[Congressional Record Volume 150, Number 51 (Tuesday, April 20, 2004)]
[Senate]
[Pages S4103-S4111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       ASBESTOS LITIGATION REFORM

  Mr. FRIST. Mr. President, for Senators who are going to be here for 
morning business, it will probably be another 20 minutes or so, total 
time between the two leaders' time, before morning business begins.
  As I said in my opening comments, our intention is to go to asbestos 
and to bring to closure a very important piece of legislation that a 
lot of people across the aisle have worked on and are dedicated to 
addressing.
  I believe now is the time to do that. I want to briefly introduce my 
view of the current status of the asbestos litigation debate and how I 
think we can bring that debate to closure.
  This body--both sides of the aisle--has recognized that asbestos 
litigation has run amok. It is time to fix what has become an 
embarrassing, inadequate system that we have, the purpose of which is 
to compensate victims. The current system is broken. It fails to 
compensate victims fairly, while at

[[Page S4104]]

the same time imposes huge costs on our economy and thus on jobs and 
job creation.
  We now have a choice, and it is a choice I very much think we should 
face right now, and that is to either leave the sick asbestos victims 
to suffer the vagaries of this system as it works today or put our very 
best work together to give them a better and more reliable and more 
secure system. There will be a lot of comments made over the course of 
the day and the week, but I think it is important to understand that we 
have made substantial progress, meaningful progress toward creating a 
better system. With all of this progress, it is now time to bring it to 
a focal point and bring it to closure.
  The chairman of the Judiciary Committee, Chairman Hatch, has brought 
S. 1125, the FAIR Act, the Fairness in Asbestos Injury Resolution Act, 
from its introduction through that Judiciary Committee, and a number of 
parties have participated in the various negotiations to get it to the 
floor.
  Now is the time to take very deliberate action--it is going to be 
difficult over the next several days to do that--and to finish the 
process and bring relief to victims and stop the devastating impact the 
current system is having on our economy. Although we have made real 
breakthroughs and we have moved forward through a lot of continued 
discussions among the various stakeholders and various Senators, a lot 
of which has occurred since Senator Hatch's work with the committee, 
there are still a lot of calls to delay and put things off until some 
indefinite time in the future. Since I have been involved, pretty much 
after it came out of committee, there have been calls for delay--we 
need another week or 4 days or month or 2 months or 3 months. Now we 
need to stop talking about it and actually do it. We need to fix the 
system, which we know--I think there is a general consensus--is broken; 
that it is unfair and it hurts the economy. It is a detriment to our 
economy.
  I have made it a leadership priority for the Senate to help resolve 
this issue. We have given parties, again and again, additional time to 
work out some of the issues. But now we need to take decisive action. 
As I said, there is wide agreement. If you look at the problem itself--
that the current system is a disaster for victims and for jobs and a 
disaster for the impact on the economy--we are pouring vast amounts of 
money into this defunct system. But as we pour money into it, the 
system is getting worse and worse. More than 700,000 individuals have 
filed claims and, right now, there are 300,000 claims out there 
pending--300,000 claims. We have spent $70 billion trying to resolve 
these claims.
  You must ask, with 300,000 claims out there and having spent $70 
billion, what do we have to show for it today? Well, we have a system 
where sick victims of asbestos exposure have to wait in line with 
thousands of unimpaired claimants. We have the sick and people who have 
not been hurt at all, and they are all waiting. Sick victims wait too 
long for an award. The ones we need to focus on, the ones who are sick, 
now have to wait a long time. It is almost like a lottery system where 
few claimants--there are a few who get very large awards, but many get 
little, often based on simply where, for example, the claim was filed. 
The big winners are always the trial lawyers who have taken billions of 
dollars out of the system, which is money that should be going to the 
sick victims.

  As much as half of every dollar spent in the system goes to the trial 
lawyers and to other expenses. If we say there is $70 billion, we say 
half is not going to the victims, the people being hurt, not to the 
potential victims. Obviously, it is clear that system needs to be 
fixed. It is inequitable, a wasteful system, and nothing is being done 
to make it better. In fact, you can see it is getting worse.
  Future funds that should be preserved to compensate sick victims are 
simply being drained away by frivolous claims today. I keep hearing 
more and more of the large number of unimpaired claims that are filed 
based on questionable, so-called ``diagnoses'' that are obtained 
through these mass screenings. That process simply has to come to an 
end.
  As business after business has gone bankrupt paying these claims, 
sources of revenue to pay the claims are drying up. Already more than 
70 companies have filed for bankruptcy after being flooded by asbestos 
claims. The companies that actually manufacture asbestos products have 
long been bankrupt. Today we have the lawyers zeroing in on new 
companies in order to keep funding their suits. Many of these companies 
have little to do with asbestos. Right now, 8,400 companies have been 
named in asbestos suits. That includes mom-and-pop companies all the 
way to Fortune 500 firms. That is 8,400 companies that have been named 
right now in asbestos suits.
  When companies collapse under this asbestos suit pressure, not only 
do resources for the sick victims dry up, for the people who have been 
affected physically by asbestos, but now there is a whole new class of 
victims that has been created. This new class of workers at these 
companies lose their jobs and lose not only current payments but also 
their retirement savings. Bankruptcies have affected 200,000 people who 
worked at bankrupt companies. Sixty thousand people lost their jobs, 
and these people will lose an estimated $50,000 in wages each because 
of the disruption. Workers also see retirement savings plummet when a 
company files for bankruptcy.
  In the end, the American economy suffers. That, of course, means the 
loss of new jobs and investment, as well as the loss of companies that 
are literally pulled under by these asbestos claims. If the current 
situation holds, it will cost as many as 400,000 new jobs that could be 
created in this time of economic recovery but will not be because of 
the failure to invest. So we have watched this deterioration and we 
have talked about it for all too long. Now we must act.
  So as we move forward, we need to move forward understanding there is 
bipartisan general agreement that the litigation challenge before us, 
which has run amok, must be cleaned up. Rationality and justice must be 
restored and we must get the compensation to those who need it. We must 
do it through a system that preserves jobs, preserves economic growth 
for current workers, and stewards funds for future claimants.
  Indeed, this body has been struggling with these issues for some 
time, and it has met with success despite the difficulty of reaching 
agreement in some very specific contentious areas. Chairman Hatch did 
yeoman's work in July getting S. 1125 through the committee. There were 
a whole range of successes worked out by the committee. Chairman Hatch 
led a major bipartisan solution on a linchpin issue of medical 
criteria; and without agreement on this issue, we simply would not have 
been able to move forward at all. This issue, over time, has proven 
very difficult, very controversial. I commend him for his leadership in 
bringing the resolution to this particular issue. That is just one of 
the many examples of issues that have been overcome.
  Chairman Hatch noted that as many as 50 changes were made at the 
urging of Democrats before--really between the bill's introduction and 
the time of markup--and there have been many ongoing discussions in the 
wake of that success.
  I also thank Members on the other side of the aisle. Senator Leahy 
has worked hard on this bill, and it simply would not have been 
possible to get as far as we have--even though we have a long way to 
go--without his work on the other side of the aisle, as well as the 
various stakeholders who have an interest in this bill.
  The commitment of many parties has created the momentum for change, 
for cleaning up the system, and the good faith that has led to a number 
of key breakthroughs that have been seen today and that I am confident 
will continue to make success possible.
  Following the committee markup, I became deeply involved in 
negotiations on S. 1125, working closely with Senator Daschle, as well 
as Chairman Hatch and Senators Leahy, Dodd and Carper, and others on 
both sides of the aisle.
  My colleague from Pennsylvania, Senator Specter, has been 
particularly instrumental working on key elements of the bill, so I 
wish to recognize him for that.
  Under S. 1125 and current agreements which are embodied in S. 2290, 
we will

