Congressional Record, Volume 152 Issue 15 (Thursday, February 9, 2006)

[Congressional Record Volume 152, Number 15 (Thursday, February 9, 2006)]
[Senate]
[Pages S879-S898]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005

The PRESIDING OFFICER (Mr. Chafee). Under the previous order, the
Senate will resume consideration of S. 852, which the clerk will
report.
The assistant legislative clerk read as follows:

A bill (S. 852) to create a fair and efficient system to
resolve claims of victims for bodily injury caused by
asbestos exposure, and for other purposes.

Mr. FRIST. With the authority of the majority of the Judiciary
Committee, I withdraw the committee amendments, and I send a substitute
amendment to the desk.
The PRESIDING OFFICER. The committee amendments are withdrawn.

Amendment No. 2746

The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Tennessee [Mr. Frist], for Mr. Specter and
Mr. Leahy, proposes an amendment numbered 2746.

(The amendment is printed in today's Record under ``Text of
Amendments.'')
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. DURBIN. I ask for the yeas and nays on the substitute amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. SPECTER. Mr. President, I suggest the absence of a quorum.

[[Page S880]]

The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

Amendment No. 2747 to Amendment No. 2746

Mr. SPECTER. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Pennsylvania, [Mr. Specter] proposes an
amendment numbered 2747 to amendment No. 2746.

Mr. SPECTER. I ask unanimous consent the reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

On the appropriate page, insert the following and number
accordingly:
Guidelines.--In determining which defendant participants
may receive inequity adjustments the administrator shall give
preference in the following order:
(A) Defendant participants that have significant insurance
coverage applicable to asbestos claims, such that on the date
of enactment, 80 percent or more of their available primary
insurance limits for asbestos claims remains available.
(Note: I recognize that this may not be the most adequate
indicator of insurance matching liabilities--however, it's a
political reality that must be addressed).
(B) Defendant participants where, pursuant to the guidance
set forth in section 404(a)(2)(E), 75% of its prior asbestos
expenditures were caused by or arose from premise liability
claims.
(C) Defendant participants who can demonstrate that their
prior asbestos expenditures is inflated due to an unusually
large, anomalous verdict and that such verdict has caused the
defendant to be in a higher tier.
(D) Any other factor deemed reasonable by the administrator
to have caused a serious inequity.
In determining whether a company has significant insurance
coverage applicable to asbestos claims, such that on the date
of enactment, 80% or more of their available primary
insurance limits for asbestos claims remains available, the
administrator shall inquire and duly consider:
(1) The defendant participant's expected future liability
in the tort system and accordingly the adequacy of insurance
available measured against future liability.
(2) Whether the insurance coverage is uncontested, or based
on a final judgment or settlement.

Mr. SPECTER. Mr. President, there are a number of issues to be
discussed, but the distinguished Senator from Utah has been awaiting
recognition. I yield now to Senator Bennett so he can make his
comments. We managers will be here all day and can speak later and not
tie up the Senate.
The PRESIDING OFFICER. The Senator from Utah.
Mr. BENNETT. I thank the Senator from Pennsylvania for his courtesy
and pay tribute to him and the Judiciary Committee for their effort in
dealing with this most vexatious problem.
When the asbestos problem burst into the American consciousness,
everyone was concerned there would be a way to compensate those who are
victims of this difficulty. Unfortunately, certain members of the trial
bar developed what I would call a business plan that was based on two
fundamental principles: No. 1, venue shopping; and No. 2, a deliberate
pattern of overwhelming the legal system so the various cases could not
be heard on their merits.
Those who adopted this business plan have been tremendously
successful. They have driven 75 companies into bankruptcy. They have
created enormous litigation all over the country. Unfortunately, the
outcome in terms of the victims has not been what anyone would want,
with the possible exception of those who were behind the creation of
the business plan in the first place.
The net effect of what we have seen in the asbestos litigation is to
take an American tragedy and turn it into an American disaster, with a
relative pittance for the victims; an undeserved windfall for people
who have no health problems; and an overwhelming bumper crop of cash
for the trial lawyers who developed the plan in the first place.
There is a great uprising of demand that we do something about this.
That demand is legitimate. The Congress should act. We do need a
national solution, even though we have seen progress take place--not at
the Federal level but at the State level. It is very interesting to
watch what has been happening as various States have grappled with this
challenge and done their best to deal with the two problems I have
identified: the venue shopping and the strategy of overwhelming the
system.
One breakthrough in this regard came from a Federal judge. Her name
was Janis Jack. I am told she had something of a medical background.
She was trained as a nurse. So when these cases came before her she
instinctively realized there was something fundamentally wrong with the
medical claims. Without going into the detail of what happened before
Judge Jack, I quote the statements she made as she handed down her
scathing decision:

These diagnoses were driven by neither health nor justice,
they were manufactured for money. The court finds that filing
and then persisting in the prosecution of silicosis claims,
while recklessly disregarding the fact there is no reliable
basis for believing that every plaintiff has silicosis,
constitutes an unreasonable multiplication of the
proceedings.

