[Congressional Record Volume 152, Number 13 (Tuesday, February 7, 2006)]
[Senate]
[Pages S738-S739]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
ASBESTOS
Mr. KYL. Mr. President, when the Judiciary committee reported an
asbestos-trust fund bill in 2003, I proposed three criteria for
evaluating such a bill: the trust fund must be fair to people with
asbestos injuries; its cost must be reasonable; and it must provide a
permanent solution to the asbestos-litigation crisis. Last year, I
voted to report this bill out of committee because I believe that the
bill does meet or has the potential to meet each of these criteria. I
also voted for the bill in no small part out of appreciation for the
chairman's extensive efforts to address my concerns about the bill. I
particularly appreciate his assistance in adding to the bill a
gatekeeper mechanism for certifying exigent claims seeking an early
settlement. Any startup provision that threatens to prematurely return
the trust fund to court is bad for victims, bad for participant
businesses, and bad for the U.S. Government. Once this fund is started,
it need to work--we cannot shift victims back and forth between the
tort system and the fund, especially those victims with malignant
conditions, who likely do not have long to live.
The need for this bill is obvious. Current asbestos litigation
practices have been accurately described by Professor Lester Brickman
as a ``massively fraudulent enterprise fit to take its place among the
pantheon of American scandals.'' Typically, trial lawyers consolidate
thousands of claims and file them against a series of defendants. These
claims are generated by mass-screening recruitment companies that
ignore all scientific standards for identifying asbestos disease and
employ corrupt physicians who will say that anyone has asbestosis if
the fee is right.
In the perverse rules, plaintiffs' lawyers have a de facto veto over
confirming the bankruptcy trust and can thus dictate its terms.
The results are predictable: even for asbestos bankruptcy trusts
amounting to billions of dollars, the plaintiffs' lawyers take 40
percent off the top. These recoveries inevitably compensate lawyers in
an amount several orders of magnitude greater than anything resembling
a reasonable hourly rate. And all for bringing claims that no honest
doctor would ever describe as legitimate cases of asbestos injury. It
is easy to see where a well-crafted trust fund could improve on this
system--how it could cut our the trial lawyer middle man and preserve
recoveries for actual victims of asbestos disease.
Nevertheless, when I voted for this bill in the committee, I
expressed reservations about the final product. One concern about this
bill looms above all others, and it directly threatens all three of the
above-stated criteria for evaluating the bill: solvency. I remain
deeply concerned that this fund will run out of money and prove unable
to pay all qualifying claimants. Allow me to explain why I am concerned
about the fund's finances.
Here are a couple of reasons why. First, look to the bankruptcy trust
funds previously existing and that have existed in the past. What has
our experience been? Not very good.
In written questions to Dr. Francine Rabinovitz, who has been
retained by trust fund bankers to estimate future claims under the
fund, I asked her about the experience under the asbestos bankruptcy
funds. Those funds are about the closest analog to what we are doing
here--no-fault funds that compensate all claimants who meet particular
exposure and medical criteria. Indeed, the criteria for this fund
explicitly are borrowed from the latest version of the Johns Manville
bankruptcy fund, which is part of her study. I appreciate her candor.
Here is what she had to say:
To my knowledge, none of the bankruptcy trusts created
prior to 2002 have been able to pay over the life anywhere
close to 50 percent of the liquidated value of qualifying
claims. Of the current generation of bankruptcy trusts, the
expected payout of those trusts, to my knowledge, ranges from
a low of 5 percent (Manville) to a high of 31.7 percent
(Western McArthur). The only current operating Trust to pay
100 percent of its scheduled values in the Mid-Valley Trust.
These percentages are sensitive, of course, to the
eligibility criteria the trusts apply. Under its original
eligibility criteria, Manville was forced to drop its initial
100 percent payout first to 10 percent and then 5 percent of
liquidated value. There will be a reevaluation of Manville's
ability to pay a higher percentage in the near future by
virtue of the impact of its recently imposed more stringent
eligibility criteria.
