it is fair to say that we will never 
know, we will never solve the projection issue. The only way we 
will know it is in the long run, and the old saying is: in the 
long run, we will all be dead. We cannot wait 30 years to do 
this bill to see how many people get asbestos-related disease 
over the next 30 years.
    You just have to make some informed predictions on the 
projections, and having in mind that the linchpin of this bill 
is if the projections are wrong, there is a sunset. If the fund 
cannot pay the claims, then there is a sunset and it goes back 
to the tort system. So if business is wrong--and everybody 
wants, and I say this for labor--labor has made it very clear, 
they do not want this to fail. They are not interested in 
sunset. They want this fund to work. And none of us know for 
sure what the accurate projections are, but nonetheless, in due 
course if the projections are higher than we think that they 
are, then it goes back to tort system. In the event of 
insolvency, of course, there is borrowing. There are tough 
remedies. The bill provides a surcharge on the defendants to 
make up a shortfall, to require the insurers to put up 
security. There are liens, Section 222 to 224, but obviously 
there is a return to the tort system. And if it should turn out 
that there is overfunding, then there are step-downs and 
holidays which would give the business the benefit of that.
    In terms of the benefit categories, I mentioned the 
unimpaired. The unimpaired simply get medical monitoring, and 
the Hatch-Leahy Bill gives a very elaborate description of how 
you qualify for Level II, how you qualify, Levels III, IV and V 
simply are increasing levels of impairment. Level III, minimal 
abnormality; Level V, serious impairment; Level IV in between; 
and of course the higher level you are in, the more 
compensation you get. And Level VI, other cancer, there are 
some medical/legal problems. Level VI requires a diagnosis of 
primary colorectal, laryngeal, esophageal, pharyngeal or 
stomach cancer. With respect to some cancers, there is some 
doubt as to whether asbestos exposure causes these cancers. 
They do not fit in easily like the mesothelioma, the lung 
cancer and the asbestosis, and the bill provides for physician 
panels to deal with these things. And lung cancer I gave you a 
kind of description. Level VII is primary lung cancer, 15 years 
of exposure but no markers; Level VII where your symptoms are 
greater; and Level IX is with asbestosis; and Level X is 
mesothelioma, which is almost always caused by asbestosis, but 
there are cases of idiopathic mesothelioma which is not caused 
by asbestosis, and there are exceptional medical claims that 
can be evaluated.
    With respect to the mesothelioma benefits I should also 
mention--and Senator Specter has expressed a great interest in 
this--there is a proposal that the mesothelioma awards be 
gradated based--let me give you an example. That a 70-year-old 
mesothelioma victim with no dependents should not get as much 
as a 40-year-old mesothelioma with a bunch of young dependents. 
The problem there is to make it cause neutral and not to burden 
the administrative structure with an awful lot of 
individualized determinations.
    We are working on legislation in terms of, one of the 
things I was going to say at the end, where we go from here, 
good that this is a discussion bill. The stakeholders are here. 
Senator Specter and I met with them yesterday, and they are at 
work on a proposal, a drafting proposal, and they have been 
enormously helpful that we will perhaps solve that problem. We 
have administratively Senator Leahy mentioned about the 
administrative process. We have a streamlined administrative 
process in the bill. Section 113 sets forth the information 
required. The claimant has to set forth employment history, 
asbestos exposure history, smoking history, medical 
information, the medical records, and various affidavits will 
suffice, because have in mind that many of these folks were 
exposed 30 and 40 years ago. The companies have gone bankrupt, 
and the records are not all available. And so there will be 
heavy reliance on affidavits and affidavits of members of the 
family with respect to medical evidence.
    The bill also contains auditing requirements. There is an 
expedited requirement for a decision within 90 days, internal 
administrative review and appeals. There is, and I am not going 
to spend much time on it, but we have set forth an elaborate 
appellate structure to various courts, and indeed, in terms of 
the thing I mentioned earlier where there is a constitutional 
challenge, the bill even says that the Supreme Court has got to 
give it expedited consideration, which of course it did to the 
Campaign Finance Bill, and I would be confident the Supreme 
Court would do that. There is also a provision with respect to 
attorneys fees, claimant assistance. There are educational 
programs. The Labor Department has to put up a website. The 
claims forms would be on the website.
    There are provisions with respect to there are limitations 
on attorneys fees, but the administrator under the bill has the 
power to limit attorneys fees in certain classes of cases. The 
prime example would be if a mesothelioma victim gets a million 
dollars, 1.075 or whatever it turns out to be, a lawyer who 
does not have very much to do, because meso is virtually a slam 
dunk, should not get a $200,000 fee for doing that. Well, there 
is a 10 percent limitation, 20 percent limitation for appeals. 
But the administrator presumably would say, look, in a simple 
mesothelioma case, that class of cases, the fee would not be 10 
percent, it would be lower.
    On the other hand, there are going to be cases where there 
are going to be causal issues, where they are really going to 
have to be litigated, and in that case, in order for attorneys 
to take these cases, which I think will be a different breed of 
attorneys than the ones that you, Senator Cornyn, were 
referring to, I think the asbestos plaintiff bar is going to be 
going on to other pastures. I think we are basically going to 
have a different bar handling these cases, and you do have to 
have some inducement for lawyers to handle these cases.
    But the short of it is that although it will be burdensome, 
the Department of Labor does have the expertise in crafting 
regulations and handling claims and developing websites. The 
original proposal to put it in the Court of Federal Claims, I 
have been in the court system long enough to know that this is 
not the kind of thing a court could handle. It is not the kind 
of thing that a court is suited to handle. The Labor Department 
would be it. There would be an administrator. The administrator 
is a presidential appointment. The administrator is required to 
appoint a deputy administrator for claims administration, and 
one for fund management. There would be an Asbestos Advisory 
Committee that the Congress will have input into, a Medical 
Advisory Committee. There will be physicians panels.
    The one thing that I would simply urge upon the Members of 
the Committee, if and when you pass this bill, is to urge upon 
the White House the importance of getting this thing up and 
running and targeting somebody, an administrator, who can get 
in place quickly, because as I will get to now, the transition 
and the sunset, become a very serious matter if this fund is 
not up and running, if the administration is not up and running 
and it has to go back to the tort system, the purpose will not 
have been achieved. So you have to target somebody, the White 
House has to target somebody. I do not think this is a 
political plum, this appointment. I do not know who is going to 
want it, but you are going to have to get the right person to 
get this thing up and running in a hurry, because otherwise the 
purpose of the legislation will not be affected.
    Now let me run quickly through the remaining issues, which 
are, I confess, some of the most controversial issues, because 
business's position is if we put up $140 billion, we do not 
want any leakage. We are putting that up to settle our asbestos 
liabilities. We do not want to have to be back in the tort 
system.
    Under start up, the money goes in. There is a transparency 
provision. It is kind of like the IRS, kind of like our taxes. 
We self-assess our taxes. These big companies know what they 
have spent. They know what their liabilities are. The insurers 
is another matter I will come to, and I can discuss that 
briefly. But within 60 days they have to set forth what they 
owe, what likely tier they are going to be in. The 
administrator has got to publish it in the Federal Register in 
case there is any issue. But once the fund goes up, there is a 
stay on all the claims. So the claims are stayed, the tort 
system is shut down. But what happens if the system does not 
get going? Obviously, you cannot keep people, I mean I think 
there is a basic understanding that if the system does not work 
or if it is overwhelmed, then folks who have lost their right 
to jury trial have a right to go back to the tort system.
    So what happens if the Labor Department is overwhelmed? 
This bill provides that within 180 days, if the administrator 
cannot certify that the exigent claims, that is, the 
mesotheliomas and the ones where the doctor says they will not 
live a year, are not being paid at a reasonable rate, they can 
go back to the tort system. We had a meeting with the 
stakeholders yesterday and I think that may have been a 
mistake. Maybe it ought to be 180 days from the time the 
administrator is appointed or it may be that if it goes back to 
the tort system it does not stay there, it can come back, or 
there is a credit. That has to be worked on some more. But 
there is a real concern, and this gets into the expedition 
point that I made, how critically important it is when this Act 
goes into effect, assuming that it does, that an administrator 
be appointed and an administrator be in place with the deputy 
administrators, and this thing has got to get up and running 
quickly. The regulations have to be promulgated, the claim 
forms have to be put out on the website, and the businesses who 
want this to work have to get their money in and up front 
quickly. I think they know that, because they want it to work, 
and I think that they will.
    There is also an escape valve for 360 days unless the 
administrator can certify that all claims or valid claims are 
being paid at a reasonable rate, and I think the same concerns 
apply there.
    Next hot button issue is pending cases, what cases should 
be grand-fathered, left in the tort system. The proposal, which 
I think cuts down the leakage, is that the only pending cases 
which remain in the tort system are those which are actual non-
consolidated cases, that is, not where some trial judge 
someplace or other has consolidated 500 cases together, but a 
one-on-one typical, traditional two-party or three-party, 
whatever it may be, law case, an unconsolidated case which is 
actually on trial. Everything else gets shut down.
    Insofar as what about settlements, there has been a lively 
discussion about that. I will point, and Senator Specter has 
been aware of this, some of the meetings that I have had with 
the stakeholders have been four-hour drafting sessions. They 
have been a lot of fun. You know, you have a lot of good 
lawyers together, and we draft and we redraft and so forth. We 
have had a lot of discussion about the settlement issue. The 
way it is in the bill now is that a settlement is preserved 
only if it has been signed by the individual and the defendant 
before the enactment of the bill, but there is a 60-day period. 
Business is not happy with that, but nonetheless, I thought it 
was reasonable. There is a 60-day period. And the insurers are 
not happy with that either. There is a 60-day period where any 
necessary paperwork has to be completed, and we have got some 
more drafting to do as to identify those.
    Winding down on the insurance issues, there is, as I 
suggested, an Asbestosis Insurers Commission, which would be 
appointed by the President with the advice and consent of the 
Senate, and once again, if this bill goes through, I would hope 
that not only the President makes prompt appointments but the 
Senate makes early confirmations to get this thing up and 
running.
    One would hope that if this bill goes through, the insurers 
would all agree on the allocations. There has to be 100 percent 
agreement. There seems to be indication that if the bill is 
going to go through, the insurers are not going to want to 
subject themselves to the tender mercies of the Asbestos 
Insurers Commission, because they do not know who is going to 
be on it and what the Insurers Commission is going to do to 
them. One of the powers that is in this bill is a ground-up 
survey, because some of the insurers do not think that the 
other insurers have accurately reported what their asbestos 
exposure is. The Commission is entitled to do a ground-up 
survey to get records from the SEC. A lot of this is public 
stuff. But there are criteria of the historic premium lines, 
the recent loss, the amount of reserves, based upon which the 
Commission makes the determination. One would hope that they 
will not have to do so.
    Another hot-button issue is what I describe as the Equitas 
issue. Equitas is the name given to the Lloyd's of London--this 
is the offshore reinsurer. Senator Specter identified the 
stakeholders as the businesses and the insurers, but we have 
had the insurers and the reinsurers, and the insurers and the 
reinsurers do not always agree, and then the domestic and the 
foreign reinsurers do not always agree. That is why Senator 
Leahy said this ain't exactly a simple proposition. We have 
also had, not only labor, Senator Specter mentioned this, but 
we have had the trial lawyers. We have had a representative of 
ATLA at every single one of our meetings, but the London 
reinsurers, the Equitas Group, think that they need to get a 
certain concession, a hardship concession that the American 
reinsurers do not think they ought to get. I do not want to say 
any more about it now. You are going to hear testimony about 
that.
    Four remaining hot-button issues, and then sunset, and then 
a few other things. Workers Comp subrogation is an issue. 
Historically most folks with asbestos disease have not sought 
Workers Compensation. They have had access to the court system 
and the court system has given them by and large reasonably big 
awards and they never sought Workers Comp. But now they will 
not have access to the tort system, so the question is will 
they go and get Workers Comp. They may go get Workers Comp and 
the question is whether or not the Workers Comp carriers will 
be able to get subrogation, whether they will be able to go 
back against the claimant.
    A couple of issues, and we mentioned before about things we 
have agreed upon. One of the things that was agreed upon early 
on in our process is that Blue Cross and Blue Shield cannot 
come back and get subrogation. We also have, in terms of health 
insurance, nondiscrimination under the HIPA Act passed by the 
Congress. There may be no discrimination against an asbestos 
worker in giving that worker health insurance because of prior 
asbestos exposure. But with respect to subrogation, the 
business says, look, if you are going to get $800,000 out of 
the fund, you ought not also be able to get Workers Comp 
because that is double dipping. Labor says, that is a different 
carrier. Sometimes it is, sometimes it is not. A lot of times, 
many of these businesses, because of the regularity of Workers 
Comp, are self-insured.
    Senator Specter and I have proposed a compromise. What we 
have tried to do all throughout is propose principled 
compromises, and I think it is a principled compromise, and it 
is the way it works in most states. It is a so-called holiday. 
That is the Workers Comp carrier cannot come back and recover 
anything that they have paid from the worker or from anybody. 
But during the period of time that the worker gets compensation 
out of the fund, to the extent of that total amount that the 
worker gets out of the fund, then the comp carrier does not 
have to pay comp. It does have to pay comp if the State law in 
New York or Delaware or Texas or wherever provides for more 
comp than they get under the fund. If they do that, the comp 
carrier has to pay that, and they cannot recover anything. So 
that is the compromise proposal. I am not going to tell you 
everybody is happy with that proposal. We think it is a 
principled proposal, but there it is, it is in the bill.
    Another one is FELA. The rail workers want to preserve--
they do not want FELA preempted, they want their rights 
preserved under both FELA and the fund. Now, talk about 
stakeholders, we also had the railroads in. Another group we 
had in were the Association of American Railroads and not just 
labor but the rail workers. It turned out, upon our 
investigation, that 95 percent of the rail workers who had 
asbestos exposure are now retired, so the would not get Workers 
Comp. But the other 5 percent or 10 percent, whatever it is, 
would get less under this bill than the non-rail workers. What 
we have proposed in the bill is that the difference be made up. 
That is a compromise. The rail workers are worried about 
somebody tinkering with the FELA. Senator Specter came up with 
the idea of putting in the bill to make it clear that Congress 
does not intend to mess with--excuse my vernacular--say, 
``Don't mess with Texas,'' ``Don't mess with the FELA,'' 
Senator Cornyn, so they say. That is in the bill. This is not 
intended to mess with the FELA. Once again, it is an 
improvement, and the railroads are satisfied with it. They do 
not like the language in the bill. The rail workers want to do 
something else. We are still talking about that, but we think 
it is a good compromise.
    Another issue that business does not like but which is a 
matter of enormous importance to labor as a health and safety 
issue is medical screening. We put in a provision for medical 
screening, that is, over the years to come--well, let me just 
start back. Business does not like medical screening because 
for years there was a history that the asbestos plaintiffs' 
lawyers had some B readers and others whom the businesses did 
not think were reputable, who they thought were mills of 
turning out plaintiffs. This provision is very different. It is 
for rigorous criteria, rigorous standards, run by NIOSH or run 