I pause here to say she is highlighting what I talked about before,
that there was a conscious business plan to overwhelm the system. She
calls it ``an unreasonable multiplication of the proceedings.''
Continuing the quote:

When factoring the obvious motivation, overwhelming the
system to prevent examination of each individual claim, and
to extract mass settlements, the behavior becomes vexatious,
as well. Therefore, the court finds that the firm will be
required to satisfy personally the excess costs, expenses,
and attorney fees reasonably incurred because of such
conduct.

I am not a lawyer, but I understand when a Federal judge uses the
words ``vexatious'' it is probably not good for the people who are in
her court listening to her. And she is requiring the law firm that
brought the case to pay all of the costs of the case. That has sent a
chill throughout the plaintiff's bar who thought they had a free ride
with their business plan.
The other thing that has happened as various States have looked at
this has been the setting up of inactive dockets, or deferral
registries, two terms with which I was unfamiliar before I got into
this. They make eminent good sense. All they do is say to those
plaintiffs who, in fact, are not sick: We will let your claim stand, we
will not dismiss it out of hand, but we will put it in an inactive
docket or a deferral registry. In other words, your claim cannot be
pursued until you get sick. Just because you have a doctor's
certificate that says you might get sick does not mean you are entitled
to damages.
Interestingly enough, the fallout from Judge Jack's ruling where she
found that doctors had gone beyond medical practice in order to give
these certifications that would allow people to come forward as if they
were plaintiffs, means that some doctors are facing jail time and some
lawyers are facing jail time as a result of the findings in Judge
Jack's court.
The combination of a judge who finally says, You need to focus on
whether people are ill, and State legislation that says, We will not
allow the courts to be overwhelmed by the claims of those who are not
ill, has begun to taper off the level of asbestos cases and has caused
some people to say we have turned the corner; that the trust fund
established in the bill before us is an idea whose time has gone; that
it is not necessary to have a trust fund to deal with these issues.
Others say: No, we have to have the trust fund. We have to have the
bill before us.
One of the perplexing things to me, as I listened to people in the
business community discuss this, has been to discuss how split the
business community is, how there are so many companies that come to me
passionate in their insistence this bill be passed, or they say there
will be disaster going on uninterrupted into the unknown future.
Just as passionate are other companies who come to my office, sit
down with me and say: This bill is the biggest disaster we have ever
seen. You cannot allow it to happen. If this bill happens, we will go
out of business.
That is not a minor gulf between the proponents and the opponents. I
have tried to figure out why business men and women examining this as
dispassionately as they can have come to

[[Page S881]]