[[Page S4105]]

replace the current adversarial asbestos litigation system with a new 
streamlined no-fault system where sick victims will be compensated 
fairly and efficiently. A national trust fund will pay claimants, 
cutting out waste and providing certainty and rationality for claimants 
and for businesses. Most importantly, this system will end the 
bankruptcy spiral, therefore preserving future funding for victims who 
need it.
  S. 1125, as reported out of committee, represents an unprecedented 
achievement in forging consensus on issues like medical criteria that 
stalled previous attempts at similar legislation. Nonetheless, a number 
of issues were left open for further discussion, and additional 
concerns were raised that were not addressed by the committee. I 
identified these issues on the floor on November 22, 2003, and they 
include adequacy and security of funding, claims values, administration 
of the system, and protection of claimants from the risk of a funding 
shortfall.
  Since the bill was reported out of committee, various stakeholders 
and members from both parties have continued negotiations. There have 
been more than 20 meetings starting last July at which my staff and 
Senator Specter's staff have negotiated these issues with staff 
representing the minority. What has emerged from all these collective 
efforts is a proposal that retains the key elements of S. 1125, and 
includes some critical modifications that address concerns that were 
raised by stakeholders. Today's proposal embodies the best thinking on 
these issues and represents an aggressive yet feasible solution to the 
crisis.
  These negotiated agreements make it possible to bring a bill to the 
floor, and the bill is better for these changes, difficult as they were 
to hammer out.
  First, we had to make sure the system contained claims values that 
would fairly and adequately compensate victims. Second, we had to make 
sure funding was adequate--and that any risk of shortfalls rests on 
defendants and insurers, and not on claimants. The bill also provides 
the administrator with more flexibility to ensure that any short term 
bulges in claims can be accommodated. Third, we had to make sure the 
new system would be easy for claimants to use, and that it could be 
funded and up and running quickly. Fourth, the bill now contains a 
number of additional provisions requested by organized labor to protect 
the rights of claimants. I am also submitting an expanded description 
of these changes for the Record.
  The top priority of this bill is to compensate claimants, and under 
any analysis, more money reaches claimants under the bill than under 
today's flawed tort system. Even so, we know that we needed to reach a 
number that Democrats felt comfortable with, so S. 2290 raises claims 
values.
  We agreed to raise the claims values in order to get consensus even 
though the claims values in S. 1125 as reported represented a 
bipartisan proposal, and included some of the highest values found in 
similar Federal compensation programs. We raised the values even though 
S. 1125 already puts more money into the pockets of claimants than the 
current tort system, where more than half of the resources go into the 
pockets of attorneys and consultants. Under the revised bill, S. 2290, 
approximately $111.5 billion of the expected $114 billion in fund 
expenditures will be available for victims. Compare this with 
Tilinghast's actuarial study of the current system, where only $61 
billion goes to plaintiffs and the rest to legal fees. Or the Milliman 
study, where they estimate as much as $92 billion could go to 
plaintiffs and the rest to legal fees. So the bill gets more money to 
victims than the leading studies estimate could go to them under the 
current system.
  What's more, S. 2290 actually gets this money to sick victims, 
whereas much of the money paid into the system today goes to unimpaired 
claimants. Under the current system, much of the compensation is 
drained away from the truly ill to fund these unimpaired mass lawsuits. 
Right now, the sickest victims, those with mesothelioma, are receiving 
only 17 to 20 percent of the funds in the system, with nonmalignant 
cases getting about 65 percent. The proposed bill would prioritize the 
sickest victims--over half of the funding would be directed to those 
with mesothelioma. Nonmalignant claimants would receive about 20 
percent. The new system would also increase the share of funds that are 
directed to pay cancer claims from about 16 or 18 percent to 24 
percent. Under S. 2290, funds are properly directed at  the sickest 
victims. And the determination of the medical criteria that should be 
used is a result of the landmark bipartisan agreement made in 
Committee.

   S. 1125 also presents a substantially better means of obtaining 
compensation than through bankruptcy trusts. The trusts being created 
in bankruptcies today discriminate between present and future claims, 
and give preferential treatment to certain claimants, not because of 
their medical condition, but because they were first in line. Let me 
also point out that S. 1125 provides significantly more money than 
claimants could receive from bankruptcy trusts, many of which are 
paying pennies on the dollar. Johns-Manville pays 5 cents on the 
dollar, UNR 9 cents, Celotex 11.3 cents, and topping out at 15.5 cents 
is Eagle Picher. So while some claimants may appear to win big court 
cases, if the defendants are in bankruptcy, which many are, claimants 
will likely only get pennies on the dollar. In today's bankruptcy 
compensation system, the risk that a trust may be inadequate falls on 
the victims, and that is not fair. Unlike these bankruptcy funds, the 
claims values in S. 1125 will be 100 percent paid or victims will be 
able to return to the tort system.
   Despite these generous values in the bill as reported, organized 
labor and Democrats urged that the values were not high enough. So we 
have agreed to raise the values because it is so important to create 
consensus and move this bill forward.
   It is crucial that the fund has the faith and confidence of 
claimants, and that it can fulfill its mandate to compensate them. 
Funding must be adequate, it much be secure, and provisions must be 
made for any shortfall. And any risk must fall on defendants and 
insurers, not claimants.
   To ensure funding adequacy, the bill establishes a new overall 
funding framework, which makes available $114 billion for direct victim 
compensation. The funding provided is substantially more than what is 
estimated to reach victims if the current tort system is allowed to 
continue.
   Let me say a few words about how this relates to the overall funding 
structure that came out of committee. The mandatory funding in the bill 
as reported was $108 billion, which is similar to what S. 2290 offers. 
That funding proposal represented a very fair amount to solve the 
problem. The committee, however, went well beyond this benchmark during 
markup. The net effect of the committee modifications to S. 1125's 
financial structure was dramatic. S. 1125 as reported could have 
required businesses and insurers to provide compensation at up to two 
times the most credible estimates of total future plaintiffs' 
recoveries under the tort system. As a result, insurers almost 
uniformly withdrew their support for the act, calling it ``dangerously 
unaffordable'' and ``potentially worse then the existing system.''
   In order to get the legislation back on track, I initiated a 
mediation process between insurers and defendant companies. We reached 
agreement whereby $114 billion would be made available for victims. To 
help ensure this funding is obtained, enforcement provisions of the 
bill were further strengthened.
   To address concerns that there will be early stress on funding, the 
revised schedule requires money from insurer participants to be infused 
in the first years, where it is expected that the highest demands will 
be placed on the Fund.
   To protect against any shortfalls, an additional $10 billion 
contingent funding is also available from defendants if necessary to 
pay claims in the out years of the fund's operation.
   Furthermore, the bill gives the administrator more time and more 
flexibility to deal with a short term bulge in claims, if necessary. 
Under the bill as reported, the fund could have unnecessarily sunsetted 
due to a short term liquidity problem if a large number of claims were 
filed at once. Alternative sunset provisions have been provided, and 
the borrowing authority has been

[[Page S4106]]