by a contractor selected by the administrator, who would for 
people in certain high-risk industry, give them examinations 
every few years to see if they get sick. If they do not get 
sick, they do not get anything. But if they do get sick, then 
they can come into the system. Business says, well, let their 
doctors, you know if they are sick they will go to the doctors, 
and this is a way of encouraging it, and most of the people 
with asbestosis do not get treated anyway.
    Be that as it may, this is a matter of it seemed reasonable 
to us to have this avenue available for people in high-risk 
industries, so long as it is subject to reasonable and rigorous 
requirements, and Senator Specter and I have put it in there. 
Labor feels very strongly about it. Business does not like it. 
This is one of the issues that the Senate is going to have to 
decide and markup someplace or other.
    One other issue where the folks are at odds is mixed dust, 
and Senator Leahy, you in effect introduced this subject. There 
are folks who have been exposed to asbestos and have also been 
exposed to silica, and they are sick. Business says, hey, look, 
I mean if what you have is really silica disease, sure, you can 
go in the tort system, but we are worried if this bill goes 
through that folks who have been exposed to asbestos, who have 
had some silica exposure, are going to repackage their asbestos 
claims as silica disease. I must say that Senator Specter and I 
have drafted a lot of things that one side or the other is not 
unhappy with. This is the only thing we drafted that nobody was 
happy with. So we did not put it in there. It is a problem that 
has to be solved. It can be solved in a number of ways. One way 
is, Senator Feinstein's proposal was, was your disease 
primarily from silica? Another way to deal with it is to set 
forth a credit, that if you have silica disease that the trial 
judge, if it goes into the state tort system, has to offset the 
proportion that is due to asbestos. That is a tough nut we have 
to deal with.
    Finally, sunset. Sunset is a big ticket issue. There are 
two levels of sunset. One is if the total program cannot be 
funded and the second is the Level VIIs. And that is the 
tradeoff, if the fund is inadequate, then folks can get back to 
the tort system where they have the right to jury trial, but 
there are a number of issues. Senator Biden was the one who 
introduced this first, but the Biden proposal has been refined. 
Everyone agrees that before there be any sunset, there has to 
be program review. The administrator has to do a shortfall 
analysis, projections, how is this fund going to do over the 
next period of time? There must be a plan for winding up. There 
is a provision that has to go to a special commission 
consisting of the Attorney General, the Secretary of Labor and 
other functionaries in the Government, and it would have to 
give Congress an opportunity to affix the system. But 
nonetheless there has to be program review. There is agreement 
on that. The question, however, is how long need we wait to 
sunset? Business's proposal, the 2290 proposal, was seven 
years. Senator Specter can speak for himself on this. Senator 
Specter felt that seven years was too long. And there is no 
provision in this current draft as to a timeframe, although, 
obviously it could not happen right away because there would 
have to be this very elaborate program review. But at all 
events, the question of the time of sunset is an issue.
    The second issue is the reversion. If it goes back to 
court, where does it go back to court? The provision that we 
have adopted is essentially a provision that Senator Feinstein 
proposed, that it could go back either to Federal Court or to 
state court, but only to a state court where the claimant lived 
or the claimant was exposed. In other words, you could not have 
100 claimants who never had anything to do with Mississippi or 
some county someplace or other which was a favorable 
plaintiffs' county and bring all the cases there. It would have 
to be either where the plaintiff lived or where the plaintiff 
was exposed. And if you cannot fine the defendant then against 
that defendant only, it is wherever you can fine the defendant. 
Business would like it to go entirely to Federal Court, but 
this is the compromise which we fashioned.
    With respect to Level VII, the Level VIIs, the ones I 
described as the lung cancers, requisite exposure smokers but 
no markers, business has worried about whether the Level VIIs 
will overcome the system. Even though business concedes that 
most of these cases, when they go back to state courts, they 
win because there are the causation issues, nonetheless there 
are potentially huge volumes of them because of the level of 
smoking in this country, and the transaction costs are huge. 
The question then is what about a partial sunset? We have 
agreed basically there would be a partial sunset just for the 
Level VIIs. What Senator Specter and I put in the bill is 15 
percent, 115 percent of the CBO figure. Labor wanted 150 
percent. Business wanted the CBO figure. That is something the 
Senate is going to have to decide.
    The other issue relates to the reversion. There we have put 
in, because there are complex issues as to whether there is in 
fact a proper Level VII reversion, there we have put in that 
that would go to Federal Court and that that could not go to 
state court. That would be a Federal Court matter. Business is 
happier with that. Labor is not.
    With respect to the bankruptcy laws, we have taken a lot of 
care that we do not mess up the bankruptcy laws and bankruptcy 
liens. By and large, other than the confirmed bankruptcies, the 
others are all laying around, and the other bankruptcies are 
going to be folded into the system.
    Three wrap-up items. Senator Murray proposed a ban on 
asbestos-containing products. That is in the bill. And Labor 
was concerned about violations of environmental and 
occupational and safety and health requirements, and we put in 
a bunch of provisions for that.
    Other than some more technical provisions, that is my 
overview of the bill. Where we go from here is we have some 
more drafting sessions. I have identified a couple of issues 
that we are still working on drafting on. There are some issues 
that I do not think we are going to be able to get consensus 
on. I think I have identified each of them, and the Senate at 
its markup is going to have to deal with those.
    I appreciate your indulgence, but it is arguably a 
sprawling bill, one of the most complex bills. I have been a 
Federal Judge for 34 years. I do not think I have ever seen a 
more complex bill than this. So forgive me for taking so long, 
but I wanted, since Senator Specter said it was an educational 
process, to lay it all out and put it on the table. I will be 
glad to answer any questions that any of the Senators may have.
    Chairman Specter. Thank you very much, Judge Becker, for a 
very comprehensive statement of the draft discussion bill. Some 
insight into your level of enjoyment came when you smiled with 
the fun of drafting. Judge Becker is known for not only the 
number of his opinions but the length and the length of 
footnotes.
    Turn the lights on 10-minute rounds, because as Chairman I 
want to observe the time limits meticulously so we can move 
ahead.
    Since that is what you consider fun, that is some insight. 
Judge Becker has been known to write opinions that rhyme, and 
among his many talents he is the pianist for the Songfest of 
the Supreme Court of the United States, one of the little 
publicized and most interesting activities of the Supreme Court 
of the United States.
    Judge Becker, as you have outlined the provisions of the 
bill, you have demonstrated the considerations on public policy 
issues where we had positions identified at length by so-called 
stakeholders, and then an evaluation of what seemed fair and 
just, and on accommodation, we found on many cases the parties 
could be brought together, and it was a matter of articulating 
language which would bridge the gap, and that has been done in 
many, many lines. The essential question which we have dealt 
with on this bill has been the giving up of the right to jury 
trial, which is a very fundamental right in our judicial 
system. In exchange for that would be a trust fund which was 
calculated to be adequate to take care of the claims. I think 
it is very important, as you went through the categories of 
claims--and Senator Leahy did a great deal of work on this, 
Senator Feinstein, Senator Frist and Senator Daschle, Senator 
Hatch--that there was pretty much agreement as to those areas.
    The draft discussion bill has tried to provide for 
flexibility, on the illustration you gave of a 40-year-old man 
with children as opposed to a 70-year-old mesothelioma victim 
without children, so that it remains revenue neutral, so that 
we have tried to provide that flexibility.
    When we had the markup in July of 2003, the issue of the 
reversion was a very contentious point, and as you have noted, 
it was Senator Biden who came in with a provision that there be 
a reversion. You have accurately noted considerations really by 
the insurers of a 7\1/2\ limit, and that is not easy to deal 
with when you have the kind of money we are dealing with here 
and the schedule of payments, it seems to be a virtual 
certainty that it would last at least 7\1/2\ years. An original 
draft put it at 20 years, which would really freeze out 
claimants in the event the fund was insufficient over that kind 
of a protracted period of time. But this is a balance.
    When you have talked about reversion in the event that the 
exigent claims are not paid within 180 days and other claims 
within 360 days, just yesterday, the session brought to light a 
very important consideration that that timing, at least in my 
judgment, ought to start from the confirmation of the 
administrator because appointments take time, and confirmations 
sometimes take time. So that would be a reasonable parameter, 
bearing in mind that people who go into court are spending a 
lot more time in dire circumstances, the exigent claims on 
mesothelioma, but it is an effort to make a balance. 
Understandably, the manufacturers and the insurers were very 
insistent upon avoiding leakage to carry all the pending 
claims. That was a reasonable request on their part considering 
the amount of the money, as yet undetermined, but the 
substantial contributions and the reversion.
    So unless the case is to verdict, not a matter of having a 
trial date, those cases go into the fund. We have left a little 
time after for settlement on individualized cases where the 
plaintiffs' themselves sign the settlement papers, not one of 
these block settlements where a lawyer settles for thousands of 
people yet to be determined in a very indecisive way so that 
there would be a large opening on that.
    When it has come to the issue of medical screening, we have 
heard contentions by the insurers and the manufacturers, and 
just as we have tried to limit the 120 days with specification 
as to what will happen during that time, there has been I think 
a substantial and successful effort to have medical screening 
in a limited context so that it is not a wide open field.
    Well, your description I think was very comprehensive, 
Judge. It sets the framework so that we can hear from others 
and see what other people have to say.
    Judge Becker. I will be glad to remain at the table if you 
want me to.
    Chairman Specter. We are going to hear now from Senator 
Leahy, so you may be here for a while.
    Judge Becker. Okay.
    [Laughter.]
    Chairman Specter. Senator Leahy.
    Senator Leahy. Thank you, Mr. Chairman.
    Judge, as I said before, I really do commend you for doing 
this, your diligence in mediating the matters. I did not 
realize it had been that number of trips down here. You sort of 
commute back and forth the same way that Senator Specter does.
    Judge Becker. Right.
    Senator Leahy. But you have made significant progress on 
the all-important issues such as the fund's borrowing 
authority, the transparency of contributions to the fund, 
allowing for a sunset if the fund runs out of money, another 
significant area. I know that involves delicate balancing acts 
and a successful trust fund cannot shift all the risk to future 
or current victims, obviously. But then you have the 
possibility of fund insolvency, the risk of inadequate funding 
short of insolvency. All these things have to be addressed. I 
think it is your number, but one of the numbers is 600,000 
asbestos cases pending in the tort system. I am worried about 
the crush of claims in that first day. What is the appropriate 
amount of up-front funding in the first three years of the 
fund's existence so that we might be able to pay out claims 
within the statutory deadline? What would you say?
    Judge Becker. The time period I have been focusing on is 
five years, and my sense is that the 60 billion, 40 billion 
plus 20 billion borrowing capacity, for five years is adequate. 
Insofar as three years as opposed to five, while I guess you 
are right that you would probably have more in the first three 
and then they would start to slow down, one of the issues is 
going to be how fast is the system going to get up and running 
and how many claims are they going to process? I mean that was 
a matter that I expressed concern about before in terms of the 
administrative capacity.
    I think there is no answer to your question. When I say 
this, there is certainly no empirical data. We have talked to 
the folks at the Manville Trust. Mr. Austern was in when we 
were talking about projections. But I think in response to your 
question is that we have not done a study--I do not know that 
we can and maybe we ought to focus on this in the next couple 
of weeks, and it is certainly consistent with my concern that I 
expressed earlier and that I expressed the other day about how 
quickly the administrator structure can get going--as to how 
many claims are going to be filed, how many we can process 
within the next year or two. I am inclined to think that there 
will be--if the businesses which have an interest in getting 
their money up front, the big companies, know what their 
asbestos exposure has been, they know what tier they are going 
to be in, and if they get their money in in 60 days or 90 days, 
there is going to be a ton of money in this fund from both the 
insurers and from businesses.
    Senator Leahy. If I could ask you about that, because we 
talked about the 40 plus 20, the 60 billion, discussed this 
with the Frist bill, the Daschle bill and the others. Do you 
have commitments or letters from the financial institutions 
regarding the availability of $20 billion in front-end funding 
for the bill's borrowing authority?
    Judge Becker. Well, I do not think anybody has those 
letters in hand. They would probably violate Sarbanes-Oxley or 
Leahy-Specter or something or other if they gave those now.
    [Laughter.]
    Judge Becker. But the predictions are that it would be 
available.
    Senator Leahy. But you see what I am getting at. And you 
are absolutely right when you say it is hard to do some kind of 
an empirical study. We are walking into something similar to 
what we did right after 9/11 with the victims and Ken Feinberg 
and the others who did that. We had some general idea where we 
were going. We did not know exactly where we were going, but we 
went. And Mr. Feinberg and others worked very well on that. 
Perfect solution? No, we are not in a perfect world, but it was 
a heck of a lot better than it had been, and that is probably 
where we are going to be here. We are not going to have a 
perfect bill from the manufacturers point of view, the 
insurance companies point of view, labor, lawyers, victims. It 
is not going to perfect for everybody. But we can get a lot 
better than the situation we now have. I would urge--because I 
know that there is representatives of all the groups I just 
mentioned in this room--do not look for perfection. Do not let 
the perfect be the enemy of the good, because we can do 
something. Senator Specter and I are committed to do something.
    I notice in your draft bill, Judge, a provision that will 
allow victims' awards to be vulnerable to liens by the 
insurance companies. I think the language was compensation 
holiday. I am worried though about a sick victim who finally 
gets an award. The next day the registered letter comes from 
the insurance company saying, hey, give me back the money, give 
me back all or part of what you got in the victim's award. I do 
not know whether this subrogation language would override 
states laws on the insurance companies' rights to sue victims 
for subrogation. Does this create trouble in your mind, because 
we are talking about a no-fault administrative system to fairly 
and quickly compensate victims? Is this a double-edged sword?
    Judge Becker. Senator, I do not think so. I mean I am not 
here in my usual capacity, but it strikes me that what the 
Congress does overrides state law here. I mean, plainly the 
Congress has the power under the Commerce Clause to do this. 
The language, as I understand it, would forbid the insurance 
company from trying to get money back from the claimant. If it 
does not say that clearly enough, it needs to be redrafted to 
say it more quickly.
    Senator Leahy. Is that what you want to do though, make 
sure they do not take back from the--
    Judge Becker. No. They cannot recover anything back, they 
cannot.
    Senator Leahy. Okay.
    Judge Becker. To the extent that that is in conflict with 
state law, the Supremacy Clause, in my opinion preempts state 
law.
    Senator Leahy. I had the joys of doing two things over the 
weekend, recovering from bronchitis and trying to go through 
the draft bill. Both had a certain degree of enjoyment. And I 
know the draft bill has been modified last night. But one thing 
I should say, all joking aside, I am extraordinarily impressed 
by what you have done. I think it reflects good-faith efforts 
to make real progress and reach the consensus that we have to 
have. I cannot emphasize enough to the stakeholders here in the 
room, this is a bill that will go through with consensus and 
end up on the President's desk. Without consensus on both sides 
of the aisle, there is no way in God's green earth it is going 
to make it there. Do you have recommendations how we might 
continue to narrow differences with the stakeholders and with 