such diametrically opposite positions. I have found, for me, what is an
explanation. I have prepared two charts that will demonstrate this.
Both of these are based on assumptions. We must understand that this
entire debate is based on assumptions. No one really knows.
There are those who say the $140 billion called for in the trust fund
will be more than enough to take care of all of the claims. There are
those who say it is nowhere near enough.
There are those who say the claims will go down as a result of the
trust fund, and there are those who say the claims will increase as a
result of the trust fund. No matter how you slice it, every argument
everybody is making, including the ones I will make, is based on an
assumption that is not provable. But I have done the very best I can to
come up with sources that are reliable.
So here is why I think the business community is split. It has to do
with where you fall on the trust fund chart, what tier you are in, and
basically how much money you have to pay.
Here is the first list that comes up, and this is compiled by a
consulting firm to the bankruptcy court that looked at asbestos claims.
I have summarized in this column of the chart, if there is no trust
fund, the estimated liabilities of the companies listed. That means,
Armstrong World Industries, according to the consulting firm, if there
is no trust fund, will face a liability of roughly $2 billion. Babcock
& Wilcox will face a liability of roughly $2 billion--and so on all the
way down--U.S. Gypsum, $4 billion. I will come back to U.S. Gypsum in a
minute because it helps make my point. So this is the column that shows
the liability of these 10 companies if the trust fund is not enacted.
Now, this is the column that shows what they will pay to the trust
fund. In other words, their liability will go from this number to this
number, if the trust fund is established. Here in this column is the
difference. For these 10 companies, it is $20 billion.
If I were the CEO of any one of those companies, I would be very
strongly for the trust fund. Now, I reject the idea this is being
driven by K Street and lobbyists. This is a very logical business
decision on the part of the CEOs of these companies, and I do not think
any of them had anything to do with this allocation. It is the way the
trust fund was structured. As they read the details, they said: This
makes good sense for us. Let's be for it.
But out of this chart comes a fundamental question that I have at the
bottom of the chart. If there is a $20 billion difference between their
liabilities and their contributions, who will make up the difference?
So now let's go to the second chart.
On this chart is a list of companies with estimated outlays, if there
is no trust fund, that will be substantially less than those on the
first chart. Foster Wheeler--I understand this number may change. These
are estimates. All of these numbers may change. But I have heard, just
this morning: Hey, we are trying to recalculate that, Senator. We want
you to be exactly accurate. It might be $79 million, but it may not.
But it will be relatively low compared to the number on the next chart.
So let's understand all of these.
But here is Foster Wheeler, Oglebay Norton. They will have no
obligation--no obligation--if the trust fund does not pass. Why?
Because they have insurance. They took precautions. They have insurance
that will pay the claims. They will have no obligation. National
Service Industries will have $11 million if the trust fund is not
enacted, and so on.
Now, Oglebay Norton will owe the trust fund $495 million in order to
be relieved of zero obligation if the trust fund does not pass. Who
will make up the difference? It will be made up by companies like
these, some of which earn so much lower numbers than the numbers that
are here that this could very easily jeopardize their survival. Some of
the companies on this chart might not survive if the trust fund is
passed. You have no obligation, but you have to pay half a billion
dollars over a 30-year period?
There are some companies here whose total revenue is $100 million a
year, and their annual responsibility to the trust fund is $19 million.
Twenty percent of their total revenues will be required, and they have
no exposure or relatively no exposure. There is not a company here with
exposure, no matter how high it may be, that would not be satisfied by
2 or 3 years' contribution to the trust fund, but they are going to
have to make that contribution for 30 years.
The companies on the first chart will see their stocks go up
dramatically as soon as this bill is passed, and I do not begrudge them
that. I think that is wonderful. But the other companies that will make
up the difference will not only see their stocks fall, they may
disappear and see their employees put out of jobs, their employees put
on the unemployment line.
I do not think there was anything sinister about the way in which the
trust fund decisions were made. But I do not think it has been analyzed
properly with respect to the real-world impact of those decisions. So,
to me, that is why we have the split in the business community, with
some companies saying this is a great idea, and other companies saying,
with some irony, over our dead body, because they may be very much
dealing with a dead body here.
All right. Does that argue that we should not have Federal
legislation? No. The progress in the States, causing this level of
litigation to level out and begin to turn down, is not even throughout
the country. We need a national standard. Ohio has led the way. Ohio
has bills that are causing the litigation to begin to dry up. We are
seeing the pattern of venue shopping dry up. But we still do not have
any action out of California or New York. And, if I may, I remember
when the Governor of Utah was once asked: What is the greatest economic
development agency you have in Utah? And he said: The California State
Legislature.

I think we can wait a long time before the California State
Legislature can be depended upon to deal with this issue. So we do need
a national bill.
But the one thing everybody on either one of these charts wants is
certainty.
Let's go back to the first chart and the example I was talking about
with respect to U.S. Gypsum or USG. Within the last week or two, USG
announced they were setting up a reserve for their asbestos
liabilities. They said: We are setting up the reserve with $900 million
in cash and $3 billion in contingent notes. Their stock went up 15
percent the next day because their investors said there is a degree of
certainty.
Now, if you take that $3.9 billion figure they determined was the
amount of their liability and you compare it to what the consultants
said their liability was--$4 billion--you are very much in the ballpark
with roughly the same figure. Now, the interesting thing about the
contingent notes they said they would sign for the $3 billion is the
contingency. The contingency was whether this bill passes. If this bill
does not pass, they will then be on the hook for the $3 billion in
contingent notes. If the bill does pass, they are out with only the
$900 million. As we see, they are only required to pay, under the trust
fund, $797 million. So as to the $900 million, they may even get a
refund from that if this bill passes.
That demonstrates the value of certainty. They came up with
certainty, one way or the other, and their stock went up 15 percent. We
can give people certainty with the right kind of Federal bill that does
not have the problems that this trust fund has.
So what do I search for in a bill? Well, the first one should be
obvious from the presentation I have made: a restructuring of the
liabilities in the trust fund. And if the trust fund were to go away,
that would not bother me either, if we could have an understanding of
how we could take the experience in the States and make it work on the
Federal level.
Back to Judge Jack and her rulings and the actions of the various
States, we discovered there really are only a few things that need to
be done to tame this monster.
The first one is to stop the venue shopping. Well, if we pass a
Federal bill, we can do that. The Judiciary Committee has worked hard
in that direction, and I commend them for it.
No. 2, building on what Judge Jack discovered, we can have the right
kind of medical certification. All she did was force these people to
prove they were injured and the claims went away. I am not satisfied
the medical certification in this bill is strong enough. I