expanded to increase the funds's liquidity. Sufficient funds will now 
be available to pay in full all claims found eligible before the fund 
sunsets, and any debt incurred by the fund will be paid by monies in 
the fund and not the United States Treasury.
   Finally, and critically, under S. 2290 the risk of underestimating 
the amount of funds needed will not fall on the victims, but on the 
defendants and their insurers. Historically, rates of asbestos victims' 
claims filing are uncertain and difficult to predict. Given the 
creation of the new compensable disease categories in S. 1125 and the 
streamlined no-fault administrative system, this problem is even more 
acute. But under the proposal, if future claims exceed estimates and 
the mandatory funding, including the contingency funding, is not enough 
the fund will end and victims will be able to seek compensation in the 
Federal courts. Ensuring that the risk of underestimation does not fall 
on the claimants was a linchpin in organized labor's proposals.
  There is, however, one particular risk to the fund that must be 
addressed, and that is the lack of predictability of claims by 
individuals, particularly smokers, who have occupational exposure, but 
not enough exposure to have caused asbestosis.
  S. 1125 is careful to provide the highest levels of compensation to 
claimants whose illness has the greatest causal connection to asbestos. 
It is not and cannot be a tobacco compensation bill. With that said, 
the bill sets out within the consensus medical criteria a level VII 
category, a new and untested category for lung cancer cases, that may 
end up compensating large numbers of individuals whose illnesses are 
not caused by asbestos, but by smoking. There are experts who believe 
the eligibility criteria for this category will reliably screen for 
asbestos-caused lung cancers. But we just don't have enough experience 
with these claims. With 87 percent of overall lung cancer cases caused 
by smoking, they could inundate and sabotage the fund.
  Accordingly, I want to put all Senators on notice that I intend to 
offer an amendment, after consultations with all interested parties, to 
provide a mechanism to protect the solvency of the fund if claims from 
level VII's dramatically exceed expected levels.
  At its heart, today's proposal represents a policy choice. On the one 
hand, we have the status quo, with its delays, failure to compensate 
victims, bankruptcies, litigation costs, wasteful transaction spending, 
and major negative impact on the economy.
  On the other hand, we have an opportunity to rationalize this broken 
system. It is true that there is some uncertainty in projecting future 
claims filing rates, but we are putting over $100 billion into the 
system. And any risk that this is not enough would fall back on 
defendants. There would be a reversion to the Federal tort system, and 
defendants would have to essentially pay twice--after staking over $100 
billion they would still be subject to tort claims. And claimants would 
get their day in court. This bargain is a reasonable policy choice.
  Another fundamental way S. 1125 improves the current tort system is 
that it is more accessible and simpler for claimants to use. Organized 
labor, however, had expressed a concern that the administrative 
structure in S. 1125 as passed out of committee was too adversarial and 
cumbersome. This was a key concern for labor, so in order to address 
this concern, industry and labor representatives agreed under the 
auspices of Senator Specter and Judge Becker of the Third Circuit Court 
of Appeals, to simplify the process. I commend Senator Specter for this 
leadership in that process, and thank Judge Becker for his expertise 
and commitment.
  Under the new proposal, claims processing will be moved from the 
Court of Federal Claims to an executive office situated in the 
Department of Labor. Now a single administrator will be responsible for 
both the claims handling and the management of the fund. The fund will 
benefit from the experience the Department of Labor has garnered from 
administering similar compensation programs over the past 90 years. The 
infrastructure already created under these programs will help with 
prompt program initiation.
  The claims application process will now be more user friendly, there 
are fewer levels of administrative review, and the claimant assistance 
program will be expanded. The new structure provides for advisory 
committees with expertise on a host of issues to advise the 
administrator, and allows for contracting with entities who have 
knowledge and experience with asbestos-related injuries and 
compensation programs to assist in the processing of claims.
  The new administrative structure also will help address concerns 
about how quickly funds will begin flowing to claimants--especially 
those with the most serious diseases, such as mesothelioma, who may 
only have a short time to live.
  The new administrative structure will help to ensure that the program 
is up and running quickly and managed efficiently to the benefit of 
claimants, including providing for interim regulations and interim 
authority to begin processing claims as soon as possible. The interim 
administrator may prioritize claims so that the victims with the most 
severe injuries, especially mesothelioma victims, have their claims 
processed first. Money will flow into the system faster, since S. 1125 
now requires upfront funding from participants. Money from defendants 
will be available within 3 months from the date of enactment from 
certain defendant participants and within 6 months from the remaining 
defendant participants, which will be in addition to the monies 
received from the bankruptcy trusts. There also is authority to require 
upfront money from the insurer participants so that there is no delay 
in obtaining money from the insurers.
  As an additional protection against an influx of early claims, the 
bill also provides the administrator with expanded borrowing authority 
to ensure that there are sufficient funds available to initiate the 
program and to pay claims in short order. The borrowing would be 100 
percent collateralized against the mandatory payments from participants 
in the Fund.

  These changes are designed to address concerns raised by Senator 
Feinstein in the committee's consideration of the bill. Senator 
Feinstein raised valid concerns that a delay in creation of the claims 
system would harm claimants. However, her amendment would have 
essentially left the current system in place for an indefinite amount 
of time and would allow credits for monies to be paid to the fund, 
having the unintended effect of perpetuating the status quo with its 
gross misallocation of payments to unimpaired claimants and its 
excessive attorney fees. Furthermore, it would have threatened the Fund 
itself, by diverting Fund assets to cover these unwarranted claims and 
fees.
  Given the improvements that have been made to the claims processing 
system, good public policy demands expedited termination of the broken 
system and commencement of payments to the most worthy claimants, as 
defined by the consensus medical criteria.
  Organized labor has an important role to play in protecting the 
interests of working people in the congressional debate. In addition to 
numerous concessions associated with the new administrative structure, 
representatives of organized labor aggressively advocated for a number 
of changes, which were adopted. These changes were aimed at ensuring 
that the program established under S. 1125 was the most fair to 
victims, as the intended beneficiaries of the program.
  S. 2290 now provides for medical monitoring reimbursement for costs 
of physical examinations as well as costs for x-rays and pulmonary 
function testing.
  S. 2290 explicitly extends the protections of HIPAA to ensure that 
claimants cannot be discriminated against for provision of health 
insurance solely as a result of filing a claim with the Fund.
  This bill also requires the use of presumptions for satisfying the 
exposure criteria for certain industries, occupations, and time 
periods.
  While I have outlined some major changes here, literally dozens of 
additional changes have been made to S. 1125 since the introduction of 
the bill. These changes clarify language and strengthen provisions to 
ensure that sick claimants are promptly and fairly

[[Page S4107]]

compensated, that the burden and risk on claimants is reduced to the 
extent possible, and that participants can obtain certainty with 
respect to their asbestos liabilities as necessary to promote the 
creation of jobs and the economy.
  And it was recognized, as the bill was being considered by committee, 
that even as we are dealing with the aftermath of asbestos, the 
substance itself is still in limited use. The committee adopted Senator 
Murray's landmark asbestos ban, and this country's workers will be 
safer for it. It simply did not make sense to create a compensation 
system and continue to allow workers to be exposed.
  We also addressed the terrible situation in Libby, MT, where many 
workers and residents have become ill from asbestos and 
the manufacturer, W.R. Grace has filed for bankruptcy leaving victims 
with little recourse. S. 1125 contains special provisions so that Libby 
victims can readily gain compensation from the Fund.

  In addition, we must not forget this Nation's veterans. Veterans have 
been long overlooked when talking about the asbestos litigation crisis. 
Men and women who served in the Armed Forces were often exposed to 
significant amounts of asbestos while serving our country, particularly 
during World War II and while serving on ships. S. 1125 provides a 
better avenue, and may be the only avenue, for veterans to receive fair 
and prompt compensation, while still preserving the veterans' benefits 
that are currently available.
  We have set forth a rational system, offering a positive alternative 
to today's broken system. It is one of the largest, boldest 
compensation programs in this Nation's history. The choice here is not 
about the mechanics of the program, the final dollar amount, or any 
individual provision. We can work those things out. The choice is 
whether to offer victims a better system than we have today, and at the 
same time rationalize the system to stop the havoc it is causing to 
jobs and the economy.
  Indeed, we have made major progress in getting this bill ready for 
the floor, especially considering the controversial issues involved. 
We've had literally dozens of stakeholder meetings. During this 
process, all of the issues have been visited and revisited. All parties 
have been heard, and all concerns have been heard. While such a 
sweeping bill will inevitably contain compromises that are not perfect 
in the eyes of each stakeholder, we have listened to all concerns and 
come up with the best solutions possible.
  I had hoped to bring the bill up for a vote before the last session 
ended. At that time, a lot of stakeholders felt that was premature. On 
November 22 of last year, I announced that I would wait, but that the 
bill would be considered by the end of March. Again on February 27 I 
made it clear that the bill would be brought up by the end of March. To 
continue the discussions among the stakeholders, I again extended this 
time to the week of April 19, and, thus, we are here. It is time to 
stop talking and bring these issues to resolution.
  We have waited long enough and worked to create consensus, and now we 
have significant support to wrap up the outstanding issues--challenging 
as they are--and hold a vote. There have been suggestions almost from 
the start that we need more time to come up with better answers. We 
have very few legislative days remaining, and as we feared, we are 
nearly out of time. Senator Hatch and I have consistently offered 
realistic scheduling and frankly have allowed too much delay already. 
Now we have run the clock out and we must act.
  Standing still is not an option, as the situation continues to 
deteriorate. Victims wait for unpredictable and inequitable 
compensation, companies continue to declare bankruptcy, and jobs and 
the economy suffer.
  For many Members, it will require courage and leadership to change 
the status quo, but I am calling on this body to give the American 
people a better system for compensating asbestos claimants. Inaction--
allowing the status quo--is in itself a choice that harms victims and 
American workers.
  I believe it is time to move forward by offering the changes I have 
described here in an amendment in the nature of a substitute.
  Mr. President, I ask unanimous consent that a detailed summary of the 
major changes in a section-by-section description be printed in the 
Record following my remarks.
  The PRESIDING OFFICER (Mr. Smith). Without objection, it is so 
ordered.
  (See exhibit 1.)
  Mr. FRIST. Mr. President, there will no doubt be constructive 
proposals from Senators on both sides of the aisle to refine and 
improve this bill. That is what the amendment process is all about.
  I encourage this process. It is my hope the process will be 
constructive and it will result in a bill that can pass this body. I 
look forward to the debate and consideration of S. 1125.
  I yield the floor.