Senators? We have Senators across the spectrum who are working 
in good faith here, as the Chairman and I are. How do we get 
more consensus?
    Judge Becker. Senator Specter and I and the stakeholders 
keep talking, keep on trucking, we keep on talking. The more we 
talk the more consensus we get. But I do believe, Senator, 
there are going to be certain issues that there is not going to 
be consensus on. I do not want to kid you. I think we can 
narrow a few more issues.
    But there are going to be some of them they are simply not 
going to agree on. There are some folks who just feel by virtue 
of their institutional arrangements that they cannot say yes. 
And at some point I think you gentlemen and ladies are going to 
have to bite the bullet. I think that there are going to be--
but the important thing is I think it may be narrowed down to 
six or seven issues.
    Senator Leahy. Well, you know, we see this in international 
negotiations all the time. Sometimes people just do not know 
when to say yes. Will you do me a favor? When you are talking 
to stakeholders on all sides, stress to them the urgency. And 
it may be a grudging yes, but at some point there has to be a 
yes. I do not think if we let this go into next year, or even 
much into this year, that we have a chance. Right now I think 
we do have a chance. Please carry that message back. They are 
going to hear it from both Republicans and Democrats. You have 
done so much. Senator Specter has done so much work on this. It 
would be a shame to let this fall apart.
    Thank you, Mr. Chairman.
    Judge Becker. I will do so.
    Chairman Specter. Thank you very much, Senator Leahy.
    Senator Leahy. I know you will.
    Chairman Specter. Senator Cornyn?
    Senator Cornyn. Thank you, Mr. Chairman.
    Judge Becker, last year when we marked up S. 1125, I know 
there were discussions about the adequacy of the funding, and I 
realize that we do not have a bottom-line figure in this 
proposal. But I want to talk to you about how do we determine 
whether the trust fund concept will be adequate to satisfy the 
demands made on those funds, and some of the things you said 
here today and some of the things I have heard previously I 
think need to be explored so everybody understands.
    The amount of money that we are talking about being 
contributed into the trust fund is without regard really to our 
ability to know what the dollar demands are actually going to 
be. Would you agree with that?
    Judge Becker. Unfortunately, yes.
    Senator Cornyn. And I am not being critical.
    Judge Becker. No.
    Senator Cornyn. I just want to make sure we all understand.
    Judge Becker. It is in the nature of the situation.
    Senator Cornyn. So if we get into extensive debates about 
whether $140 billion is enough or $110 billion is enough or 
$150 billion is too much, the truth is we do not know what the 
demands are going to be on this trust fund.
    Judge Becker. I think that is right. I think you end up 
talking to yourself.
    Senator Cornyn. So it is certainly in everyone's interest 
who wants to see this approach work, this general approach 
work, to make sure we do whatever we can to make sure that the 
money that does go into the fund goes to victims. You would 
agree with that, wouldn't you?
    Judge Becker. Absolutely.
    Senator Cornyn. And I know there has been some discussion 
about the near-term funding requirement, and you talked about 
in the first 5 years the $40 billion plus the $60 billion--
    Judge Becker. Plus the $2 billion.
    Senator Cornyn. --borrowing capacity, which I think is a 
good cash flow device, which obviously helps ensure the fund is 
more likely to be successful. But, actually, the $40 billion, 
if my calculations are correct, represents about a four-fold 
increase over the amount that is currently paid out in the tort 
system. If you look at the--it consumes in the neighborhood of 
$5 to $7 billion annually, with about 60 to 65 percent going to 
transaction costs. Not to quibble over the numbers, but the 
amount of money that goes into this trust fund the first 5 
years is substantial, and it is a multiple over the amount of 
money that currently is paid out to victims under the current 
tort system.
    Judge Becker. I have seen those figures, and there is 
documentation that would support those figures. I think the 
other side, I think that labor would controvert that. But, 
plainly, that is what the RAND study shows, absolutely.
    Senator Cornyn. Let me ask you a little bit about--
    Judge Becker. Like $6 to $8 billion a year times, you know, 
5, 6, years, that is the 40. So that is right.
    Senator Cornyn. Let me ask you a little bit about the 
claims process. Is it the intent of the working group and your 
intention to make this claims process as simple as possible?
    Judge Becker. The answer is yes.
    Senator Cornyn. And here, again, if you look at the RAND 
study that you alluded to, about 60 cents on the dollar under 
the current system go to pay the plaintiff's lawyer or the 
defendant's lawyer or court costs or other costs. Our goal here 
is to try to boil down the claim to eliminate as many 
transaction costs as possible so the victims get the money.
    Judge Becker. Absolutely.
    Senator Cornyn. And is this something, a claim process that 
you think a reasonably intelligent individual could do on their 
own, or are they going to have to hire a lawyer?
    Judge Becker. I think for the most part, most of these can 
be done on their own. There are going to be some where they are 
going to need lawyers. Some are going to be complicated. Most 
of them they can do it on their own, and the Labor Department, 
by and large, they will hire contractors. I would say the way 
this is done is to hire contractors, and there are a lot of 
folks out there who have processed these claims for the 
bankruptcy trusts and so forth who should be available. But it 
is a claims evaluation process on the basis of the information 
that is--I do not think it is extraordinarily complex. It has 
got to be done carefully. But I think in most cases the 
claimant will be able to do it him--it is almost always going 
to be a himself. And you are not going to have to have a highly 
sophisticated claims examiner to evaluate the claim.
    Senator Cornyn. And if, in fact, an individual, a victim of 
asbestos disease, is able to file their own claim, will they 
then be able to keep the entire award?
    Judge Becker. Yes.
    Senator Cornyn. In other words, the amount of money that 
they would otherwise pay as attorney's fees would go into their 
pocket?
    Judge Becker. Absolutely.
    Senator Cornyn. Okay. And I note under the Becker draft 
that there is a 10-percent provision for attorneys' fees.
    Judge Becker. And 20 percent if there is an appeal.
    Senator Cornyn. And I want to ask you a little bit about 
that appeal, because, of course, this is just the amount of 
money that would be paid to the plaintiff's lawyer, the one who 
would be filing the claim.
    Judge Becker. Right.
    Senator Cornyn. And you would expect, the world being what 
it is, that there would be some money spent, other transaction 
costs in addition, I guess.
    Judge Becker. I suppose there would be some--in any--it is 
a kind of personal injury case. There may be some costs for 
reports. There is not going to be formal discovery, but I guess 
there would be, you know, xerox costs if there are voluminous 
records. I do not think they would be significant, but I think 
there would be some other costs, travel costs maybe.
    Senator Cornyn. Let me ask you about if there is a 
hearing--and I note there is a provision for a hearing under 
exceptional cases.
    Judge Becker. Right.
    Senator Cornyn. Will this be an adversarial hearing?
    Judge Becker. No, I do not think it is an adversarial 
hearing.
    Senator Cornyn. So it will just be the hearing officer, 
whoever that is.
    Judge Becker. The hearing officer, yes.
    Senator Cornyn. And the victim and their lawyer, if they 
have a lawyer. And you have a provision--
    Judge Becker. But there is no defendant who has any 
interest.
    Senator Cornyn. Right. Well, in terms of transaction costs, 
that is a substantial benefit in terms of getting money to the 
victim, which is our goal. But there is a 20-percent provision 
for appeals. Is that correct?
    Judge Becker. That is correct.
    Senator Cornyn. And as I understand, there are, I guess, 
two kinds of appeals. One would be an administrative appeal and 
one would be judicial review, which would be based on 
substantial evidence review. But why is there a provision made 
to double the attorneys' fees for appeals because ordinarily--I 
mean, my experience is probably the same as yours, I hope it 
is, that appeals tend to be a little bit cheaper in the tort 
system than the trial preparation and the trial level itself.
    Judge Becker. Well, I think that generally is correct, but 
here you are talking about a relatively simple initial 
proceeding, and it is hard to picture at this point what the 
appeal issues are going to be. But my guess is that the appeal 
issues are going to be--it is a no-fault system and you do not 
have to deal with product identification and that kind of 
thing, which you deal with in the ordinary trial of an asbestos 
case. But it is probably going to be where there is some 
causation issue or, for example, the individual has got 
colorectal cancer, and was this colorectal cancer caused by 
asbestos.
    Senator Cornyn. Caused by inhalation of asbestos.
    Judge Becker. Yes, I mean, that is a tricky issue, and a 
lawyer may have to do a lot of work, you know, to figure that 
out and argue that case.
    Senator Cornyn. I would say a successful lawyer would have 
to do a whole lot of work to make that causal connection.
    Judge Becker. Well, that may be so. But that is why we have 
given to the administrator the authority to regulate the fees. 
These are simply presumptive maximums, and the administrator 
has the authority to cut them back--or to increase them if 
there is a fair case.
    Senator Cornyn. Well, I will just leave it at this: As you 
have explained it, and as I understand it, the desire is to 
maximize money to the victim, eliminate as many transaction 
costs as possible, create a simple system that can be done even 
without counsel, should an individual choose to do so. So I 
would like to continue to work with you and the Chairman on 
those attorneys' fees allocations.
    Judge Becker. Of course.
    Senator Cornyn. Because I think we ought to try to 
encourage and create a system that is, as a practical matter, 
something that could be done cheaply, efficiently, and with as 
few transaction costs as possible.
    Finally, let me just in this round of questioning, you have 
mentioned the problem with Category VII. These are the people 
that have lung cancer, with no markers indicating that they 
actually have asbestos-related disease. And you said these are 
the kinds of cases if they go to court that typically the 
defendant would win.
    Judge Becker. They tell me they do. I do not know.
    Senator Cornyn. Well, I would think that even if you are 
exposed to asbestos but you do not have any evidence of 
asbestos disease and you die or your diagnosis is lung cancer, 
that is, should be, a pretty tough case to win on the basis of 
an asbestos claim.
    Judge Becker. They do pretty well. They do not win them 
all, but they do pretty well in those cases, apparently.
    Senator Cornyn. And under the provisions of this bill, 
there is as much as $200,000 that could be allocated to former 
smokers who have lung cancer but no evidence of asbestos 
disease.
    Judge Becker. That is correct. It is a much lower sum, but, 
you know, I guess it is an evaluation of risk. You know, in the 
tort system they may win three out of four cases, but they lose 
the fourth, and the plaintiff lawyer rings the bell, as they 
used to say, you know, on the fourth case. But, by and large, 
business has acknowledged that if we are going to have a 
gradated system, there has got to be a dollar figure there. And 
the only thing I can say is that dollar figure, as business has 
proposed it, and as Senator Specter and I have proposed it, is 
much less--also as Senator Feinstein has proposed it, is much 
less than what labor and Senator Daschle have proposed.
    Senator Cornyn. I see my time is up, Mr. Chairman. Thank 
you.
    Chairman Specter. Thank you very much, Senator Cornyn.
    Judge Becker, before you terminate your testimony, you had 
said in the final question from Senator Leahy that there were 
some issues where we cannot have consensus, and you 
particularized six or seven. I think it would be useful if you 
could enumerate those.
    Judge Becker. Well, I do not think we are going to get 
labor and business to agree on the dollar amount for the up-
front funding. I do not think business is going to agree to 
medical monitoring, but you and I met with a whole bunch of 
business folks the other day and said do not fall on your 
swords on this. You know, it takes two to tango or three to 
troika, or whatever it is. But I think business is--business, 
kicking and screaming, may agree. The rail unions were working 
on this FELA thing. Yesterday at our meeting, Mr. O'Bannon from 
the Association of Railroads and Mr. Griffin from the 
maintenance of way folks agreed to talk some more about a 
formula. I think there is some possibility we may work 
something out on that.
    I think that on the workers' comp subrogation, although I 
think what you and I have come up with is a principled 
solution, my guess is that labor is not going to--or the trial 
lawyers are not going to sign off on it.
    Mixed dust, I am hopeful that we can work something out.
    Let me look at my notes here. Equitas, the insurance issue, 
the offshore Lloyd's of London folks, I think you are going to 
have to resolve that.
    I think with respect to the sunset provisions in terms of 
the reversion, I think we have a principled solution there, but 
I do not think--I mean, I think these are relatively narrow 
issues. It is up or down. But I just think you are just going 
to--especially with respect to the Level VII reversions, as to 
whether it is 115 percent and as to whether it just goes to 
Federal court, I do not think they are going to come to a 
consensus on that. And the time of the sunset, both in terms of 
the initial stay, the terms of that, although I think your 
approach to that is a sensible one, but the time of the 
ultimate sunset I think may be--business had said seven and a 
half years, and insurers have taken a strong position on that. 
Labor has taken the opposite position.
    I think those are the main issues that you are going to 
have to resolve.
    Chairman Specter. Well, Judge Becker, I am frankly 
encouraged by your specification of the outstanding issues. I 
think as to the dollar amount there is no doubt that the 
Congress is going to have to decide that. You have 140; as 
opposed to labor, trial lawyers at 149. Then you have 140 
endorsed by Senator Daschle when he was head of the Democratic 
Party. So we are within the realm of handling it.
    Medical monitoring, I understand the problems, but as we 
have delineated it, we may be able to limit it even further.
    The FELA, we are going to solve that one with language. 
Labor is concerned about this being the start of the slippery 
slope to eliminate Federal employers' liability, and that is 
not the intention, and we can guard against that.
    And the workers' comp subrogation, well, there is an issue 
where we may not come to terms, but it is not a gigantic 
matter. It is important.
    Mixed dust, I think we will be able to draft through on 
that.
    Equitas is for one group, and we will have to make that 
decision. We are prepared to do that.
    When you talk about sunset, the time of sunset, seven and a 
half years and the amount of the funding to carry through that 
period of time, I think ultimately that the stakeholders, when 
they decide what positions to take, will have to make a 
judgment as to whether a bill which they have some concerns, 
even significant concerns, is better than going on with the 
system as it is now.
    Judge Becker. I should add the claims values, the claims 
values on the Level VIIs.
    Chairman Specter. I should not have paused if you were 
going to add things.
    Judge Becker. The Level VII smokers, I do not think they 
are going to agree on that either.
    Chairman Specter. Okay. On the reversion on that, labor at 
150 percent and business and CBO and this draft comes in at 
115. That is subject to some modification. But considering 
where we started off--and we all know that the perfect is the 
enemy of the good, and we are going to have to face up to the 
catastrophic nature as to what is going on. And there may be 
some room for patriotism here. That perhaps is an inappropriate 
word where it is dollars and cents and shareholders, but the 
economy of the country is at risk.
    Anything further, Senator Leahy?
    Senator Leahy. No. I think you have said it all very well. 
I agree.
    Chairman Specter. Judge Becker, we would like you to remain 
at the witness table, if you would.
    Judge Becker. I would be pleased to.
    Chairman Specter. Because there may be some comments which 
come up as we have the balance of our panel: Senator Engler, 
Ms. Seminario--
    Senator Leahy. Governor Engler. He does not want the 
demotion, Arlen.
    [Laughter.]
    Chairman Specter. Governor Engler. Pardon me. Mr. Forscey, 
Ms. Keener, Mr. Speicher, and Mr. Robinson. If you ladies and 
gentlemen will come forward, our lead witness is the former 
three-term Governor of Michigan, John M. Engler, who is now 
president of the National Association of Manufacturers, the 
largest industry trade group in America. Before becoming 
Governor, Governor Engler served 20 years in the State 
legislature, was the youngest person elected to the Michigan 
State House of Representatives. Seven of his 20 years in the 
legislature were as State Senate Majority Leader. Governor 
Engler has a law degree from the Cooley Law School and his 
bachelor's degree from Michigan State University.
    Governor Engler, it is a pleasure to see you.
    Senator Leahy. Mr. Chairman, before we start, could I just 
ask consent to put in the record a statement by Senator Kennedy 
and some expert testimony in the record on subrogation?
    Chairman Specter. Sure. Without objection, they will be 
made part of the record in full.
    Our timekeeper will set the time at 10 minutes, and we look 
forward to your testimony, Governor.