These figures should disturb us all.
We are legislating a $140 billion trust--one that must work, because
the costs of failure would be catastrophic. And yet the model for this
fund is one that has failed every time that it has been tried. The
miserable performance of the bankruptcy trusts should, at the very
least, make us very cautious in proceeding down the same no-fault
trust-fund path. While I recognize that this Fund is not exactly like
the bankruptcy trusts--that it is designed better in some ways--in
other ways the compensation criteria employed by this Fund are a change
for the worse.
Another example that ought to give us some pause is the black lung
fund, which is designed to compensate miners with CWP, a coal-mining-
induced lung disease. That fund is now $8.7 billion in debt. It is now
finally bringing in enough revenue to pay current claimants, but it is
unable to service its debt. Each year's interest is simply added to the
total debt. This is no way to run a trust fund.
It is telling to read the story of the black lung fund and hear why
it has become so overburdened. The narrative should sound familiar to
anyone who has closely followed the committee proceedings for the
asbestos fund. There is a June 12, 2002 report from the Congressional
Research Service. I wanted to quote from part of it, but the bottom
line is that the crafters of the black lung fund ignored medical
science when they set up the fund's compensation criteria. As is
predictable for Congress, criteria were developed in the spirit of
political compromise rather than under the guidance of hard science.
The results have been very unfavorable.
The report basically said:
Virtually all of the expectations for the Black Lung
Benefits Act when it was enacted in 1969, e.g., the numbers
of claims submitted or approved, were contradicted by
subsequent experience. Corrective legislation was adopted in
1972, 1977, and 1981, including the establishment of trust
fund financing in 1977, but results have continued to be at
variance with expectations. As a consequence, the trust fund
has perennially been in a position of growing deficit.
In other words, even at a time when the black lung fund's liberal
compensation criteria were generating a surplus of claims, political
pressures nevertheless pushed Congress to further liberalize those
criteria and further bankrupt the fund.
In the asbestos arena, I fear that we already have repeated the first
part of the black lung fund story. Our concern is that as we continue
down this path, we risk repeating the rest of the story as well.
But this fund is different from black lung in one key respect: it is
much, much more expensive. This fund has the potential to burn through
scores of billions of dollars, rack up $30 billion in
[[Page S739]]
debt, and throw us back into the tort system--all within one decade.
Such a result truly would make the black lung fiasco seem
insignificant. It would be an utter disaster. We cannot let it happen.
I wish that the Judiciary Committee had learned more from the black
lung experience--that we could at least recognize that a no-fault trust
fund must be run as a tight ship, with rigorous compensation criteria
and no leakage of claims. Unfortunately, that does not describe the
bill that has been produced by the Judiciary Committee.
In his recent testimony before this committee, Dr. James Crapo
described how we are repeating the same mistake made in the black lung
fund: we are compensating diseases that are not caused by occupational
exposure to asbestos. Dr. Crapo criticized the fund's compensation of
persons with pleural reactions, which are not regarded as a disease and
are not even a predictor of future disease. He also criticized the
fund's claim level for persons with colorectal, stomach, and other
cancers, noting that it would ``result in large compensation to large
numbers of individuals who develop a cancer for which there is no
established causal relationship to asbestos exposure.''
And just as was the case with black lung, despite the asbestos fund's
use of criteria that are far more liberal than what can be justified by
medical science, we already are hearing arguments that the fund should
go further, that its compensation criteria should be even more liberal.
For example, the medical literature strongly demonstrates that the only
marker for asbestos-related lung cancer is clinically significant
asbestosis. The cohort studies overwhelmingly show that unless a person
has at least some asbestosis, asbestos exposure played no role in his
lung cancer. But in this bill, we go further than compensating lung
cancer in the presence of asbestosis. We also compensate lung cancer
with pleural plaques. Pleural plaques are evidence of asbestos exposure
but are not a valid marker for asbestos-related lung cancer.