                               Exhibit 1

          S. 2290--Summary of Changes From S. 1125 as Reported

       S. 1125, the Fairness in Asbestos Injury Resolution Act, as 
     reported out of the Senate Judiciary Committee, represents an 
     unprecedented advance on complex and difficult issues that 
     have stalled previous attempts at similar legislation. 
     Landmark agreements were reached on asbestos injury 
     compensation issues such as medical criteria, and over 50 
     consensus-building changes were adopted overall. Nonetheless, 
     a number of issues were left open for further discussion, and 
     additional concerns were raised that were not addressed by 
     the Committee. Since the bill was reported out of Committee, 
     various stakeholders and members from both parties have 
     continued negotiations. The substitute bill being introduced 
     reflects agreements on some of these difficult issues reached 
     during these negotiations, and attempts to address a number 
     of concerns that have been raised but have not yet been 
     subject of agreement. In particular, the First/Hatch bill: 
     raises claims values, creates a more streamlined 
     administrative system that can be up and running quickly, 
     provides increased liquidity and upfront funding so that 
     claims can be paid in short order, and places the risk that 
     the Fund runs out of money on the defendants and insurers and 
     not on the claimants. These are just some highlights of the 
     numerous changes that were made to make a fairer system for 
     claimants. The following provides a section-by-section 
     summary of the changes in the First/Hatch bill from S. 1125 
     as reported with explanations as to the need for the changes.


                          sec. 3. definitions

       Changes were made to various definitions under this section 
     to conform with other amendments in the bill to provide 
     clarifications.
       Sec. 3(3) Definition of ``asbestos claim.'' S. 1125 seeks 
     to replace the current broken tort system with a streamlined, 
     administrative system. S. 1125, therefore, must preempt and 
     supersede all asbestos claims filed in the current tort 
     system. Concerns were raised that the definition of 
     ``asbestos claim'' in S. 1125 as reported may have been 
     interpreted as unduly limited, failing to cover some types of 
     asbestos claims that are currently overburdening the tort 
     system today, which were intended to be preempted and 
     superseded by the Act. This definition was amended to help 
     ensure that the definition is interpreted broadly to 
     encompass all types of claims that are being filed in the 
     system today. This definition has also been amended to make 
     clear that claims alleging damage to tangible property are 
     left intact.
       [Sec. 3(6) Definition of ``collateral source 
     compensation.'' The disease categories under S. 1125 are not 
     easily translatable from those filed in the tort system. The 
     definition of ``collateral source compensation,'' therefore, 
     was clarified to more clearly encompass awards in the tort 
     system.]
       Sec. 3(9) Definition of ``insurance receivership 
     proceeding.'' A new definition for ``insurance receivership 
     proceedings'' was added to S. 1125. This definition 
     accompanies changes made to section 402 that would give the 
     Fund a priority for collection of assessments from insurers 
     in state insurance receivership proceedings. These provisions 
     track those provided for insolvent companies in bankruptcy. 
     This definition describes the state law proceedings to which 
     the priority applies. This, like the bankruptcy provisions, 
     help to ensure that the payments made to the Fund are 
     continued despite any subsequent insolvencies of insurer 
     participants.
       [Sec. 3(11) Definition of ``participant.'' One of the 
     exceptions to ``participant,'' defined in section 3(11), are 
     companies who have completed their bankruptcy proceedings. 
     This exception was amended to ensure that the bill is in 
     concert with the United States Bankruptcy Code. A  company is 
     not ``out of bankruptcy'' until the plan of reorganization 
     becomes effective in accordance with its terms. Under the 
     Bankruptcy Code, changes to the plan can occur until the 
     date on which the plan is ``substantially consummated,'' 
     as defined in section 1101(2) of that Code. Conforming 
     changes were made to applicable sections in the funding 
     provisions under title II.]


                   Title I--Asbestos claims resolution

      Subtitle A--Office of Asbestos Disease Compensation
        The Frist/Hatch bill incorporates a new administrative 
     structure for the processing and

[[Page S4108]]