  STATEMENT OF JOHN M. ENGLER, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON, 
                              D.C.

    Mr. Engler. Thank you, Mr. Chairman. Senator Specter, 
Senator Leahy, and members of the Judiciary Committee, thank 
you for the opportunity to testify about the need for asbestos 
liability reform, and I do want to say up front that I also 
have a written statement I would like to submit.
    Chairman Specter. Without objection, your full statement 
will be made a part of the record, as will all the statements.
    Mr. Engler. Thank you. I would also like to introduce our 
counsel for the Asbestos Alliance, Mr. Pat Hanlon, of Goodwin, 
Proctor, who is seated right behind me. So I have actually 
brought expert back-up as well.
    Chairman Specter. Mr. Hanlon has been an extraordinary 
contributor to our 35 sessions. An extraordinary contributor. 
So you are well backed up.
    Mr. Engler. I am indeed.
    Senator Specter, the draft legislation, also, we want very 
much to compliment you. It reflects your serious commitment to 
finally resolving the litigation crisis, and we are grateful to 
you for that. I certainly want to acknowledge also the efforts 
of Judge Becker for such dedicated labor on behalf of the 
public good.
    Today, as you have indicated, I am here speaking on behalf 
of the National Association of Manufacturers' Asbestos 
Alliance, a broad-based coalition of companies and associations 
committed to seeking a fair resolution of the asbestos 
litigation crisis. I am also very concerned about the plight of 
the victims, both medical victims and workers whose jobs and 
retirement savings have been affected. For their sake, Congress 
must build on last year's efforts and pass fair and reasonable 
legislation.
    Our alliance strongly supports the trust fund approach. 
Removing claims from the tort system is the only way to ensure 
that the compensation goes to the victims, not the lawyers. It 
is also the only way to ensure that victims receive fair and 
prompt compensation, that the bankruptcies stop, and that the 
fraud and the uncertainty are eliminated.
    I also want to note for the record that numerous veterans 
groups, including the Veterans of Foreign Wars, Non-
Commissioned Officers Association, Paralyzed Veterans of 
America have also endorsed the trust fund approach. I think my 
seatmate, Ms. Keener, will be speaking to that a little bit 
later, but they do certainly because many veterans are also 
asbestos victims. I would ask that their endorsements be made 
part of the record as well.
    In addition, I read yesterday that AFL-CIO President John 
Sweeney again described a trust fund approach as the best way 
``to show genuine compassion for the victims of asbestos 
disease.'' So, Mr. Chairman, I believe support for the trust 
fund concept is broad and it is bipartisan. And now I would 
like to move to the specifics of the draft bill. We have been 
continuing our review of that 250-page-plus draft that we 
received Friday evening, and the alliance is prepared to bring 
several general observations.
    First, as has been discussed, the draft does not address 
the central issue of funding. The maximum size of the fund must 
be no more than $140 billion, as finally agreed to last fall by 
Senators Frist and Daschle. And just so there is no fuzzy math 
on that point, that $140 billion total includes all sources: 
defendant companies, the asbestos trusts, and insurers.
    In addition, the funding schedule, especially in the first 
5 years, must be reasonable. The approximately $40 billion in 
cash contributions in the first 5 years discussed last year, 
and certainly again this morning, meets that test. With the 
borrowing authority in the bill, the administrator could have 
as much as $60 billion or more to pay claims.
    Now, to put that in context, the entire amount paid in 
asbestos litigation from the beginning in the late 1960s 
through 2002 was only $70 billion, and 60 percent of that went 
to those transaction costs we have been discussing, to lawyers 
on both sides of the issue.
    The next requirement is that an asbestos solution must 
completely shut down the broken asbestos tort system. 
Provisions in the draft that call for a return to the tort 
system if certain deadlines are not met as the administrator 
sets up the fund are counterproductive. Worse, if we fail to 
get these cases out of the tort system, it could increase the 
costs to the program by tens of billions of dollars and result 
in asbestos victims and their families continuing to be 
victimized twice, first by the disease itself, second by a tort 
system broken beyond repair.
    Certainly the heart of the problem is that too many claims 
are filed on behalf of people who are not sick and may never 
become ill from asbestos. That problem was dramatically 
illustrated last year in an independent study by Johns Hopkins 
researchers. The study was reported in Academic Radiology, one 
of the top peer-reviewed radiology journals. And, Mr. Chairman, 
I brought a copy of that and I would ask that that article and 
the accompanying editorial entitled ``Is Something Rotten in 
the Courtroom?'' become part of the Committee's record.
    Chairman Specter. We will make it part of the record, 
without objection.
    Mr. Engler. In this study, the researchers obtained 492 X-
rays that had been examined by doctors retained by plaintiffs' 
lawyers and used in asbestos lawsuits. The plaintiffs' X-ray 
readers found asbestos-related lung damage in 96 percent of the 
cases. The Hopkins researchers put together an independent 
panel to interpret the same X-rays. The six panelists that they 
assembled were not told that these X-rays had been used in 
asbestos cases. The independent radiologists found 
abnormalities in a mere 4.5 percent of cases. That is 4.5 
percent versus 96 percent. This is an outrage, and, generally, 
all too common in many of these asbestos cases.
    The real tragedy is that thousands of these questionable 
claims are forcing victims, real victims, with serious 
illnesses in many cases, to wait longer and longer and longer 
for compensation. We cannot continue with a system that is 
hurting those who deserve help the most.
    So, Mr. Chairman, I ask this Committee also ensure, which 
is a point we have been discussing this morning, that the 
legislation not become a smokers' compensation bill. Payments 
for lung cancer claimants who are current or former smokers 
should reflect their smoking history. This principle is 
essential and will protect the fund against an avalanche of 
smokers' claims that have little or nothing to do with 
asbestos.
    The bill also must contain strong and effective provisions 
to lock the back door so creative trial lawyers just do not 
convert tens of thousands of unimpaired asbestos claims into 
silica claims and head to the courthouse once again. And I am 
encouraged by your comments on that today.
    Finally, I do want to express concerns, as Judge Becker 
noted, about the new medical screening program included in the 
discussion draft. People who may have been exposed to asbestos 
but have no indication of any asbestos disease would receive 
medical services that are similar but less frequent than those 
received by Level I claimants. These people would have no claim 
in court and no right to compensation under State or Federal 
law. My concern with this is that every dollar diverted to the 
screening program, this new screening program, is a dollar then 
that is not available to compensate the sick.
    Now, we are continuing our review and will continue to 
provide additional feedback through our able counsel, and the 
alliance remains committed, Senator, to working with you, 
Senator Leahy, Senator Cornyn, Senator Carper, who I was 
delighted stopped in this morning, because we recognize, as you 
have stated this morning, that this is a crisis that needs 
resolution. So your hard work and determination will be matched 
by our efforts. We do look forward to working with you and the 
members of the leadership and members of the Senate and 
ultimately the House and the White House to finally pass a bill 
that cares for victims and ends the current scandal-ridden 
system.
    Thank you for the opportunity, Mr. Chairman.
    [The prepared statement of Mr. Engler appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Governor Engler.
    Our next witness is Ms. Margaret Seminario, Director of 
Occupational Safety and Health, AFL-CIO. She has worked for 
AFL-CIO since 1977, and since 1990 has been responsible for 
directing the organization's activities on safety and health. 
She holds a master of science degree in industrial hygiene from 
the Harvard School of Public Health and a bachelor's degree in 
biological science from Wellesley. Ms. Seminario has been a 
regular attender at our marathon sessions and a major, major 
contributor, heading up a very distinguished team from the AFL-
CIO.
    The floor is yours, Peg.