[[Page S882]]

would prefer to take the kind of medical certification we have at the
State level, particularly Ohio, and say if we can write that into the
Federal bill, then we are on our way toward realizing Judge Jack's goal
in eliminating those who are not medically certified.
The third thing we can do is adopt the position that many of the
State courts have adopted, which simply says: You can file your claim
if you are not sick because you think you might be, but we are going to
put that claim in an inactive docket, or a deferral registry--pick
whichever term of art you prefer--and it will sit there unacted upon
until you can come in and prove you are sick.
If we can do those three things--stop the venue shopping, get a
legitimate medical certification, and set up inactive dockets--at the
Federal level, the State experience says we can solve this problem.
Whether there is a role in all of that for the trust fund, I am not
sure.
I am enormously respectful of the senior Senator from Pennsylvania.
He is a close, personal friend and has been the entire time I have been
in the Senate. I commend him and the members of the Judiciary Committee
for their efforts in working on this bill. But I do have a sense that
in their focus on the disaster this has been throughout our history
they have crafted a solution that, like the generals in the Army, may
be the solution to the last war. They may have been fighting the last
war instead of addressing what has currently happened.
So I understand the Senator from Texas has an amendment, which I
intend to support. I understand the Senator from Arizona, Mr. Kyl, has
a provision that presumably will affect this difference between people
on the two lists. I am interested in that. I am not sure it is the
solution, but I want to move in this direction. I think we need a bill.
I want to support a bill. As the bill currently stands, I think it is
in need of the kinds of changes I have outlined.
Mr. DURBIN. Mr. President, will the Senator yield for a question?
Mr. BENNETT. I am happy to yield.
Mr. DURBIN. I would like to commend the Senator from Utah. He and I
come from different parts of the political spectrum, and his life
experience in business and otherwise is quite different from my own
life experience. But I will tell you that I agree completely with your
analysis. I think you have carefully looked at the impact of this
pending bill on real-life companies, real-world companies, and there
are clearly winners--and big winners--and losers--and big losers--in
the course of creating this trust fund.
Without assigning any motive as to why some companies do so well and
others do so poorly, I think what you have suggested as an alternative
is the sensible middle ground. And the sensible middle ground, which I
think will soon be offered by the Senator from Texas, is to look at
successful efforts in States that have changed the whole environment on
asbestos litigation.
I am looking to this amendment. I want to read it carefully before
making any commitment on my part, but this seems to me to be the right
move to make, to capitalize on the State efforts before we create a
trust fund.
I would like to ask the Senator if he has any knowledge or personal
experience with the creation of other trust funds in the past in an
effort to solve problems like black lung, and even in the trust funds
that were created by companies like Johns Manville, and whether the
initial estimates of cost turned out to be accurate in the long run.
Mr. BENNETT. I thank the Senator for his kind words. We will continue
to be on opposite sides of the spectrum, but we will continue to be
good friends.
In response to his specific question: Yes, the GAO has done a study
of Federal trust funds and has found that as a general rule, the
creation of a trust fund creates roughly twice as many claims as was
anticipated at the time of their creation. This doesn't automatically
mean twice as much money. In some cases, it means substantially more
than twice as much money. And in one case, it means the amount of money
stayed the same because the amount proclaimed was less than projected.
The one thing we can draw from that experience is what I said at the
beginning of my remarks. Virtually everything we are saying about this
is a guess. Everything we are assuming is based on an extrapolation
based on other assumptions. We cannot, with any certainty, say that the
trust fund will be sufficient or that it will not be sufficient. The
one thing that we can say with certainty is, this is how much you will
have to pay if the trust fund is created. That, as I say, is the reason
for the split in the business community. As people have done the
numbers, some say: I am better off in the tort system. Others say: I
will pay anything to get out of the tort system.
The trust fund needs to be manipulated, if we are going to keep the
trust fund, to make sure that there is a greater degree of fairness on
the part of those who are contributing to it.
This is taxation with a vengeance on the part of the Federal
Government for many of these companies. And some companies are saying:
We are willing to pay that tax rate. Others are saying: Under no
circumstances.
It will be very interesting if a conversation is held with those
companies fighting for the bill and the proposition is made, if you
really want the bill, will you increase the amount of your contribution
to the trust fund so that the amount for some of these other companies
will go down? That will be an interesting conversation. I understand
some people are thinking about having it. I would like to be present
when it is had, to see where we go with this.
Mr. DURBIN. I thank the Senator.
Mr. BENNETT. I yield the floor.
The PRESIDING OFFICER. The minority leader.
Mr. REID. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. REID. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Ensign). Without objection, it is so
ordered.
The Senator from Texas.