     paying of claims, which was part of an agreement between 
     representatives of labor and industry groups negotiated under 
     the auspices of Senator Specter and Judge Becker. This new 
     structure responds to concerns raised by representatives of 
     organized labor, who wanted a more streamlined and more non-
     adversarial system than that in S. 1125 as reported. Various 
     aspects of the new structure promote the efficient management 
     of the program and crate a less burdensome system for 
     claimants. Old title I, subtitle A, which created a claims 
     processing structure within the Court of Federal Claims, was 
     replaced with new subtitle A, which creates an executive 
     office situated in the Department of Labor to administer the 
     program. Subtitle B in S. 1125 as reported, which outlined 
     the claims handling process, also was substantially amended 
     to respond to requests by stakeholders. The new 
     administrative structure also contains provisions to ensure 
     that the program is processing claims as soon as possible, 
     which were added as part of the alternative to the Feinstein 
     startup amendment. Conforming changes were made throughout 
     the bill.
        Sec. 101. Establishment of Office of Asbestos Disease 
     Compensation Program. New section 101 establishes within the 
     Department of Labor, an Office of Asbestos Disease 
     Compensation. This section clarifies that all administrative 
     expenses of the program are to be paid from the Fund. The 
     office is headed by an Administrator, who will be responsible 
     for both the claims handling and the management of the Fund. 
     The Administrator is appointed by the President with the 
     advice and consent of the Senate, and reports directly to the 
     Assistant Secretary of Labor for the Employment Standards 
     Administration. The general duties of the Administrator are 
     provided in this section, and provisions regarding the 
     Administrator's fund management duties found in section 222 
     of S. 1125 as reported (p. 168-69) were incorporated into 
     this general authority provision. Civil penalties up to 
     $10,000 for false statements and fraudulent acts against the 
     Office are also provided for under this section. Two Deputy 
     Administrators will be selected by the Administrator--one to 
     carry out the Administrator's claims processing 
     responsibilities, and one to carry out the Administrator's 
     Fund management responsibilities. Finally, a general 
     provision with respect to the application of the Freedom of 
     Information Act (``FOIA'') was added to section 101.
        Placing the office within the Department of Labor was 
     requested by labor representatives. In addition, much of the 
     provisions in the Frist/Hatch bill are based on provisions 
     from statutes and implementing regulations for compensation 
     programs administered by the Department of Labor. The 
     Administrator, therefore, can utilize the 90 years of 
     experience the Department has in administering similar 
     compensation programs and the infrastructure already created 
     for these programs.
       Sec. 102. Advisory Committee on Asbestos Disease 
     Compensation. New section 102 provides for the establishment 
     of an Advisory Committee on Asbestos Disease Compensation 
     within 120 days after the date of enactment of the Act. The 
     Advisory Committee will advise the Administrator on general 
     policy and administration matters. The Advisory Committee is 
     composed of 24 members with 3-year staggered terms. Sixteen 
     members are to represent the interests of the claimants (at 
     least 4 of which are recommended by recognized labor 
     federations), defendant participants, and insurer 
     participants. The remaining 8 members are appointed by the 
     Administrator and cannot have earned more than 25% of their 
     income for each of the 5 years prior to their appointment by 
     serving in asbestos litigation as consultants or expert 
     witnesses. The Administrator selects a Chairperson and Vice 
     Chairperson. The Advisory Committee must meet at least 4 
     times a year for the first 5 years of the program and at 
     least twice a year thereafter. The Administrator must provide 
     information and administrative support as may be necessary 
     and appropriate for the Advisory Committee to carry out its 
     functions. The members are entitled to travel and meal 
     expenses. An advisory committee was provided for under the 
     Energy Employees Occupational Illness Compensation Program 
     Act (``EEOICPA''), 42 U.S.C. Sec. 7384o, which served as a 
     model to the new administrative structure. The size and scope 
     of the Advisory Committee was outlined by labor 
     representatives in order to provide stakeholders with the 
     opportunity to provide the Administrator with input on the 
     compensation program.
       Sec. 103. Medical Advisory Committee. New section 103 is 
     permissive rather than mandatory, granting the Administrator 
     the authority to create a Medical Advisory Committee to 
     provide general medical advice relating to the review of 
     claims that cannot be adequately addressed by the larger 
     Advisory Committee on Asbestos Disease Compensation. To help 
     ensure objectivity on the part of the members of this 
     Committee, individuals who earned more than 25% of their 
     income for each of the 5 years prior to their appointment by 
     serving in asbestos litigation as consultants or expert 
     witnesses cannot be appointed to the Committee.
       Sec. 104. Claimant Assistance. New section 104 expands the 
     claimant assistance program under section 116 of S. 1125 as 
     reported (p. 39). At the request of labor representatives, 
     the program was expanded to include, among other things, the 
     requirement to establish resource centers and to contract 
     with labor and community based organizations. Aspects of this 
     more expansive program are modeled on Section 7384v of the 
     EEOICPA, for which several resource centers have already been 
     established by the Department of Labor.
       The streamlined administrative structure and the claimant 
     assistance program, which includes assistance in finding pro 
     bono legal representation, both reduce the burden on the 
     claimant seeking compensation and the need for a lawyer. 
     Although legal representation is allowed, the goal of S. 1125 
     is to reduce the high transaction costs of the current tort 
     system, which can be upwards of 40% for legal fees to the 
     plaintiff's attorney alone. As such, the Frist/Hatch bill 
     provides for reasonable limits on attorneys fees to reflect 
     this streamlined process, allowing for higher percentages for 
     more complex cases. Penalties are provided for to ensure that 
     these limits are followed.
       Sec. 105. Physicians Panels. The Physicians Panels were 
     established in order to perform the functions of the Medical 
     Advisory Committee originally contemplated under S. 1125 as 
     reported, section 114(j) (p. 37). The Physicians Panels will 
     provide necessary medical advice in the adjudication of 
     individual claims, as opposed to the newly created 
     Medical Advisory Committee which would advise on general 
     medical policy. While the Administrator still chooses how 
     many panels are required, the statute now requires that 
     each panel be composed of 3 physicians. The third 
     physician is only to be consulted in the event the other 
     two physicians cannot agree. The qualification that 
     physicians serving on the panels be actively practicing 
     was replaced by a limitation that such physicians cannot 
     have earned more than 25% of their income for each of the 
     5 years prior to their appointment as an employee of a 
     participant or a law firm representing any party in 
     asbestos litigation or as a consultant or expert witness 
     in matters related to asbestos litigation. The previous 
     qualification was deleted in order to allow doctors who 
     are retired but have knowledge and experience with 
     diagnosing asbestos-related illnesses may serve on the 
     Physicians Panels. It was replaced by a requirement that 
     sought to ensure objective doctors were placed on these 
     panels. Labor representatives also requested less 
     restrictive compensation provisions due to its impression 
     that it is currently difficult to retain qualified doctors 
     under the EEOICPA because of a limitation on compensation. 
     A provision ensuring that Physicians Panels are exempted 
     from the Federal Advisory Committee Act was also included 
     at the request of labor representatives.
       Sec. 106. Program Initiation. New section 106 was inserted 
     in order to address concerns raised by labor representatives 
     that the program could take an inordinate amount of time to 
     start paying claims. This section requires the establishment 
     of interim regulations, including regulations for the 
     processing of exigent claims, within 90 days from the date of 
     enactment in order to allow for an expeditious program 
     startup, addressing concerns raised that victims do not have 
     time to wait through undue delays until a whole new 
     administrative program is established. The Secretary of Labor 
     is required to provide the Administrator with temporary 
     personnel and other resources as necessary to facilitate the 
     initiation of the program. This section also defines 
     ``exigent health claims'' as those made by individuals who 
     are living mesothelioma claimants and others who have been 
     diagnosed as terminally ill from an asbestos-related illness 
     and having a life expectancy of less than one year. The 
     Administrator has the discretion to identify additional 
     exigent health claims as well as extreme financial hardship 
     claims to be handled on an expedited basis.
       Stakeholders recognized that an interim administrator may 
     be appointed in the event that the Administrator is a 
     presidential appointee to avoid any delays related to the 
     Presidential appointment and Senate confirmation of an 
     Administrator. To address this issue, the Frist/Hatch bill 
     provides that the Assistant Secretary of Labor for the 
     Employment Standards Administration serve as Interim 
     Administrator, until the Administrator is appointed. The 
     Interim Administrator may begin processing and awarding 
     claims without regard to the time limits set forth in the 
     title I, subtitle B. The Interim Administrator also may 
     prioritize claims processing based on severity and causation, 
     so that living mesothelioma victims or terminally ill 
     claimants, who may not have much time, can be placed first in 
     line and be paid as quickly as possible. The provisions, 
     along with placing the Office within the Department of Labor, 
     help to ensure that the program can be up and running in 
     short order and effectively administered in the long run.
       Sec. 107. Authority of the Administrator. New section 107 
     was added to provide the Administrator with general authority 
     to issue subpoenas and conduct hearings, and is derived from 
     the Federal Employees Compensation Act (``FECA''), 5 U.S.C. 
     Sec. 8126. Such authority is necessary to implement the 
     Administrator's responsibilities under the Act.
     Subtitle B--Asbestos Disease Compensation Procedures
       Subtitle B lays out the claims handling process. Although 
     it incorporates many of the same provisions found in title I, 
     subtitle B, of S. 1125 as reported, new subtitle B represents 
     the more streamlined process requested by labor 
     representatives and includes changes which labor felt would 
     create a fairer process for claimants.

[[Page S4109]]