And yet, even this has not satisfied some fund critics. This
committee was even forced to vote several times on an amendment that
would have obligated the fund to pay compensation for lung cancer when
the claimant did not even have pleural plaques. The committee did
defeat that amendment by a vote of more than 2 to 1, showing some
respect for medical science. Nevertheless, the amendment is a harbinger
of the political pressures that this Fund ultimately will face over its
life.
Several other aspects of this bill also cause me concern. Let me
summarize some of those.
For example, the sunset: The bill still contains a provision that
would prematurely terminate the fund and return all claims to State and
Federal court, with no mechanism for fixing problems even if the reason
that the fund is running out of money is because it is paying non-
meritorious claims. Once the fund is started, it must work. Going back
to court is not a realistic option. As the bill now stands, the fund
would borrow $30 billion prior to any sunset. Once companies are back
in court defending against asbestos claims, they would also be paying
down this debt. This would require full trust fund assessments for at
least a decade. These payments, combined with renewed litigation and
no, or heavily eroded, insurance policies, would be unaffordable for
many companies. The effects of such a sunset likely would be so
devastating that companies would demand that the Federal Government
begin directly subsidizing the fund. This is a prospect that we should
do all that we can to avoid. The fund should have a self-correction
mechanism that makes sure that a sunset will never happen.
Another problem is allocation. This is an emerging problem, the scope
of which we are only gradually becoming aware of, and, frankly, one to
which I will devote my primary attention. The bill requires companies
to pay into the fund based on their past asbestos expenditures,
judgments, settlements, and litigation costs, even if those payments in
the past were all absorbed by insurance. Companies' insurance will not
cover their trust fund payments; insurers pay into the fund separately.
The fact that the bill effectively invalidates the company's insurance
contracts creates colorable takings claims against the fund. It also
creates some serious inequities. Companies that found their asbestos
liabilities to be manageable will find themselves facing unaffordable
fund assessments. I am going to insist we have language in this bill
that will address these inequities.
Another problem is startup. Much progress was made during the last
days of markup toward fixing the so-called startup provisions.
Nevertheless, the fund still ultimately allows claims to return to
court if there are delays in startup, with no limits on award and no
offsets in future fund payments for participants. Other, much simpler
trust funds, such as those for radiation workers, have taken 18 months
to start functioning. We cannot dismiss the possibility that this fund
will require more than 2 years to begin paying all claims. Without an
offset in limits, such a startup reversion would be disastrous for many
companies.
Another issue relates to pending claims. The fund allows claims that
already have advanced to trial to remain in the tort system with no
offsets and no limits on damages. Already, some trial lawyers have
begun seeking acceleration of their trial dates in order to take
advantage of this provision. For the same reasons as applied to the
startup provisions, such continued litigation could be very damaging.
A final problem is the problem of medical criteria which I alluded to
earlier. Although improved over the 2003 committee bill, especially
with regard to removal of level VII smokers, the fund still pays people
with very common diseases that were not caused by exposure to asbestos.
Credible medical experts had expressed the view to the committee that
these problems will bankrupt the fund. These flaws in the bill would be
less severe if the fund contains some self-correction mechanism that
allowed tightening the million-dollar criteria in the event of
insolvency caused by nonmeritorious claims, but it currently contains
no such mechanism.
In summary, the bottom line is this is a bill which remains very much
a work in progress. I am committed to addressing its problems as the
bill advances through the Congress. I want to see it advance through
the Congress. The bill is so important to so many people: the asbestos
victims seeking compensation--at least it might help take care of their
families, the businesses with only marginal connections to asbestos
that nevertheless face bankruptcy through litigation, and workers and
pensioners who see their jobs and retirement accounts destroyed by the
litigation juggernaut. This bill is important. I look forward to
working on the legislation with the chairman of the committee, the
ranking member, and others who are supporting it. I will support the
cloture motion and motion to proceed to the consideration of the bill.
The PRESIDING OFFICER. The Senator from Kentucky.
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