 STATEMENT OF MARGARET SEMINARIO, DIRECTOR, SAFETY AND HEALTH 
             DEPARTMENT, AFL-CIO, WASHINGTON, D.C.

    Ms. Seminario. Thank you very much, Senator Specter, and we 
do appreciate the opportunity to testify on this legislation on 
asbestos compensation.
    As you have stated, we have been very, very involved in 
this most recent process. Just to note, the first asbestos 
compensation legislation that I was involved with was in 1978, 
so the AFL-CIO has been at this for a very, very long time, and 
we are pleased to see the progress that is being made with 
respect to addressing this issue.
    I want to thank you and Senator Leahy, both of you, for 
your commitment and your tireless efforts to craft and sound 
asbestos compensation bill. And I would also like to 
acknowledge and thank Judge Becker for all of his very hard 
work, his tireless hours and hours spent on this very, very 
difficult issue.
    We have welcomed the opportunity to participate in these 
efforts to craft a fair compensation bill for asbestos victims. 
For the last several decades we have seen the toll of workers 
and family members disabled and killed by asbestos disease 
mount to staggering levels, the result of willful practices of 
manufacturers and employers who withheld information about the 
hazards of asbestos and did little or nothing to control the 
exposures. And the result of these actions is an occupational 
and environmental disease crisis of unprecedented magnitude. 
And I think that we have to keep this in front of us, that 
while we talk about a litigation crisis--and there are indeed 
problems in the litigation system--the root of the problem is 
one of being an occupational health and environmental disease 
crisis of unprecedented proportions. Hundreds of thousands of 
victims have already suffered and died, and hundreds of 
thousands more will die or suffer in the coming years.
    As the disease crisis has grown, so has the litigation as 
victims have sought redress for their injuries. And as I have 
said, there are indeed problems in the current civil litigation 
system which we have recognized. And it is indeed for both of 
these reasons--the massive asbestos disease crisis and the 
serious problems with the current litigation system--that we 
have engaged so deeply in efforts to craft a fair bill.
    We have indeed supported in principle the establishment of 
a Federal asbestos trust fund to compensate victims for their 
personal injuries through a no-fault system to replace the 
inadequate civil litigation system. We have consistently made 
clear that establishing a national compensation fund must 
provide for fair compensation for victims who suffer disease. 
It must have adequate funding to pay claims and ensure the 
fund's solvency. It must deliver compensation in an efficient 
and timely manner to victims. And it must ensure that victims 
will not be left at risk if administrative or financial 
problems arise.
    We have also made clear we will not support and we will 
strongly oppose any legislation that does not meet these basic 
principles and any legislation that relieves defendants and 
insurers of responsibility and liability at victims' expense.
    In the last Congress, much progress was made on some key 
issues of asbestos trust fund legislation, including the 
medical criteria and the establishment of a no-fault 
administrative system. But, indeed, differences on key issues 
remain, and let me turn to some of those key issues of concern 
for the AFL-CIO.
    First and foremost is fair compensation for victims because 
ultimately asbestos compensation is about providing fair 
compensation to those who have developed a disease as a result 
of asbestos exposure. The compensation awarded should be 
commensurate with the level of disease and disability suffered. 
And, indeed, compensation values for diseases have moved closer 
to what represents in our view is fair compensation. However, 
the values proposed for some diseases in the last draft, 2290, 
and some of the latest business offers, particularly those 
proposed for the Level VII lung cancers in our view are too 
low. I think it is important to state that exposure to asbestos 
causes lung cancer and not only that, that indeed among victims 
who smoke, there is a synergistic effect with the resulting 
risk from both the exposure to asbestos and the smoking causing 
essentially a 50- to 90-fold increase in risk.
    And so the fact of the matter is the fact that people 
smoked may indeed increase risk, but the exposure to asbestos 
has increased it even more, and those people deserve to be 
fairly compensated.
    We also believe that with respect to the awards that are 
offered to victims under this bill, there should be no 
subrogation or liens against awards. And we do think that the 
proposals by insurers, which essentially call for a 
compensation holiday but still allow a total lien--a total lien 
against that award, is really unfair. And, indeed, it is worse 
than exists under many State laws where they do not allow a 
subrogation or lien against the entire award. And so we really 
do not think that those proposals are fair.
    There must be adequate funding to ensure the trust fund 
solvency, and essentially the major sources of concern for us 
have most immediately focused on the early years when the 
demands and the stresses on the system will be the greatest. 
Last year the Congressional Budget Office itself, in an 
estimate of 2290, estimated that in the first 6 years the cost 
of claims under that bill will be $56 billion. The awards 
values that we are talking about here are higher than that 
bill. So the estimates of CBO are essentially in the range of, 
you know, $56 billion in the first 6 years of the program.
    But we are concerned that those costs and claims 
projections are actually too low, and in one area alone, 
mesothelioma claims, the Government data, the most recent 
Government data show mesothelioma claims running essentially 30 
to 50 percent higher than those estimates. And these are not my 
figures. These are the latest data from the National Center for 
Health Statistics released this November, and I would like to 
put those in the record of the hearing because I think--
    Chairman Specter. Without objection, they will be made a 
part of the record.
    Ms. Seminario. I think it is very important that we base 
this on the best information we have. While there is a lot of 
uncertainty, let's use what we have.
    And related to that, last summer the Centers for Disease 
Control, again, put forward information on what is going on 
with deaths relates to asbestosis, and, again, I would like to 
put that in the record as well, so that we can base these 
decisions--
    Chairman Specter. Without objection, that will be made a 
part of the record as well.
    Ms. Seminario. So what we think is very, very important, 
that we use the information that we have, and that information 
indicates that the stresses on the system immediately will be 
very great. We think that we should fund to what is expected. 
We do not think that we should be looking at using borrowing 
authority to pay for what is expected. Borrowing authority may 
be useful to deal with what is unexpected, just the same way as 
we had a contingent call on 1125. But if we know the cost of 
this bill is $60 billion in the first 6 years, there should be 
$60 billion paid and not, you know, turning to a pool of money, 
because if the point is reducing transaction costs, we do not 
need to be paying a lot of money in interest. We need to be 
paying that money to the victims of this fund.
    Another area of concern is the preemption of the definition 
of asbestos claim in the bill. That definition actually changed 
from 1125 as reported out of committee to what is in 2290 to be 
much broader. S. 1125 basically said this bill was about 
personal injury claims for asbestos-related diseases. S. 2290 
now says that this is about any claim in the civil litigation 
system related directly, indirectly, derivative from, anything 
dealing with health effects of asbestos. We think that is far 
too broad and would have the unintended consequences of 
essentially preempting many actions that really should not be 
covered by this bill and for which there is no redress. So we 
do think that has to be looked at very carefully.
    Another issue of concern, transition to a new system. This 
is probably one of the most difficult and complex issues with 
respect to this fund. With the existing 600,000 pending claims, 
new claims being filed, new cases coming forward, there are 
many, many people that are involved, and we do not think the 
system should be set up so that people who are getting sick are 
essentially put in a new holding pen. They might have been in 
one already in the current system to wait while the system gets 
up and running. It is not fair to people who are sick to 
basically have to bear what essentially are the time costs in 
setting up a new system. We have to do better with respect to 
providing some redress for those people while the system is 
getting up and running.
    With respect to the sunset and reversion, I think with 
respect to the process that has been included in the draft in 
the bill, that is one that we have made progress on. But, 
again, we think if this does not work--and we hope it does 
work--that the system really has to go back to the status quo 
and not put in place a whole new set of rules because we do not 
see this as tort reform, we see this as--
    Chairman Specter. Ms. Seminario, could you summarize 
please? The red light is on.
    Ms. Seminario. Yes. Let me just say that, in conclusion, we 
do support the establishment of a national asbestos trust fund, 
but it must meet the basic principles that we have set forth. 
We cannot and will not support legislation that does not 
provide fair compensation to victims, but we do stand ready to 
work with Senators and other stakeholders on the outstanding 
issues to see if an agreement on fair asbestos compensation 
legislation can be reached.
    Thank you very much.
    [The prepared statement of Ms. Seminario appears as a 
submission for the record.]
    Chairman Specter. Thank you very much,
    Ms. Seminario.
    We now turn to Mr. Craig A. Berrington, Senior Vice 
President and General Counsel of the American Insurance 
Association. Prior to joining the AIA in 1986, he held several 
key positions at the Department of Labor, including Deputy 
Assistant Secretary for Employment Standards. He received the 
Phillip Arnold Award, the Labor Department's highest honor for 
distinguished public service. He has his law degree from 
Northwestern and is a graduate of the School of International 
Service at American University and has been a contributor and 
attendee of our marathon sessions.
    Welcome, Mr. Berrington, and we look forward to your 
testimony.

  STATEMENT OF CRAIG A. BERRINGTON, SENIOR VICE PRESIDENT AND 
 GENERAL COUNSEL, AMERICAN INSURANCE ASSOCIATION, WASHINGTON, 
                              D.C.

    Mr. Berrington. Thank you very much, Mr. Chairman. As 
noted, I am general counsel of the American Insurance 
Association, and my statement today is also on behalf of other 
insurance trade associations--the National Association of 
Mutual Insurance Companies, the Property Casualty Insurers 
Association of America, the Reinsurance Association of America, 
and the Independent Insurance Agents and Brokers of America. We 
very much appreciate this hearing, and it goes without saying 
we appreciate the extraordinary efforts that you and this 
Committee have made.
    In this connection, I echo what others have said, that we 
all owe a tremendous debt of gratitude to Judge Becker who has 
led his graduate seminar in asbestos litigation with equal 
measures of intellect, patience, and firmness, and whose 
masterful presentation this morning took everyone through the 
bill in an extraordinarily clear way.
    We have a written statement we would like to have submitted 
for the record, and I would like to make just a few conceptual 
comments.
    Chairman Specter. It will be made part of the record, 
without objection.
    Mr. Berrington. Thank you.
    As others have noted and as you, Mr. Chairman, stated with 
great force this morning, the current system of asbestos 
litigation has caused litigation chaos in the courts, massive 
economic dislocation to major sectors of the economy, great 
pressures on the insurance industry, and an extraordinarily 
expensive system of financial relief whose awards are often 
capricious, with a great majority of them going to people who 
are not sick. The United States Supreme Court has decried it 
but said that only Congress can fix it, as Judge Becker 
mentioned earlier.
    In the insurance industry, we are prepared to support any 
legislation that will work. We had initially focused on 
legislation like that introduced in the last Congress by 
Representative Cannon. The legislation would provide medical 
criteria for the courts to use in asbestos lawsuits and, in 
addition, would address a variety of other litigation abuses, 
including those caused by lawsuits being brought not in the 
usual manner, where the plaintiff resides or the defendant is 
located, but where a favorable court decision could be 
guaranteed.
    From the point that the Judiciary Committee decided to go 
the trust fund route, we have worked hard, along with all the 
other stakeholders, to make that approach work as well. At one 
point I think former Chairman Hatch referred to the effort--and 
it was referred to again this morning, I think perhaps by 
Senator Leahy--as this being the toughest litigation task that 
the Judiciary Committee had ever tackled. And I think we would 
all agree with that.
    As we have worked on the trust fund approach, we have tried 
to stress certain bright line tests that are critical to us. 
While any piece of trust fund legislation will be complex, that 
complexity is only exacerbated if these bright lines are not 
included.
    The essential bright line is that the amount of money that 
insurers put into the trust fund in the aggregate must be both 
certain and reasonable, and the money must pay for the system 
that is the exclusive place for resolving asbestos-related 
cases. Certainty comes in four ways:
    First, by having the amount specifically set forth in the 
bill to be paid pursuant to a reasonable schedule. I understand 
why it is not in the bill right now, but I want to emphasize 
that the $46 billion nominal in S. 2290 represents maximums, 
not floors, and does not reflect the payments, the very, very 
substantial payments that have been made through litigation in 
the bankruptcy system over the past 2 years.
    Second, the bill should make certain no litigation remains 
after the trust fund legislation is enacted. This is often 
referred to and has been this morning as ``the leakage 
problem.'' It may be leakage from the trust fund, but it could 
be a huge financial drain for insurers. In short, the trust 
fund, as I mentioned, must be the exclusive remedy for 
resolving asbestos claims from the day the President signs the 
bill, and all asbestos-related claims.
    Third, the bill should not include provisions that require 
some type of operational certification for the trust fund 
before the litigation can be fully shut down, and we very much 
appreciate the conversations that we have had about that over 
the last several days. We must all come to grips with this 
because while we clearly understand the desire, indeed the need 
to have the trust fund get organized and start operations 
quickly, the bill already has a full set of operational 
provisions to do that. If more authority is necessary, the bill 
should add it. But if the bill holds out the possibility that 
the litigation system can start up again if operational 
certification is not given to the trust fund, it will have 
perhaps inadvertently provided incentives for some to throw 
road blocks in the fund's path or to mount legal challenges 
even to any certification that is given. This will cause 
massive leakage problems and litigation over the certification 
itself.
    Fourth, if the bill is to include a litigation fail-safe 
system to kick in if the trust fund does run out of money, we 
believe there is no public policy justification, none 
whatsoever, for merely returning to the same litigation system 
that has been the vessel for all of the current problems. Thus, 
any such fail-safe system should, at the very least, place 
litigation in the Federal courts, not the State courts. Of 
course, a properly balanced law would be one where the 
possibility of the trust fund running out of money is very low 
because the fund's benefit payment system is well balanced with 
the fund's income.
    Beyond the bright line requirements, the bill presents 
numerous important policy choices, and I want to raise one red 
flag about one of them. And I was happy to hear that the issue 
again is being addressed, and that has to do with how we deal 
with smokers, if individuals have long smoking histories, in 
the trust fund. We want to make sure that the trust fund is not 
designed with failure built in, yet this is the implicit 
assumption that a return to the tort system is inevitable. The 
reason for that assumption is that many believe the Level VII 
cases will swamp the fund. In fact, that is why there is that 
separate carve-out to move them back to the tort system. And it 
is imperative to remember that, as Judge Becker mentioned 
earlier, the Level VII cases include those claimants who have 
smoked, have lung cancer, and while exposed to asbestos perhaps 
40 years ago, have never developed any underlying asbestos 
disease. A return to the tort system for these claims or 
because of these claims would be a function of eligibility 
criteria that will place on the fund a huge financial burden of 
compensating lung cancer generally rather than focusing on the 
compensation of lung cancer that was caused by asbestos 
exposure.
    If the fund is to compensation those whose illness is much 
more likely to be the result of smoking, then at the very least 
we believe that the award level should be determined 
accordingly so those awards in the aggregate do not threaten 
the fund's existence.
    Mr. Chairman, the insurance industry is committed to 
remaining at the table and to continuing our joint work toward 
a true and much needed resolution of our Nation's asbestos 
litigation crisis, whether through a properly constructed trust 
fund, as we are discussing today, or a medical criteria bill 
that directly addresses problems in the litigation system.
    As we have heard this morning, the continued impact of this 
crisis on the victims, the business community, and the economy 
calls for a solution now. We want to help work with the 
Committee to get that solution.
    Thank you.
    [The prepared statement of Mr. Berrington appears as a 
submission for the record.]
    Chairman Specter. Thank you. Thank you very much, Mr. 
Berrington.
    We turn now to Mr. Michael Forscey, who has been involved 
in the asbestos issue since the 1970s, both as a congressional 
legislative assistant and private attorney. He appears here 
today representing the trial lawyers, the Association of Trial 
Lawyers of America, on the asbestos issue. He has had a 
distinguished career as a staff assistant for the Senate Labor 
Committee from 1977 to 1980 and as chief minority counsel on 
the Human Resources Committee under Senator Kennedy from 1981 
to 1985 and worked as a legislative assistant to House Majority 
Whip John Brademas in the early 1980s. He has been a regular 
attender and a major contributor to our marathon sessions.
    Welcome today, Mr. Forscey, and we look forward to your 
testimony.

 STATEMENT OF MICHAEL FORSCEY, ON BEHALF OF THE ASSOCIATION OF 
           TRIAL LAWYERS OF AMERICA, WASHINGTON, D.C.