       Sec. 111. Essential Elements of Eligible Claim. Section 111 
     amends old section 113 from S. 1125 as reported (p. 28) as 
     requested by labor representatives, by collapsing the 
     requirements that were listed separately into a general 
     reference to the ``medical criteria'' section in subtitle C, 
     which includes latency, exposure, diagnostic and medical 
     criteria requirements.
       Sec. 112. General Rule Concerning No-Fault Compensation. No 
     change from old section 112 in S. 1125 as reported (p. 28).
       Sec. 113. Filing of Claims. New section 113 revises section 
     111 from S. 1125 as reported (p. 23). Section 113(a)(1) 
     incorporates the definition of ``personal representative'' as 
     the term is defined in 28 C.F.R. Sec. 104.4, which contains 
     the regulations governing the September 11th Victim 
     Compensation Fund of 2001. This change was made to avoid some 
     of the difficulties that may be encountered in defining who 
     may file on behalf of a deceased claimant and sorting through 
     potential familial disputes. Also at the request of labor 
     representatives, new provisions defining the ``date of 
     filing'' and clarifying the procedures for handling 
     incomplete claims were added. These provisions were based on 
     the Radiation Exposure Compensation Act, 42 U.S.C. Sec. 2210 
     note, section 6(d), and regulations implementing the EEOICPA, 
     20 C.F.R. Sec. 30.100(c), and the Black Lung Act, 20 C.F.R. 
     Sec. Sec. 725.404(d), 725.409.
       Statute of Limitations. Labor representatives raised a 
     concern with respect to the statute of limitations section in 
     S. 1125 as reported, which would allow setoffs in multiple 
     injury cases of recoveries for all prior claims made with the 
     Fund (section 111(c)(3), p. 27). New section 113(b) clarifies 
     that a claimant who files a second injury claim with the Fund 
     for a subsequently diagnosed malignant disease does not 
     receive a setoff for prior recoveries from the Fund in cases 
     where the claimant has already filed and resolved a claim 
     with the Fund for a nonmalignant injury. This new provision 
     is based on the 2002 Trust Distribution Procedures for the 
     Manville Trust, which recognizes that claimants who develop 
     and receive awards for a nonmalignant claim should not 
     receive setoffs in the event that claminant is subsequently 
     diagnosed with a malignant disease.
       Another change was made to the statute of limitations for 
     pending claims. Although S. 1125 creates a specific statute 
     of limitations for ``pending claims'' timely filed in the 
     courts or with a bankruptcy trust, S. 1125 does not seek to 
     revive stale claims. As such, a definition of ``pending 
     claims'' with bankruptcy trust was added to clarify when such 
     a claim is ``pending'' for purposes of the statute of 
     limitations. The new definition provides that only claims 
     that have not yet been resolved with the trust be allowed to 
     take advantage of the relaxed statute of limitations, and 
     that claims will not be considered pending simply because 
     they are awaiting additional payment installments or may have 
     the potential to have increased payment.
       Required Information. Additional changes were made to the 
     required information provision of S. 1125 to reflect concerns 
     raised by labor representatives that the application 
     requirements were too strict, and to clarify certain require 
     information at the request of labor representatives.
       Sec. 114. Eligibility Determinations and Claims Awards. New 
     section 114 replaces the claims handing provisions of S. 1125 
     as reported, including the administrative appeals process, 
     largely in response to requests by labor representatives. It 
     establishes a more streamlined system, eliminating at least 
     one level of review from S. 1125; thereby resulting in the 
     deletion of subtitle E of title I (En Banc Review) in S. 1125 
     as reported. Subsection (a) authorizes the Administrator to 
     render decisions on claims for compensation. This language is 
     based on provisions found in FECA, 5 U.S.C. Sec. 8124. 
     Subsection (a) also clarifies that costs associated with any 
     additional medical evidence or testing requested by the 
     Administrator as part of the individual's claim shall be 
     borne by the Fund.
       Proposed and Final Decisions. The Administrator is required 
     to issue a proposed decision, containing findings of fact and 
     conclusions of law as well as an explanation of the 
     procedures for review, within [90] days of the filing of a 
     complete claim. The claimant then has the opportunity to 
     request, in writing within [90] days of issuance of the 
     proposed decision, an informal hearing or review of the 
     written record. If a hearing is requested, it is to be 
     conducted before a representative of the Administrator, and 
     claimants have the right to request a subpoena, which may be 
     granted or denied at the sole discretion of the 
     representative hearing the claim. If no review has been 
     requested, the Administrator issues a final decision. If the 
     final decision in such cases materially differs from the 
     proposed decision, the claimant may then seek review. If 
     review of the proposed decision is requested, the 
     Administrator is required to issue a final decision within 
     [180] days after the request for a hearing, and [90] days 
     after the request for review on the written record. A 
     claimant may authorize an attorney or other individual to 
     represent him or her in any proceeding under this Act. The 
     provisions in new section 114 are largely based on FECA and 
     its regulations and on regulations implementing the EEOICPA.
       Sec. 115. Medical Evidence Auditing Procedures. New section 
     115 consolidates various program-wide and individual claims 
     auditing provisions found in S. 1125 (sections 115(a), (b), 
     p. 38, sections 114(c)(3)(B)(i), (c)(4), p. 31-32), with some 
     modifications. The general auditing authority was clarified 
     to require the development of methods for auditing and 
     evaluating medical evidence and other types of evidence 
     submitted to the Office (new section 115(a)(1)).
       Independent Certified B-Readers. The provisions providing 
     for review of x-rays by independent certified B-readers was 
     amended to allow the Administrator to consider the findings 
     of the independent certified B-readers rather than denying 
     the claim in the event the independent B-readers disagree 
     with the reading submitted by the claimant as was previously 
     provided. This change was made to account for potential 
     disagreements between the independent certified B-readers 
     (new section 115(b)(3)). The purpose of this review, however, 
     is still to ensure that questionable x-ray readings submitted 
     by claimants are not considered when determining eligibility.
       Smoking Assessment. Provisions on the assessment of 
     claimant representations as to their smoking status was 
     amended to clarify that such review applies only to other 
     cancer claims, lung cancer claims, and exceptional medical 
     claims. Based on past experience of claims filing, this 
     section also now provides that the review of claims on 
     smoking status should address at least 5 percent of the 
     claimants asserting status as nonsmokers or ex-smokers 
     because of the potential for fraud in such cases.
     Subtitle C--Medical Criteria
       In order to preserve the bipartisan agreement reached with 
     respect to medical criteria, no changes have been made to 
     this subtitle except where necessary to conform to the 
     revised administrative structure under title I. One 
     substantive change that was made as part of the agreement 
     between labor and industry representatives on the 
     administrative structure was to add a requirement that the 
     Administrator develop presumptions for satisfying the 
     exposure criteria for certain industries, occupations, and 
     time periods. A similar provision was included in S. 1125 as 
     introduced, but was dropped from the medical criteria in S. 
     1125 as reported.
     Subtitle D--Awards
       Several major changes were made to Subtitle D (p. 81) of 
     title I in S. 1125 as reported. [First, section 131(b)(1) 
     adjusts the claims values to reflect those proposed by the 
     Majority Leader (and to correct one apparent typographical 
     error for nonsmoker, Level VIII claims). This bill raises 
     claims values above S. 1125 in several categories.] Second, 
     section 132(b) now provides medical monitoring reimbursement 
     for costs of physical examinations by the claimant's 
     physician as well as costs for x-rays and pulmonary function 
     testing. A physical examination is another important element 
     for obtaining a proper diagnosis, and should also be covered 
     by the fund. Finally, although providing for payments over a 
     three-year period was provided for in Committee at the 
     request of labor and democrats, it was further clarified, 
     also at the request of labor and democrats, that such 
     payments should be made in the following amounts: 40% the 
     first year, 30% the second year, and 30% the third year. The 
     statute now provides a standard by which the Administrator 
     must comply to extend such payments to 4 years--that is, if 
     warranted in order to preserve the overall solvency of the 
     Fund.


            title ii--asbestos injury claims resolution fund

     Subtitle A--Asbestos Defendants Funding Allocation
       In addition to technical amendments, Subtitle A was amended 
     to reflect the new funding allocation to defendant 
     participants proposed by the Majority Leader, to provide a 
     structure that would guarantee the $2.5 billion (net of 
     hardship and inequity adjustments) in defendant participant 
     annual contributions, and to incorporate a funding proposal 
     that would infuse the Fund with monies within months of 
     enactment.
       Aggregate Payment Obligations Level. As part of the 
     Majority Leader's funding proposal, section 202(a) now 
     provides that the defendant participants be required to pay 
     $57.5 billion to the Fund, subject only to a contingent call 
     for additional payments. Section 204(h) requires annual 
     aggregate payments to the Fund of $2.5 billion a year for 23 
     years or until such time as the requirement in section 202(a) 
     is reached (if it is reached in less than 23 years). In the 
     event there are insufficient monies collected from defendant 
     participants to reach this annual requirement (net of any 
     hardship and inequity adjustments) in any given year, the 
     Administrator is granted the authority to obtain the 
     balance from a guaranteed payment account established 
     pursuant to section 204(k). If there are insufficient 
     funds in the guaranteed payment account to raise the 
     balance required, the Administrator is granted the 
     authority to impose a guaranteed payment surcharge under 
     section 204(l) on all defendant participants, on a pro-
     rata basis in accordance with the liabilities under 
     sections 202 and 203, as necessary to raise this minimum 
     aggregate payment obligation (net of hardship and inequity 
     adjustments) in any one year.
       Financial hardship and Inequity Adjustments. Unlike S. 1125 
     as reported, the defendant funding formula now guarantees 
     that funding will be available for hardship and inequity 
     adjustments up to the annual limit of $250 million. Section 
     204(d) was clarified to

[[Page S4110]]

     ensure that adjustments in effect in any one year made for 
     both financial hardship and inequity are subject to a 
     combined $250 million cap. Although limits based on a fixed 
     percentage roughly equating to $150 million for severe 
     financial hardship and $100 million for demonstrated inequity 
     were originally provided, the Administrator is now given the 
     discretion to use the $250 million for demonstrated inequity 
     adjustments and for financial hardship adjustments as deemed 
     necessary. It is anticipated that the severe financial 
     hardship adjustments will increase in importance in the 
     future as companies become confronted with unanticipated and 
     unpredictable financial hardships. The Administrator's 
     discretion would be broad enough to allow the Administrator 
     to reallocate monies from inequity adjustments to accommodate 
     future financial hardships. [In addition, unlike S. 1125 as 
     reported, such adjustment determinations would be subject to 
     review.]
       A financial hardship and inequity adjustment account under 
     section 204(j) replaces the orphan share reserve account in 
     S. 1125 as reported (section 223(h), p. 189). Under section 
     204(k), any excess monies above the $2.5 billion minimum 
     aggregate annual payments are to be placed into the financial 
     hardship and inequity adjustment account up to $250 million 
     in any given year. Any monies not used in the account in any 
     given year are carried over for use in the next year. Any 
     additional excess funds (after the $250 million) go to the 
     guaranteed payment account established under section 204(k) 
     to be used to ensure that the defendant participants reach 
     the minimum annual aggregate payment amount (net of hardship 
     and inequity adjustments) in future years. The monies in the 
     financial hardship and inequity adjustment account are now to 
     be used only to the extent the Administrator grants a 
     financial hardship or inequity adjustment, and not in the 
     event a defendant participant files for bankruptcy and cannot 
     meet its obligations as previously provided in S. 1125 as 
     reported. The guaranteed payment account provided for under 
     section 204(k) (plus the potential surcharge) is meant to 
     address any potential shortfalls due to such bankruptcies.
       Contingent Call. Pursuant to the new Frist funding 
     proposal, only defendant participants are subject to a 
     contingent call for additional payments and, therefore, the 
     contingent call provisions in S. 1125 as reported (section 
     223(f), p. 179-87) were moved to subtitle A of title II and 
     amended to reflect the new Frist funding formula. Due to the 
     increased liquidity provided for under the Frist funding 
     proposal, the back-end payments provisions (section 223(g), 
     p. 187-89) were deleted. The amended contingent call 
     provision, section 204(m), grants the Administrator the 
     authority to require up to $10 billion in additional payments 
     to be allocated based on the defendant allocation scheme in 
     sections 202 and 203. To invoke the contingent 
     call authority, the Administrator must certify, after 
     consultation with appropriate experts, that such monies 
     are required to meet the Fund's obligations. Although the 
     Administrator may invoke the contingent call authority at 
     any time for purposes of borrowing monies, the additional 
     payments may not be assessed against defendant 
     participants until after the total aggregate payment 
     amount has been reached.
       Upfront funding. Subtitle A also reflects changes that 
     would require defendant participants to provide upfront 
     funding to infuse the Fund with monies to begin paying claims 
     within months of enactment. Section 204(i) requires a 
     defendant participant to make a good faith determination as 
     to its prior asbestos expenditures and/or payments made to 
     pay claims brought under the Federal Employees Liability Act 
     (``FELA''), and submit payments to the Administrator within 
     90 days of the date of enactment for Tiers I and VII and 
     within 180 days of the date of enactment for Tiers II through 
     VI. It is believed that 90 days is sufficient time for 
     debtors and Tier VII defendant participants to determine 
     their liability under this section and make initial payments. 
     Due to the greater complexity of determining prior asbestos 
     expenditures for Tiers II through VI, however, 180 days is 
     allowed for defendant participants to be able to make an 
     initial, good-faith determination and payment, conforming to 
     the 6 month requirement for bankruptcy trusts to assign their 
     assets to the Fund. The Administrator would still make a 
     final determination as to a defendant participant's tier and 
     subtier, and request additional payment or rebate for year 1 
     if necessary. After the initial payment, defendant 
     participants must then make payments and submit information 
     as prescribed by the Administrator. The right to an 
     administrative rehearing was also clarified, and the statute 
     now expressly requires the exhaustion of such administrative 
     remedies prior to seeking judicial review.
       Clarifications for Debtors. The superseding provisions 
     related to debtors under section 202(e) were clarified to 
     ensure that a plan of reorganization or other agreement 
     associated with asbestos claims are superseded.
     Subtitle B--Asbestos Insurers Commission
       Subtitle B in S. 1125 as reported has been amended to 
     reflect the new Frist funding proposal and to address 
     potential constitutional problems that were inherent in 
     Subtitle B of S. 1125 as reported. [Additional changes to 
     further clarify these provisions may be necessary.]
       Establishment of Asbestos Insurers Commission. Given the 
     authority granted to the Commission, the appointment 
     provisions in S. 1125 as reported allowing for Presidential 
     appointment of the members after mere consultation with 
     certain members of Congress, present potential appointments 
     clause problems. Section 211, therefore, now provides that 
     the members of the Commission are appointed by the President 
     with the advice and consent of the Senate. In addition, 
     Section 211 now provides that the Commission may act based on 
     the participation of a majority of the members. S. 1125 as 
     reported had required all the members be present for the 
     Commission to be able to act, which was not practical and 
     could have resulted in unnecessary delays in the allocation 
     process.
       Aggregate Payment Obligation Levels. As part of the 
     Majority Leader's funding proposal, section 212(a)(2) 
     provides that the insurer participants be required to pay 
     $46.025 billion to the Fund, and section 212(a)(3) outlines 
     the annual aggregate payments. Insurer  participant payments 
     are front loaded, but are to be paid over a period of 27 
     years. Additional conforming changes were made to reflect 
     the new funding provisions and to clarify the allocation 
     process and criteria.
        Upfront Funding. Similar to the defendant participants, 
     the insurer participants are now required to provide upfront 
     funding to help infuse the Fund with monies to begin paying 
     claims quickly. Sec. 212(e) grants the Administrator the 
     authority to require insurer participants to pay interim 
     contributions to the Fund to assure adequate funding by 
     insurer participants during the period between the date of 
     enactment of the Act and the date when the Commission issues 
     its final determination of contributions. Contributions 
     required by the Administrator will be credited to the insurer 
     participants subsequent payment obligations established by 
     the Commission.
       Guaranteed Payment. [To be determined.]
      Subtitle C--Asbestos Injury Claims Resolution Fund
        As described above, various provisions were moved to other 
     parts of the bill and deleted from subtitle C in S. 1125 as 
     reported. In addition to provisions previously identified, 
     the provisions relating to violations of environmental and 
     occupational health and safety requirements (section 222(c), 
     p. 171) were moved to Title IV--Miscellaneous Provisions. 
     Various substantive changes, as well as other conforming 
     changes and technical corrections, were made to this subtitle 
     to help increase the Fund's liquidity and to help protect the 
     integrity of the Fund.
        Borrowing Authority. As part of the Majority Leader's 
     funding proposal, the borrowing authority provision of S. 
     1125 as reported (section 223(c), p. 177) was amended to 
     provide more expansive authority to increase the Fund's 
     liquidity. Under new section 223(b), the Administrator is now 
     authorized to borrow against up to seven years of expected 
     payments by the participants. The new borrowing provisions 
     clarify that any debt incurred is to be paid solely by 
     amounts available in the Fund. To help ensure that the fund 
     is up and running quickly, monies may be borrowed from the 
     Federal Financing Bank during the first two years of the 
     Fund. The increased liquidity will also help to fix short-
     term funding problems in the event there is a bulge in claims 
     to ensure that the Fund is not unnecessarily subject to an 
     early sunset.
        Increased Enforcement. Additional provisions were added to 
     subtitle C to strengthen the Administrator's authority to 
     enforce the participants' payment obligations. New audit 
     authority has been provided for under section 223(d). This 
     audit authority is for the following purposes: (a) 
     ascertaining the correctness of any payments made to the 
     Fund; (b) determining whether a person who has not made a 
     payment to the Fund was required to do so; (c) determining 
     the liability of any person for a payment to the Fund; (d) 
     collecting any such liability; or (e) inquiring into any 
     office connected with the administration of enforcement of 
     title II. In addition to the criminal penalties already 
     provided for in S. 1125 as reported, civil penalties for 
     false statements and fraudulent acts against the 
     Administrator have been added under this section. The 
     enforcement provisions in section 225 now provide that the 
     Administrator may enforce the provisions of this Act in 
     proceedings outside of the United States to ensure the 
     ability to go after recalcitrant foreign companies subject to 
     the liabilities under the Act. Additional enforcement 
     provisions aimed at insurer participants were also added 
     to section 225. New section 226 provides that interest be 
     paid on any amount of payment obligation that is not paid 
     on or before the last date prescribed for payment.


                       title iii--judicial review

       The judicial review provisions in S. 1125 were largely 
     replaced to reflect changes in the administrative structure 
     and to simplify the provisions. These changes were largely as 
     a result of negotiations between representatives of labor and 
     industry.
       Sec. 301. Judicial Review of Rules and Regulations. Section 
     301 now applies to judicial challenges of rules and 
     regulations promulgated by the Administrator or the Asbestos 
     Insurers Commission pursuant to the Act, granting the United 
     States Court of Appeals for the District of Columbia Circuit 
     exclusive jurisdiction over such actions. Any petition for 
     review must be filed within 60 days of the date the notice of 
     such promulgation appears in the Federal Register.
       Sec. 302. Judicial Review of Award Decisions. Section 302 
     now applies to judicial review of eligibility determinations 
     made by