    Mr. Forscey. Thank you, Mr. Chairman and members of the 
Committee. I am appearing here today on behalf of the 
Association of Trial Lawyers of America. I have represented 
ATLA in the discussions conducted by Judge Becker pertaining to 
the establishment of a trust fund to pay asbestos claims.
    ATLA members represent the vast majority of the 500,000 
existing victims who would lose--in an unprecedented fashion--
their constitutional right to a jury trial under this Act. 
These victims have filed claims in good faith under the 
prevailing law for which they can expect to obtain substantial 
recovery in the courts. In our view, to radically change the 
rules governing the adjudication of these claims now is 
inherently unfair. We, therefore, deeply appreciate your 
willingness to listen to our views and to include us in the 
discussions that this Committee has sponsored and that Judge 
Becker has facilitated over the past several months.
    At the outset, let me say that I believe no organization or 
lawyer should oppose the theoretical possibility of a trust 
fund that would provide fair compensation, paid promptly, to 
the approximately million and a half of our fellow citizens who 
will develop asbestos disease in the future. ATLA has always 
said it could support a fully funded trust fund that would 
guarantee payment to future victims.
    We believe that Judge Becker's involvement in this 
negotiation has produced a number of improvements that have 
moved us closer to the goal of a fair resolution for victims.
    First and foremost, the current--and I emphasize ``the 
current''--draft brings us much closer to both the language and 
the intent of the Biden amendment than does S. 2290. The Biden 
amendment, as we see it, has always been a critical incentive 
to achieve guaranteed funding, not an excuse to avoid it.
    Second, Judge Becker's recognition that a 2-percent 
attorney fee is inadequate to ensure legal representation for 
claimants is also an improvement over earlier drafts, although 
we do not agree that we should retain the administrative 
discretion that is in the current draft.
    Third, Judge Becker's proposal to increase award values is 
another welcome development.
    Fourth, we believe that a medical screening and monitoring 
program is the least that Congress should provide to victims 
whose established right to compensation is being taken away. We 
believe this program should be fully funded.
    Finally, we appreciate the judge's decision to remove a 
confusing provision that would have moved claims stayed under 
the bill back and forth between the tort system and the trust 
with no prospect of quick resolution.
    However, many other improvements represent compromises 
which go only partway toward correcting the flaws of S. 2290. 
We remain convinced that the inflexibility shown by some of the 
other stakeholders on several key issues will need to change if 
a balanced package is to be produced through the negotiating 
process.
    It is important to remember that the public health crisis 
caused by asbestos is real and continues to grow. When asbestos 
legislation was first considered by the Judiciary Committee 
last year, many Senators had been led to believe that few 
workers were still getting sick from asbestos exposure. Recent 
evidence, as Ms. Seminario pointed out, proves otherwise.
    All told, over 300,000 U.S. workers have died because of 
exposure to asbestos, and approximately 10,000 people die each 
year from asbestos-related diseases. Epidemiologists, as Ms. 
Seminario pointed out, expect these trends to continue for 
decades, not decline.
    The money necessary to fairly compensate these victims for 
the harm caused by asbestos manufacturers is obviously 
daunting. We believe the cost of compensating victims is 
clearly greater than $140 billion and could approach $200 
billion. In the first 5 years, if all pending claims are forced 
through the fund, at least $60 billion will be necessary. If 
borrowed funds are used to pay pending claims, as is currently 
envisioned, required interest payments on these funds will 
deplete the money available to pay benefits by as much a 25 
percent. Unless legislative proposals include guarantees of 
funding at substantial levels, the proposed asbestos trust will 
fail.
    Thus, while the draft circulated by Judge Becker includes 
several proposed changes that we support, the central issue of 
financing--who pays and how much--is far from resolution. It 
seems unreasonable to move forward without a resolution to this 
issue that is grounded in sound claims estimates. We believe 
this issue has remained unresolved largely because the 
manufacturers and insurers have insisted on artificially low 
liability caps. Such caps render unreasonable a demand that all 
pending claims be forced into an administrative system that 
does not yet exist and that will likely not be operational for 
18 months even under the best of circumstances.
    The demand that all pending claims be resolved by the trust 
fund is at the heart of many of the unresolved issues with 
which this Committee continues to struggle: up-front funding, 
administrative gridlock, and reversion to the tort system. 
Forcing the pending claims into the fund also produces a 
substantial cost shift, away from those with vast current 
liability to those with relatively few current claims, as this 
Committee is just beginning to learn. Manufacturers and 
insurers have objected to honoring many settlement agreements 
into which they have voluntarily entered--agreements to pay 
specific sums to specific victims which, if honored, would 
significantly reduce the front-end funding needed for the bill 
and would greatly improve the fairness of the draft. Finally, 
these same defendants and insurers have unfairly insisted on 
forcing into the fund even those cases that have produced a 
judgment and an award, forcing claimants to start anew if that 
judgment is appealable. And we are pleased to see that the 
draft that was released last night appears to correct that 
problem, and we thank Judge Becker for that.
    We are also concerned that the Department of Labor will not 
be able to process claims at the rate envisioned by the bill. 
We know from experience with other Government compensation 
programs that claims projections have historically been low. We 
also know that it is unrealistic to assume this program can be 
up and running in 90 days. Substantial delays have plagued both 
the black lung compensation program and the recent Energy 
Employees Compensation Act. These two programs are only a 
fraction of the size of this trust. The Committee must solicit 
the Department of Labor's views, in our view, on whether or not 
it can do what it is being asked to do. If the Department of 
Labor cannot get this program running in a matter of months, 
then Congress should not, as a matter of fundamental fairness, 
including the pending claims in the trust.
    I am going to skip over a couple things, and I want to say 
finally one thing about the mixed dust cases. We do not think 
there is any evidence that mixed dust cases burden the courts, 
are not fairly resolved, or require Federal intervention. We 
think the legislation should not address these cases with 
legislative language.
    Also, as to mesothelioma values, while the claims values in 
the latest draft are an improvement, we think that and we would 
propose that meso claims be compensated at a rate of $1.8 
million, which is the average death benefit paid by the 
September 11th Fund.
    In the past, compensation programs have been designed to 
provide a benefit to victims of harm when the courts have 
failed to do so. We do not believe Congress has ever before 
adopted a compensation program that takes away from victims an 
established right to obtain compensation in the courts. As we 
move forward, we should not lose sight of the fact that in this 
case we are preserving not creating the right to compensation 
for asbestos victims.
    Thank you very much.
    [The prepared statement of Mr. Forscey appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Mr. Forscey.
    We now turn to Ms. Mary Lou Keener, the daughter of a 
mesothelioma victim who contracted this deadly illness while 
serving as a machinist mate in the United States Navy during 
World War II. Ms. Keener's father, who spent many hours in the 
engine rooms and boiler working on miles of pipes and fittings, 
ultimately succumbed to mesothelioma on Veterans Day 2001. And 
we will be hearing from two relatives of victims today, and I 
would underscore what Ms. Seminario had said, that when we talk 
about crises, we are talking about an occupational disease 
crisis.
    Thank you for joining us, Ms. Keener, and we look forward 
to your testimony.

         STATEMENT OF MARY LOU KEENER, MCLEAN, VIRGINIA

    Ms. Keener. Chairman Specter, Ranking Member Leahy, and 
members of the Committee, I am honored by this opportunity to 
appear before you here today and tell you about my dad's battle 
with asbestos-related disease and his untimely death from 
mesothelioma.
    Following my dad's death, my family's personal experience 
in dealing with the current asbestos litigation system has not 
been a positive one, and it is my hope that by sharing this 
experience with you, the importance of your efforts to 
establish an asbestos injury compensation fund will become 
apparent.
    My dad and I had a very special bond. We were both Navy 
veterans. I served as a Navy nurse in Vietnam, and he served as 
a machinist mate during World War II. During his service, he 
was on three different Navy ships, and two of those ships were 
literally blown up underneath him. And because, as you 
indicated, Mr. Chairman, he worked down in the engine room, 
there was really no doubt about the fact that he was exposed to 
significant amounts of asbestos.
    In addition to having those two ships literally hit and 
blown up underneath him, he rode one of those ships back to the 
West Coast and worked in the shipyard to help in repairing that 
ship for several months.
    Now, we all know, it is well documented that Navy ships 
then and even today still contain significant amounts of 
asbestos. It was literally almost more than 50 years after his 
service in the Navy--it was about April of 2001 that he first 
began to experience some pain under his shoulder on the right 
side. My dad and my mom came from Michigan to the D.C. area 
where they spent about 2 months with my husband and I, where he 
was seen and cared for at the National Cancer Institute at the 
National Institutes of Health in Bethesda.
    It was there that after two months of driving back and 
forth each day on the Beltway, day after day for test after 
test, that he was diagnosed with stage 3 mesothelioma. After 
that diagnosis, he decided he wanted to go back home, where he 
underwent six weeks, five days a week, of radiation therapy in 
northern Michigan. He was too weak to undergo chemotherapy, and 
as he probably would have wanted it if he could have chosen, it 
was, as you said, on November 11th, Veterans Day, of 2001, that 
he died a very painful death from mesothelioma.
    After my dad's death, because in my second life I was a 
lawyer, I was able to help my mother navigate all the 
regulatory and legal issues that she had to deal with. Of 
course, my dad's passing was so quick, six months from 
beginning to end, that we really never even thought about 
trying to pursue any type of compensation. All we wanted to do 
was make sure that he was cared for and had a good quality of 
life.
    After his death, as I said, I was able to help my mom 
because I am also a veteran and very familiar with Department 
of Veterans Affairs benefits. I was able to help her file a 
DIC, a Dependent Indemnity Compensation claim, to receive 
service-connected death benefits because of my dad's death from 
mesothelioma due to exposure while he was in the Navy.
    Then I helped my mom file a lawsuit with a plaintiffs law 
firm. That was in April of 2002. That was almost three years 
ago, and to this date her claim has not moved forward at all. 
Her claim is standing in line behind hundreds of claims of 
unimpaired victims. Nothing has happened, and that is just not 
fair.
    As was mentioned before, there are very few viable, solvent 
defendants left in these cases. The law firm tells us that 
there are possibly 60 defendants in her case. Of these 60 
defendants, 7 of them may be solvent; the remainder are all 
bankrupt. To date, my mother has received about three 
settlement checks from bankrupt defendants to the tune of 
pennies on the dollar from bankrupt defendants.
    Unfortunately, my dad's story is just one of thousands like 
it in the veteran community. A Wall Street Journal article 
reported that claims from individuals exposed in military 
service and shipyard construction account for 26 percent of all 
mesothelioma claims, 16 percent of all lung cancer claims, and 
13 percent of all asbestosis and other disabling lung disease 
cases.
    Very few of these men and women who served in the military 
and were unknowingly exposed to asbestos as part of their 
service are receiving the compensation that they so rightfully 
deserve under this current system. The courts are so logjammed 
that they simply cannot provide compensation to the truly sick 
in a fair and a timely manner. The true victims of asbestos-
related disease need to be compensated now, not years from now, 
in the current system.
    For these and for many other reasons, I am so proud to join 
with my many friends in the veterans community in supporting 
this trust fund solution. Currently, there are 16 national 
veteran service organizations supporting a trust fund solution 
to the current asbestos litigation crisis. Some of these 
organizations are the Veterans of Foreign Wars, the Non-
Commissioned Officers Association, the Military Order of the 
Purple Heart, the Jewish War Veterans, and many others, 
including numerous State-based veterans organizations. These 
groups comprise hundreds of thousands of veterans across this 
country that are supporting the trust fund solution.
    The names of all these veterans service organizations are 
included in my written statement, which I respectfully submit 
in its entirety for today's hearing record, and I look forward 
to answering any questions that you may have, Senator.
    [The prepared statement of Ms. Keener appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Ms. Keener.
    We now turn to Mr. Billie Speicher, a 67-year-old former 
Marine and pipefitter-steamfitter, who spent most of his career 
in Southern California oil refineries. He was exposed to 
asbestos as an aircraft mechanic in the Marine Corps in the 
1950s and as a pipefitter. He suffers from mesothelioma and 
asbestosis and has a pending asbestos tort claim.
    Thank you for joining us, Mr. Speicher, and the floor is 
yours.

       STATEMENT OF BILLIE SPEICHER, ONTARIO, CALIFORNIA

    Mr. Speicher. Good morning. My name is Billie Speicher and 
I appreciate the chance to talk to you today about the asbestos 
bill you have been working on.
    I am here today for three reasons, to speak up for the men 
that used to work side by side with me who someday will have to 
live through what I am going through now. I want to speak for 
my family, and I would like to urge more research into the 
cancer that has changed my life.
    I have mesothelioma. I don't have to tell you what that 
means because you have been there long enough. It is a deadly 
cancer, and by all rights I should only have a few months left. 
I was exposed as an aircraft mechanic for the Marine Corps in 
1950, and a pipefitter from 1965 until 1999. And looking back, 
I can't think of two more dangerous lines of work, although 
none of us knew it then. No one told my buddies and me that 
asbestos could kill you.
    Working on airplane brakes and insulation, and later in 
refineries and duster shops knocking off pipe insulation and 
installing and removing pipes and valves, cutting asbestos 
cement pipe, asbestos was everywhere. It was all over me and 
all over everybody who worked there.
    I got the bad news mailed first. At first, the doctor I was 
seeing for two years kept telling me I had asthma, even though 
I had a CAT scan that showed my lungs were scarred with 
asbestos. Finally, the fluid built up so much in my lungs that 
they realized that I had asbestosis, stage 3. Now, I am living 
with a lot of pain and I can barely get my breath sometimes. I 
can't hardly sleep at night.
    You know that mesothelioma is a death sentence--one year, 
18 months, tops. That is all they give you and that is all they 
gave me. Well, I am still alive and kicking today because of 
one thing, an experimental drug called Veglin that was 
discovered by Dr. Gill. I started getting the Veglin shots 
about four months after my diagnosis, and so far it has stopped 
me from getting any new tumors.
    You can probably figure out that these new experimental 
medicines like Veglin are very expensive. They are the reason I 
want to talk to you about the bill you are thinking about here 
in the Senate.
    I filed a workman's comp claim in my home State of 
California to help cover my medical expenses. The lawyers who 
handled this case tell me that since I have meso, I will most 
likely receive the maximum level of benefits under State law 
for permanent total disability medical benefits because I have 
meso and a death benefit. I am not sure how much--somewhere 
between $200 and $300,000. I also have a court case coming up 
and the trial date is set for February 22 of this year.
    Now, I have followed this bill we are talking about since I 
got meso, and I have to say that I don't like the idea of it. I 
am no legal expert, but to me the jury system in our country is 
about as important as it gets, and I just don't think it is 
right to take those rights away from people, which I feel this 
proposal will do.
    I don't want to be rude because you invited me here today, 
so I am going to do something with this new trust fund. There 
are a couple of things I hope you keep in mind. For one thing, 
if you would put this thing into law today, that would wipe out 
my trial rights. Even if I go to court before that and win a 
settlement, you get this thing passed by summer and it all goes 
away and it would be like I never got my day in court.
    I would have to start all over again and go into this trust 
fund that is supposed to be set up in about a year that I don't 
have. I don't want to be disrespectful, but I was in the 
Marines. Except for war, I don't think the Government does 
anything very fast. The thing is I don't have a lot of time. 
And you may not know it, but I live in California where folks 
like me with meso get put at the head of the line in a court 
case.
    Now, I don't want anybody thinking I came up here with my 
hand out or saying ``show me the money,'' because that is not 
what I care about. I need help with my medical bills. Those 
Veglin shots are keeping me alive, and they are the only thing 
that is keeping me alive.
    Second, I want to make sure my family is taken care of--my 
wife and my kids and the most beautiful granddaughter you have 
ever seen. This costs a lot of money to keep me alive and it 
will cost a whole bunch more. I don't want my family stuck with 
a pile of debts after I am gone. I am telling you right now 
that causes me as much pain as the cancer that is eating inside 
of me, in my body.
    Finally, I want to say a word about research and the guys I 
used to work with. I am here to speak for them, not just the 
guys who busted pipe and asbestos with me, but the hundreds of 
thousands of guys all over the country who did it for years and 
may still be doing it today because, you know, asbestos is 
still out there in the construction trade and the buildings. 
The construction workers are exposed to asbestos whenever they 
do renovations.
    You also know that everyday another worker is diagnosed 
with meso or some other asbestos-related disease, and many more 
will keep on coming in the future. So whatever you do, you have 
to make it work for them, and you also have to do something to 
help with the research to find a cure for this disease. I don't 
know if you put any money in the bill to help that, but you 
ought to, and you ought to do even if the Federal Government 
has to pay for it.
    Now, I know that that doesn't go over too good, as we are 
in a war with a big deficit. But the plain truth is the 
Government had a lot to do with exposing guys like me to 
asbestos. I got my first taste of it working on airplanes in 
the Marine Corps. A whole lot of veterans got their first 
exposure to asbestos serving their country.
    So I would just like to close by saying I hope you do the 
right thing by us when you finish writing this bill, and I hope 
you are thinking about all the workers in the future like me 
who are going to hear the same thing I did last May that they 
only have about one year left to live. Let's find a cure for 
mesothelioma. We know it is going to still be killing people 
for years and years, so let's do something about it.
    Thank you.
    [The prepared statement of Mr. Speicher appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Mr. Speicher, for 
sharing with us your own situation, and we see the difficulty 
of your testimony. We very much appreciate your being here and 
presenting your views.
    Our final witness is Mr. Jeff Robinson, who is a partner 
with the law firm of Baach, Robinson and Lewis. He is a 
graduate of Lafayette College, summa cum laude, and Yale Law 
School; served as Deputy Assistant Attorney General for the 
Department of Justice and did extensive work on this Committee, 
working for me many years ago. He has been an adjunct professor 
of law at Georgetown. He has been an active participant in our 
marathon sessions.
    We welcome you here today as a witness, Mr. Robinson, and 
look forward to your testimony.

STATEMENT OF JEFFREY D. ROBINSON, BAACH ROBINSON & LEWIS PLLC, 
                        WASHINGTON, D.C.


    Mr. Robinson. Thank you, Chairman Specter, Senator Leahy. I 
am here today on behalf of Equitas, which is an English company 
which is responsible for the pre-1993 liabilities of Lloyd's of 
London. Those include the asbestos liabilities.

    Although a foreign company and in the position to avoid 
this, Equitas is keenly aware and supportive of efforts to find 
a legislative solution to the asbestos issue. Some of the 
allocations which have been done suggest that Equitas could be 
one of, if not the single largest contributor to the asbestos 
compensation fund.

    I want to start by expressing our appreciation to you, Mr. 
Chairman, Senator Leahy, former Chairman Hatch and the other 
members of the Committee who have worked so hard during the 
past two Congresses to address the issue of asbestos litigation 
reform. Without that difficult and intense work, we would not 
be here today with the opportunity to enact historic 
legislation.

    Like everyone else, I would also like to thank Judge Becker 
for his work during the last two years. He has forced agreement 
which makes the possibility of legislation a reality.

    Many years ago, Equitas recognized that tremendous growth 
in claims from unimpaired individuals threatened to overwhelm 
the ability of the existing tort system to compensate those who 
were truly injured by exposure to asbestos. This flood of 
claims also threatened the financial viability of numerous 
defendant companies and their insurers.

    Equitas has done what it can as a single company to resist 
claims from the unimpaired and has had some success in this 
regard, but it has become obvious that no single company or 
group of companies can solve this problem through their own 
actions. A legislative solution is required.

    Equitas actively supports efforts to obtain comprehensive 
legislative reform of the asbestos litigation system. We are 
not wedded to a particular approach and do not insist upon 
particular provisions in legislation. What we have also asked 
is that any legislation be effective at addressing the abuses 
in the current system and fair to all the participants--the 
claimants, defendants and insurers.

    Unfortunately, various provisions in the current discussion 
draft render it ineffective and unfair in some respects. My 
comments today are focused on Title II, the subtitle related to 
the Asbestos Insurers Commission.

    Insurers are expected to provide upwards of $46 billion in 
funding for the proposed trust fund. It should be noted that 
that $46 billion figure was reached almost two years ago. 
Equitas, like others in the insurance industry, has spent 
considerable amounts resolving claims during that period, 
significantly reducing our future liabilities for asbestos 
claims.

    Despite repeated promises to do so, insurers have not 
presented a formula specifying how contributions would be 
calculated that could be set forth in the statute. As a result, 
the Asbestos Insurers Commission will be charged with the 
critical task for ensuring that the insurers' contribution is 
collected and allocated amongst the various insurers and 
reinsurers who will be participants. Despite that critical 
function, the current discussion draft handcuffs the 
commission, severely limiting its ability to obtain the 
required amounts through a fair process.

    First and foremost, the discussion draft does not ensure 
that the members of the commission will be free of actual or 
perceived conflicts of interest when they perform their 
sensitive task of allocating contributions amongst insurers.

    As currently designed, an officer or employee of an insurer 
participant could leave his or her job one day and the next be 
in charge of allocating billions of dollars amongst his or her 
former employer and its competitors. While it may be acceptable 
in some circumstances for a former employee or party to sit in 
judgment on matters of interest to that party, where the matter 
involves an allocation of enormous financial liabilities 
amongst the former employee's principal and its competitors, it 
is patently unacceptable, with or without disclosure.

    The commission members should be subject to no less of a 
test than are judges, who would clearly be required to recuse 
themselves from deciding a case of this magnitude involving 
their former employer. The appearance of impropriety would 
compel it. Imagine the consternation and mistrust you would 
feel if you learned that your company had been assessed $1 
billion more than you anticipated by a commission led by the 
former CEO of your major competitor. No one would accept such a 
result from a court and it should not be accepted here.

    Second, the discussion draft contains a provision allowing 
groups of insurers and reinsurers to circumvent the work of the 
commission and shield themselves from the commission's review 
by concluding private agreements regarding allocation.

    Remarkably, the provision provides that all of the 
authority of the commission terminates with respect to insurers 
who are parties to such an agreement. This provision should be 
rejected. The provision undermines the entire role of the 
commission. If an independent commission applying a fair and 
transparent methodology to determining insurer shares is an 
appropriate and important exercise, it is appropriate for all 
participants.

    Second, the provision is discriminatory because it permits 
domestic and foreign insurers and reinsurers to form alliances 
to enter into such agreements, but inexplicably precludes 
companies such as Equitas from participating in such 
agreements.

    There has been much back-and-forth, as Judge Becker knows, 
concerning the shape of the asbestos commission. We are keenly 
concerned about it because under any version of the bill, our 
liability will be determined by the asbestos commission. Others 
who express interest in how the asbestos commission works go on 
to say that, in their desired world, they will never be subject 
to it because they will reach an agreement that terminates the 
commission's jurisdiction with respect to them.

    Finally, Equitas is particularly concerned about a 
provision targeted only at it that would deny the commission 
the ability to grant Equitas meaningful financial hardship or 
exceptional circumstances adjustments, adjustments that could 
be granted to all other insurers and reinsurers.

    Under the terms of the bill, insurers and reinsurers can 
obtain an adjustment that reduces their payment obligation to 
the fund if payment without such adjustment would threaten the 
solvency of the company, be exceptionally inequitable, or fail 
to account for other payments the insurer was required to make. 
This is very similar to the provision which are contained for 
defendant companies.

    To keep the fund whole in the event of such an adjustment, 
the amount of the adjustment must be paid into the fund by the 
remaining insurer contributors based upon their proportionate 
shares of payment to the fund, again as is the case with 
defendant companies.

    Although the bill allows Equitas to receive such an 
adjustment, it then discriminates against Equitas by applying 
to it and to no other insurance participant a provision that 
would nullify any such adjustment. The provision would require 
that the parties reinsured by Equitas make a payment to the 
fund in the amount of any adjustment granted to Equitas, 
thereby giving with one hand and taking way with the other.

    This provision could lead to the following absurd result. 
The commission determines that the formula it has adopted 
substantially overcharges Equitas because Equitas would be 
faced with fewer liabilities in the existing tort system. The 
commission then grants an adjustment to Equitas, but the 
parties whom Equitas reinsures would then be required to pay 
back to the commission the amount of the adjustment, even 
though it has been determined to be inequitable. That situation 
would arise with no other reinsurer, whether they could make 
their payments or whether--if they could not make their 
payments or if they got a hardship adjustment, the amounts are 
reallocated around the entire insurance community. But for 
Equitas, it is targeted back only on those people whom it 
reinsures.

    It is simply wrong to treat one identified participant 
differently from all others, and it is also foolhardy. This 
discriminatory principle may make it impossible for Equitas to 
make a substantial contribution to the fund. It engenders some 
concern from the UK government and others about whether or not 
we are treating all foreign companies in the same way that we 
are treating American companies.

    In conclusion, Mr. Chairman, we applaud you for taking up 
the critical but difficult issue of asbestos litigation reform. 
The discussion draft presented represents an important next 
step in the process, but it is a step hindered by some 
correctable errors. Absent steps to address these identified 
failings, this legislation will be neither effective nor fair. 
Taking these steps will go a long toward creating legislation 
that can resolve the asbestos litigation crisis facing the 
Nation.

    On behalf of Equitas, we pledge our continued cooperation 
with the Committee in formulating an effective and fair reform 
of the asbestos litigation crisis. Mr. Chairman, I have a 
statement which I ask, like the others, be included for the 
record, and I thank you for inviting us here today.

    Chairman Specter. Your statement, without objection, will 
be included for the record. Thank you very much, Mr. Robinson.

    [The prepared statement of Mr. Robinson appears as a 
submission for the record.]

    Chairman Specter. Mr. Speicher, your testimony was very 
compelling. When you talk about finding a cure for mesothelioma 
and cancer-related ailments, I serve on the subcommittee of 
Appropriations--actually, chair it--Labor, Health, Human 
Services and Education. We have allocated some $28 billion for 
National Institutes of Health research, and the cancer fund is 
right at the $5 billion level. So there are very, very 
substantial efforts being made, but I will take another look to 
see what the National Center Institute is handling on 
asbestosis and mesothelioma, and see if more could be done 
there.

    Ms. Keener, thank you for your testimony on your father, 
who was a victim, and we note the problem which you have 
identified where your mother's claim is not moving forward 
because so many people are getting compensation and are in 
court where they have no disabilities. Governor Engler 
mentioned that as well, and that is one thing this bill is 
going to change.

    The Supreme Court of the United States handed down that 
ruling. It was sort of inexplicable that they handed it down, 
but they do that from time to time. One of the things that the 
Judiciary Committee is going to be taking a close look at is 
more of the judgments which Congress can correct, and that is 
one which we can deal with.

    I was pleased to hear the level of support for the trust 
fund from Governor Engler and Ms. Seminario and Mr. Forscey, 
although Mr. Forscey has substantial reservations about many 
provisions.

    Mr. Berrington, you raise the issue of the medical criteria 
bill. Now, the medical criteria bill pops up from time to time. 
Would you like to see us put the trust fund in the back burner 
and pick up a medical criteria bill--

    Mr. Berrington. We would like to work with--

    Chairman Specter. --for the next 5, 10, 15 years?

    Mr. Berrington. I am glad you finished that sentence.

    Chairman Specter. Well, I didn't want there to be any doubt 
as to my view of the medical criteria bill, but it is out there 
in the nimbus; it is out there in the clouds. Even the eminence 
of Judge Becker cannot produce a perfect bill. He just can't do 
it, and it greatly disappoints me that he hasn't done it.

    But do you seriously think we ought to start looking for 
alternatives like the medical criteria bill?

    Mr. Berrington. We want to work with the Committee on what 
the Committee believes is the best way to proceed to get a 
resolution to this issue. And if we can do it through a good 
trust fund, let's do it. But if that turns out not to be 
possible, let's continue to work on the issue and find another 
approach.

    Chairman Specter. Well, this Senator thinks that the trust 
fund is the best idea and I would hate to see us go back to 
ground zero. After the kind of effort which the Congress has 
put into this, it would be very hard to contemplate the kind of 
drive being duplicated on this issue which has happened in the 
past several years, with Senator Hatch and Senator Leahy as 
Chairman and Ranking--Senator Leahy conducted hearings when he 
was Chairman--to go back there.

    I am pleased to have heard the comments about improvements, 
and Mr. Forscey has been a regular attender and has grave 
reservations about taking away the right to jury trials, 
frankly, as I do. But we have tried to provide the safeguards 
and the safety valves with the reversion, and we have heard the 
concerns about the reversion which Governor Engler has 
articulated.

    And then you have the Level VII on smokers and non-smokers, 
smokers, ex-smokers, non-smokers, and lung cancer I. Governor 
Engler doesn't want this to be a smokers' bill, and Ms. 
Seminario brought up the issue that the figure is too low and 
it is synergistic. I was glad to hear about synergism between--
or interested to hear--maybe not glad to hear about it, but 
interested to hear.