[[Page S4111]]

     the Administrator. Any claimant adversely affected or 
     aggrieved by a final decision of the Administrator awarding 
     or denying compensation may petition for judicial review 
     within [90] days of the issuance of a final decision of the 
     Administrator. Such petition may only be filed in the United 
     States Court of Appeals for the circuit in which the claimant 
     resides at the time of the issuance of the final order. At 
     the request of labor representatives, the standard of review 
     of such eligibility determinations was changed from the usual 
     arbitrary and capricious standard to a substantial evidence 
     standard.
       Sec. 303. Judicial Review of Participants' Assessments. 
     Section 303 now applies to judicial challenges of 
     participants' assessments made by the Administrator or the 
     Asbestos Insurers Commission. The United States Court of 
     Appeals for the District of Columbia Circuit, rather than the 
     United States District Court for the District of Columbia as 
     was provided in S. 1125 as reported, has exclusive 
     jurisdiction over such actions. A petition for review must be 
     filed within 60 days of the final determination giving rise 
     to such action. Defendant participants must file a petition 
     for review within 30 days of the Administrator's final 
     determination (after rehearing), and insurer participants 
     must file a petition for review within 30 days of receiving 
     notice of a final determination.
       Sec. 304. Other Judicial Challenges. Section 304 provides 
     that any action challenging the constitutionality of any 
     provision of the Act must be brought in the United States 
     District Court for the District of Columbia. The provision 
     also authorizes direct appeal to the Supreme Court on an 
     expedited basis. An action under this section shall be filed 
     within 60 days after the date of enactment or 60 days after 
     the final action of the Administrator or the Commission 
     giving rise to the action, whichever is later. The District 
     Court and Supreme Court are required to expedite to the 
     greatest possible extent the disposition of the action and 
     appeal.
       Sec. 305. In General. As provided in S. 1125 as reported, 
     section 305 also states that no stays of payments into the 
     Fund pending appeal are allowed. In addition, no judicial 
     review other than as set forth in sections 301, 302 and 303 
     is allowed. Any decision of the federal court finding any 
     part of the FAIR Act to be unconstitutional shall be 
     reviewable as a matter of right by direct appeal to the 
     Supreme Court within 30 days of such ruling.


                   title iv--miscellaneous provisions

       The following provisions in Title IV have been amended from 
     S. 1125 as reported.
       Sec. 402. Effect on Bankruptcy Laws. Various changes were 
     made to section 402 for clarifications and to address 
     possible constitutional arguments that may affect the ability 
     of the Fund to receive assets from current bankruptcy trusts.
       Sec. 403. Effect on Other Laws and Existing Claims.
       Asbestos Claims Barred. Section 403(d)(2) is changed to 
     address a variety of unconventional asbestos claims that 
     plaintiffs have asserted directly against both defendant 
     participants and insurer participants in the tort system.
       Subsection (d)(6) is added to permit parties to obtain a 
     credit in the event that a court ignores or misapplies the 
     exclusive remedy provisions of the Act, and erroneously 
     awards a judgment in favor of asbestos claimants outside of 
     the federal compensation program.
       Initiation of the Fund. Because the new administrative 
     structure and the new funding provisions were amended to 
     ensure that the program is up and running in a matter of 
     months, section 403(d)(5) (p. 211) was deleted from the bill.
       Sec. 404. Effect on Insurance and Reinsurance Contracts. 
     Section 404 (Section 406 in the Committee Bill) deals with 
     the effect of the Act on insurance and reinsurance contracts. 
     Section 406 as it came out of Committee accounted for 
     ``erosion'' of insurance policies that cover not only 
     asbestos liabilities, but also potentially other liabilities. 
     The section established how contributions to the fund by 
     insurers and reinsurers would reduce the limits of existing 
     insurance policies held by the defendant participants.
       Erosion. Changes have been made in section 404(a), dealing 
     with erosion of insurance coverage limits, in order to 
     account for the possibility of an early sunset of the Fund. 
     Based upon the assumption that insurers and reinsurers will 
     be required to make payments into the Fund for 27 years after 
     enactment, erosion of the policy limits is deemed to occur at 
     enactment. If the Act sunsets early, however, the insurers 
     may not be required to pay the full amount for which they 
     have been given erosion credit. In order to treat this 
     situation, section 404 has been amended to provide for the 
     restoration of unearned erosion that exists at the time of an 
     early sunset.
       Additionally, section 404(a)(2)(B) has been amended to 
     conform the Act to the revised funding structure. The Bill 
     that passed out of Committee deemed certain erosion to occur 
     upon a contingent call because the contingent funding was 
     shared equally by the insurer participants and the defendant 
     participants. Any required contingent funding is now to be 
     required solely of defendants, and therefore no erosion will 
     be deemed to occur upon contingent payments.
       Finite Risk Policies Preserved. The Frist/Hatch bill 
     includes a new section 404(d), dealing with finite risk 
     policies. Finite risk policies are non-traditional insurance 
     and reinsurance vehicles that have in recent years been 
     obtained by a relatively small number of defendants in 
     asbestos litigation and some of their insurers in an effort 
     to responsibly manage their asbestos liabilities. These 
     contractual arrangements were specifically designed because 
     traditional asbestos coverage was no longer available after 
     the mid-1980s. Generally, finite risk policies provide 
     coverage with respect to events that occurred in the past and 
     are already known to both parties to the contract. Commercial 
     General Liability insurance provides coverage usually for 
     injuries that may occur in the future.
       Because of the unique nature of these kinds of contractual 
     arrangements, it is appropriate that finite risk insurance be 
     excluded from the legislation. This will avoid the danger 
     that participants that have entered into these arrangements 
     could be required to pay twice. Without the exclusion, 
     participants that have entered into finite risk arrangements 
     would be required to pay substantial amounts to the trust 
     fund and also be subject to a potential forfeiture of their 
     rights to funds comprised, in effect, mostly of their own 
     money used to prepay their asbestos liabilities. The 
     participants that have obtained finite risk insurance should 
     not be penalized by the legislation. If the finite risk 
     arrangements are not excluded from the legislation, the 
     insurance carriers issuing the finite risk insurance policies 
     would reap a substantial windfall at the expense of such 
     participants.
       Treatment of Other Insurance and Reinsurance Rights or 
     Obligations. A new section 404(e) has been added to specify 
     the effect of the Act on certain reinsurance and insurance 
     claims. Generally, no participant may pursue coverage claims 
     against another participant or captive insurer for required 
     payments to the Fund. Certain insurance assignments are 
     voided. Otherwise, the Act does not affect insurance or 
     reinsurance rights or obligations unless a person voluntarily 
     pays a claim superseded by the Act or otherwise available 
     limits are deemed eroded.
       Sec. 405. Annual Report of the Administrator. The sunset 
     provisions in S. 1125 as reported (section 404(3), p. 214) 
     created an inflexible trigger that could cause the Fund to 
     terminate unnecessarily because of a short-term bulge in 
     claims to the detriment of claimants. Section 405 amends old 
     section 404 to provide a workable alternative to the sunset 
     provisions, giving the Administrator more time and more 
     flexibility, such as through the increased borrowing 
     authority, to deal with a short term aberration in claims and 
     available funding. S. 1125 only gave the Administrator a mere 
     90 days to correct for short-term liquidity problems. S. 1125 
     as reported also would have only ensured that 95% of the 
     award amounts owed for the prior year and 95% of eligible 
     claimants be paid prior to sunset. The alternative now in the 
     bill would require that sufficient funds be available to pay 
     all resolved claims in full. Moreover, the bill now makes 
     clear that any debt incurred by the Fund is paid by monies in 
     the Fund and not the United States treasury. These provisions 
     also ensure that the risk that the Fund runs out of money is 
     borne by the participants, providing that, in the event of 
     sunset, a federal cause of action is created and the 
     claimants may file their claims in federal court.
       Sec. 406. Rules of Construction Relating to Liability of 
     the United States. This section was previously section 405 in 
     S. 1125 as reported [with one change to conform to the new 
     administrative structure].
       Sec. 407. Rules of Construction. Provisions found in 
     section 101(d) of S. 1125 as reported (p. 23) can now be 
     found under new section 407.
       Sec. 408. Violations of Environmental and Occupational 
     Health and Safety Requirements. Provisions found in section 
     222(c) of S. 1125 as reported (p. 171) are now placed in new 
     section 408.
       [Sec. 409. Tax Treatment. Currently, insurers have tax-
     deductible status for reserves originally set aside for 
     payment of asbestos claims. Under S. 1125, these reserves 
     would now be used to pay assessments required by the Act. New 
     section 409 would maintain the tax deductibility of these 
     reserves until such time as the insurer makes payment to the 
     Fund.]
       Sec. 410. Nondiscrimination of Health Insurance. New 
     section 410 incorporates a proposed amendment by labor 
     representatives and Democrats that explicitly extends the 
     protections of HIPAA to ensure that claimants cannot be 
     discriminated against for provision of health insurance 
     solely as a result of filing a claim for medical monitoring 
     reimbursement with the Fund.

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