    But on this table, Judge Becker and I did precious little 
with it. It came to us pretty much in this form. Judge Becker 
has been very patient and has sat at the witness table for more 
than an hour.

    Judge Becker, on the individual evaluation as to number 
VII--and this sort of points up the problem that we have on 
different points of view--the smokers get $75,000, the ex-
smokers $200,000, the non-smokers $625,000. Can you give us the 
genesis or origin of these amounts of money?

    Judge Becker. Well, the 625 for the non-smokers is Frist, 
Daschle and Feinstein. Everybody is agreed on that. I mean, 
those four parties agreed on 625 for the non-smokers, on the 
theory that if they had 15 years of weighted exposure, even 
though they had no absolute asbestos-related symptoms, the 
causality question would likely, if they were not non-smokers, 
be resolved in their favor. Hence, the $625,000.

    The smokers, although--well, with respect to the ex-
smokers, which is the big difference--

    Chairman Specter. Where did that figure come from, Judge 
Becker, if you know?

    Judge Becker. Well, basically, I mean, Senator, all of 
these are arbitrary. They are, I trust, reasonably arbitrary.

    Chairman Specter. Who put the arbitrary figure on them, if 
you know?

    Judge Becker. The answer is I don't know. Senator Frist put 
one figure on, Senator Daschle put one on, Senator Feinstein 
put one on, and we kind of compromised it and we kind of split 
the difference. But what we put on was much less than the Labor 
or the Daschle offer, and significantly less than the Feinstein 
offer. It was a little more than the Frist offer just with a 
view to sweetening it a little and maybe cutting the baby in 
half and seeing if everybody could be satisfied.

    With respect to the smokers, we were very close to the 
Frist offer and significantly below the Daschle offer, on the 
theory that the smokers, as appears to be the case in the tort 
system, are going to have a difficult time proving causation. 
So by and large, what we did was kind of a sweetener, by not by 
much, to see if we could get everybody's agreement. I don't 
know that we have.

    Chairman Specter. Governor Engler, you have talked about 
the medical screening and I would like you to take a look at 
that, and Pat Hanlon behind you, if there is any language that 
you would like to see us delineate more precisely to avoid 
opening the flood gates, which I understand is your concern.

    Ms. Seminario, you have raised the issue about the 
definition of asbestos being too broad. If you have an idea on 
that, we are glad to entertain it further.

    I was pleased to hear you say, Mr. Forscey, that the 
current draft is a big improvement on the reversion. And, 
again, we are open to further suggestions. We are working with 
Mr. Berrington on the avoidance of the leakage on the short 
amount of time afterwards. So we are still prepared.

    Mr. Robinson, your issue we have taken up with you 
individually. We have given you a lot of attention. That is one 
thing that Judge Becker and I have done. You wanted to be a 
witness and we are glad to have you in as a witness, although 
you have a very fine point. But I don't like the idea of 
conflict of interest and discrimination, and if you give us 
language, we will consider it.

    Senator Leahy, my yellow light is about to expire into red.

    Senator Leahy. Mr. Chairman, I appreciate the way the time 
goes. I have served on a lot of committees, as you have, and 
have Chaired a number, as you have. Sometimes, it is fault, 
sometimes it isn't. But there just being the two of us here, I 
would certainly have no objection if you need more time.

    Chairman Specter. Well, I do need more time, but we have 
done a rather thorough job here and I am going to observe my 
time limit.

    Senator Leahy. Thank you. Mr. Chairman, some of this I am 
going to have to submit for the record just because of time 
constraints and because I am also supposed to be somewhere else 
at the moment.

    Mr. Berrington, I was puzzled, actually concerned by your 
testimony. You know, everybody here is dealing in good faith. 
The manufacturers have. I think we have been fortunate in 
having Governor Engler here, a person who, in his former career 
as governor, had to balance certainly in his State some of the 
most unbelievable, conflicting groups, and balanced them very 
well.

    He had to deal with the legislature. He had to deal with 
all the problems of a major State, one with a huge industrial 
base as it transitions into an entirely different time. And I 
say this very honestly. I think, Governor, you did that in a 
way that very few people could have.

    But we are here now in the realities, Mr. Berrington. You 
speak of the criteria bill. With all of the discussions, the 
hours and hours of work on this, the huge amount of lobbying--
and I can almost hear the meters whirring in this room with 
those who are not here totally on their own nickel, as Judge 
Becker is.

    The idea of a criteria bill--you know, in the last Congress 
there was only one sponsor of the criteria bill and one 
cosponsor, and now the sponsor has retired from the Senate. 
Now, we are not going to get anything through that doesn't have 
both Republican and Democratic support. It is going to need 
that to get passed. I believe it can be done, but let's not 
waste time on something that could only get one cosponsor last 
time and one sponsor, especially when that sponsor has retired.

    Now, Mr. Speicher and Ms. Keener, I thank you for your 
military service. Ms. Keener, I hope you understand the 
gratitude of all of us for your father's service, and yours, 
and our condolences on his death.

    Mr. Speicher, my youngest son is a former Marine, and so 
there is always a special part in my heart for Marines.

    Ms. Keener, before you feel that somehow that leaves you 
out, my wife is a nurse. So we are covering all the bases.

    But in your cases--Ms. Keener, in your father's case, and, 
Mr. Speicher, in yours, the exposure to asbestos was in service 
to your country. Many veterans are now sick, as you have 
pointed out, Mr. Speicher and Ms. Keener, with asbestos disease 
as a result of their exposure during service.

    Would you think that the Federal Government should be 
providing contributions either directly or through tax 
incentives to provide more funding to a national trust fund 
because of the number of veterans who are going to be affected 
by this? Do either one of you want to answer?

    Mr. Speicher. The research for mesothelioma which I 
appreciate you addressing was addressed as a cancer grant, and 
the thing with mesothelioma is there weren't enough of us and 
it was kind of pushed over to the side and they tried 
everything else because all the chemos and everything that work 
for other cancers just don't do this.

    So this is the reason I say we need more research in 
mesothelioma. The research that was done there by Dr. Gill is 
the reason I am able to sit here today, and somebody had to 
fund it. It was the Mesothelioma Foundation there at Norris.

    Senator Leahy. Ms. Keener.

    Ms. Keener. No, sir, I am not advocating any Government 
expense, but I do have a question perhaps of Judge Becker. In 
the prior bill, there were several provisions in 1125 and 2290 
that provided specific advantages for veterans in the bill.

    Also, Mr. Speicher, in that bill there was one provision 
that provided $1 million from the fund for each of the fiscal 
years 2004 through 2007 for up to ten mesothelioma disease, 
research and treatment centers. And I guess my question is I am 
hoping that those provisions are or will be included in this 
current draft.

    Judge Becker. If I may respond, Senator Leahy, Section 
222(c)(1) of the bill, on page 79 of the new bill, entitled 
``Mesothelioma Research and Treatment Centers,'' provides that 
the administrator shall provide $1 million from the fund for 
each of the fiscal years 2005 through 2009 for each of up to 
ten mesothelioma disease research and treatment centers. It 
provides that the centers shall be chosen by the Director of 
NIH, chosen through competitive review, et cetera. So that 
provision remains in the bill.

    Senator Leahy. Ms. Seminario, I know you watched this very 
carefully. I mean, at the AFL-CIO, there are thousands of your 
members who have been exposed to asbestos during the course of 
their occupations. You have been a strong advocate for victims, 
I know, from the work with Judge Becker. You are an expert on 
occupational safety and health.

    Let me ask you this question. Last October, Congress passed 
and the President signed into law legislation transferring the 
Energy Employees Occupational Injury Program from the Energy 
Department to the Labor Department. What kind of lessons can we 
learn from the Energy workers Federal comp program? Especially, 
I am thinking of difficulties approving claims, but also 
getting past bottlenecks, because we are talking about some 
time constraints for a lot of the people who are affected by 
this.

    Ms. Seminario. I think there are a number of lessons to be 
learned. The Energy workers program was one which was actually 
a relatively small program. It was to compensate those 
individuals who had worked in the DOE nuclear facilities. They 
are essentially the Cold War veterans, the people that built 
the atomic bombs in this country who were exposed to a variety 
of toxins, and as a result are suffering very significant 
illnesses and are dying.

    The Congress passed the law, I believe, originally in 1999-
2000. Part of it went to DOE, and what happened there is that 
the problems of trying to prove, first of all, exposure for 
individuals was very difficult. These were exposures that took 
place a long time ago. It became a huge, huge bottleneck.

    It turned out that after four or five years of trying to 
get this program up and running, I believe ten people had been 
compensated. There was $75 million spent and 10 people 
compensated. DOE was trying to assist people to be compensated 
through the State compensation programs.

    So what you had was with both these evidentiary 
requirements, as well as the way it was set up 
administratively, the hurdles were so high that nobody got 
compensated and a lot of money went to the administrative 
costs.

    So the Congress made a decision to essentially shift it to 
an agency that knew how to deal with compensation programs, 
but, as importantly, to basically put in place more simple 
criteria to be the guide posts for whether or not people would 
be compensated.

    The Department of Labor has just received that program and 
that program is dealing with 20,000 pending claims. They have 
been given 210 days to get that up and running. That compares 
to this program with, let's say, 600,000 pending claims, and 
there are proposals for 180 days. I think we have to be 
realistic about the time that is going to be needed, even with 
the best intentions and the smartest people.

    So we are very concerned that during this transition 
period, the defendants and insurers are concerned about 
leakage. But if you are basically going to shut down the 
existing system, that means that people will have nowhere to go 
and that is not fair. It is not fair that victims who are going 
to die within 6 months--in 180 days, people will be dead by the 
time this program gets up and running. And we think that that 
is unconscionable and that the Congress cannot and should not 
put in place legislation that leaves victims with no redress.

    Senator Leahy. Mr. Chairman, I will follow your good 
example. I will have, if I might, a number of questions for the 
record.

    Chairman Specter. Sure.

    Senator Leahy. On some, I will want to follow up on 
Governor Engler's testimony, which was excellent, as was 
everybody's.

    Mr. Berrington, I have a question, as you may gather, for 
you, and Mr. Forscey. I realize this goes beyond the time, but 
I just wanted to applaud the Chairman for doing this.

    Chairman Specter. You may go well beyond the time.

    [Laughter.]

    Senator Leahy. This is one of those things where there are 
all these glamorous things you could be doing in hearings. 
Certainly, everybody is going to be having hearings on tsunami 
aid, and we are going to have hearings on this, that and the 
other thing. In this Committee, you could hit all of the hot-
button items. This is one of the hard work--this is not the 
show horse; this is a work horse kind of thing. It is extremely 
difficult.

    I applaud the Chairman for taking it on as one of the very 
first things he is doing as Chairman. I know the frustration I 
felt during the 17 months I was Chairman in dealing with it, 
but I also know the tremendous potential boost it can give to 
our economy if it is solved and the tremendous sense of closure 
and help it can give those who suffer. I mean, these are human 
cases. They are not just numbers; they are human cases. I have 
met many of these families. None of it is going to be perfect. 
Judge Becker would be the first one to say that, and the 
Chairman would, but we can do so much better than we did.

    So I applaud you for that, Mr. Chairman. Lead on.

    Chairman Specter. Well, thank you very much, Senator Leahy, 
for your cooperation, your joinder on this issue, and your hard 
work and your staff's participation.

    I think the testimony of Mr. Speicher and Ms. Keener was 
especially important today to put a focus on the victims. It is 
not easy for Mr. Billie Speicher to appear here and talk about 
the short time that he has because he suffers from 
mesothelioma, and Ms. Keener's comment about her mother not 
being able to get to court because so many people are head of 
her, where they don't have any injury. So taking care of 
America's victims is indispensable as we move ahead here. 
Senator Leahy has commented about the tremendous drain on the 
economy.

    I am pleased to have heard the broad support for the trust 
fund concept. Sure, there are lots of issues, but that broad 
support is very important. With respect to improvements, we are 
still open. What we are going to be doing is going back to work 
a week from tomorrow, on the 19th, at ten o'clock, where there 
will be more time to review the draft. I have invited a number 
of you to submit more language.

    My hope is to have other Senators take a look at this draft 
and the changes that we will incorporate, and to try to get a 
bill ready for introduction very, very early on, because once 
the Senate starts to function, it is a virtual impossibility to 
get floor time. That is why we have maintained this very, very 
heavy workload and full-court press over November and December 
and into January.

    I am encouraged by what I have heard today, although I am 
not unmindful of the criticisms, and we are going to try to 
meet them to the extent we can. It is my hope that where the 
criticisms or the questions or the concerns relate to the 
uncertainty as to what we can predict that that will not be a 
bar as to whether final sum that we put on is going to be 
enough, because we do have an active safety valve.

    Kim and I talked about yesterday the seven-and-a-half 
years. They would like there to be some assurances. It seems to 
me that there are a lot of practical assurances that will go 
well beyond seven-and-a-half years. But if the bottom falls 
out--and I don't think it is going to, but my point is not to 
let the uncertainties pull us down to look for greater 
certainties or greater protection. It is a question as to where 
we are.

    And I use the number VII, smokers/non-smokers sort of 
illustratively. Maybe $200,000 is too much for people who have 
quit smoking and maybe $75,000 is too much for the smokers. But 
in the grand scheme of things, that is not going to be a big 
factor in this bill. And I would suggest that some of the other 
concerns we have are not going to be gigantic factors either, 
compared to getting something done. And it is really now or 
never, so let us not let the perfect be the enemy of the good.

    Seema Singh, who has done yeoman work, sitting behind me, 
my staffer, will be receptive to any thoughts you may have, as 
will I and also Judge Becker. We will reconvene on the 19th, 
with a view to trying to put the bill in final form. In the 
interim, I will be talking to my colleagues in the Senate to 
see if we can find some agreement, and we will come up with a 
figure when we have the next bill.

    Thank you all very much.

    [Whereupon, at 12:50 p.m., the Committee was adjourned.]

    [Questions and answers and submissions for the record 
follow.]

    [Additional material is being retained in the Committee 
files.]
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