Amendment No. 2748 to Amendment No. 2746

Mr. CORNYN. I send an amendment to the desk and ask for its immediate
consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Texas [Mr. Cornyn], for himself, Mr.
Coburn, Mr. Graham, Mr. Thune, Mr. Ensign, Mr. Inhofe, Mr.
Martinez, Mr. Crapo, Mr. Bennett, Mr. Smith, Mr. Craig, Mr.
Sununu, Mr. DeMint, Mr. Thomas, and Mr. Bunning, proposes an
amendment numbered 2748 to amendment No. 2746.

Mr. CORNYN. I ask unanimous consent that reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. REID. Mr. President, I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
Mr. CORNYN. Mr. President, I rise to join my colleagues in a call for
asbestos reform. No other issue more readily highlights the toll that
excessive litigation has placed on our society and, even more
poignantly, on the lives of those who are dying with asbestos-related
disease who are left with inadequate legal recourse and compensation by
virtue of the massive waive of litigation, primarily by those who are
not sick and who suffer no impairment as a result of their exposure to
asbestos. Make no mistake about it: Today we are not just talking about
liability reform, we are talking about scandal reform.
The legislation before us represents a genuine effort--I dare say, a
Herculean effort--by the chairman of the Judiciary Committee and the
ranking member and others who have worked together with them to try to
bring us to where we are today; that is, with a good-faith proposal to
address this complex problem. No one has worked harder or driven the
members of the Judiciary Committee harder than our chairman, Senator
Specter. He has tried hard to reach consensus among so many disparate
parties and on so many different complicated issues.

[[Page S883]]

The question before us is whether a national trust fund of the
magnitude contemplated is the appropriate method to ensure victims will
be compensated fairly and efficiently and that the trust fund can
reasonably expect to remain solvent and viable.
After countless hours of reviewing and studying the options and hours
of working with my colleagues to achieve reform, I unfortunately
conclude that in its current form and with its current significant
weaknesses, it is not. Rather, I believe the likelihood is far greater
that the trust fund will sooner, rather than later, prove unsustainable
and return us to the same broken tort system, then leaving thousands of
Americans in the wake of a failed Government program, wondering where
to go and why they must now go back to court. This simply cannot be the
outcome.

I offer an alternative solution, a simple solution that has been
tested in States around the country and a solution that would target
the key causes of the asbestos liability crisis. I am pleased to offer
this amendment on behalf of 14 cosponsors: Senators Coburn, Graham,
Thune, Ensign, Inhofe, Martinez, Crapo, Bennett, Smith, Craig, Sununu,
DeMint, Thomas, and Bunning. We are working closely with our colleagues
on the Democratic side who are looking for an alternative solution. I
do believe, before the close of business today, we will have bipartisan
cosponsorship of this amendment.
We are looking for a solution that provides a simple but effective
approach and one that establishes a national floor with respect to the
medical criteria required to bring a claim into court, one which tolls
the statute of limitation to ensure that victims get their day in court
and virtually eliminates the likelihood of fraud in the medical
screening industry, which has proven to be a corrupt cottage industry.
In short, that is basically what this amendment would do. It is about
50 pages, not 400 pages. It requires no complicated administrative
scheme, no complex funding formulas that require a Ph.D. in economics
to understand. There are no complex constitutional questions, no
litigation that will arise over the constitutionality of the proposal,
and no real cost to the American taxpayer or, for that matter, to the
businesses that would otherwise have to contribute to this $140 billion
trust fund. There is no question about favoring one constituency
differently than another constituency. Most importantly, I am confident
that our solution is a system more likely to ensure that those
individuals who are truly sick from exposure to asbestos will receive
fair and efficient adjudication of their claims against those who were
actually responsible for their injuries.
This proposal is embraced by such a diverse group as the American Bar
Association that studied it. You can imagine getting lawyers to agree,
with their divergent interests, on what solution to this problem would
likely work best and be the least disruptive to our civil justice
system. They believe this is it. Indeed, our legislation would target
directly the well-documented causes of the asbestos liability scandal
plaguing our civil justice system.
The oft-quoted RAND Corporation, in its research, has discovered:

Almost all the growth in the asbestos caseload can be
attributed to the growth in the number of nonmalignant claims
which includes claims from people with little or no
functional impairment.

In other words, these are people who are not sick. Those are the main
claimants today under the asbestos liability system. Their research
reveals that up to 90 percent of the plaintiffs filing claims have no
physical impairment, but they have clogged our courts and delayed
justice for those who are sick with asbestos disease. These claims
brought by unimpaired plaintiffs often are generated through mass
screenings and supported by questionable medical evidence, backed by
doctors who do not claim to have a doctor-patient relationship but who
will screen thousands of x-rays and who, not surprisingly, more often
than not, overwhelmingly find some evidence of asbestos-related
disease. When those same x-rays are given a second opinion by someone
without a vested interested in finding asbestos-related disease, only a
minute fraction actually are confirmed. So this is a cottage industry
of fraudulent claims which has further contributed to the broken system
we have today.
Under the status quo, forum shopping is rampant. For example, between
1998 and 2000, five States captured 66 percent of the filings; 66
percent of the asbestos lawsuits were filed in just five States because
of rampant forum shopping. They were the States of Texas--my State--
Mississippi, New York, Ohio, and West Virginia. It is not surprising
that each of these States has now enacted or is seriously considering
enacting asbestos liability reform at the State level. The good news
is, as the Senator from Utah, Mr. Bennett, pointed out, these State
reforms appear to be working. They are working because they rightfully
focus on the causes. So, too, should a national solution. Doctors and
medical providers take the Hippocratic oath which says: First, do no
harm. We in the Congress, particularly in the Senate, have a
Hippocratic responsibility to, first, do no harm in the legislation we
pass.
Notwithstanding the Herculean efforts undertaken by the chairman and
the Judiciary Committee, I believe we cannot honestly take that oath
and represent to the American people that we have done no harm in the
proposal currently before us. We need an alternative which we have
offered with this amendment.
The past several years have witnessed encouraging signs from States
known to have been havens of the worst of the asbestos litigation
abuses. As I mentioned, States such as Texas, Mississippi, Ohio,
Florida, and Georgia are taking action. During the time that we have
debated in the Nation's Capitol what to do, the States have acted.
Some States have created special dockets for unimpaired claimants,
allowing only those who are sick to proceed to trial. It makes sense.
The modest venue reforms and limits on consolidation have been adopted,
and at least 4 States, including, last year, Texas, have enacted
objective medical criteria.
The Texas bill, in the context of asbestos-related claims, allows
claimants who are actually impaired to pursue their claims in the
judicial system and merely defers the claims of those who are exposed
but not impaired. It does this by establishing medical criteria that a
claimant must meet to demonstrate some impairment before proceeding
with the lawsuit. The good news for these individuals who are not
impaired and have been exposed, and for the system generally, is the
vast majority of them never will get sick.
Under the perverse limitations required by the statute of limitations
that require you to file a lawsuit or risk being forever barred under
the current system, they must file now, thus contributing to the huge
clog of our court system and the bankruptcies that have racked up
seemingly one after another. These State efforts are, in fact, working.
While it is difficult to assess the nationwide impact in the short
time they have been implemented, anecdotal evidence indicates there has
been a real impact. For example, one Texas tort reform observer, in
2006, said this:

We are still waiting on more definitive figures, but rough
estimate at this point--filings of new claimants in Texas
have dropped in excess of 50 percent since the State bill
passed in July. Based on the terms of the act, the time has
just run for claimants to file medicals to avoid the [multi
district litigation in Federal Court]. The effect will be
that at least 75 percent of pending claims will be dismissed
or abated. Thousands of claims from unimpaired claimants have
been rendered dormant and will not proceed.

Perhaps the most important point is the ones that justifiably should
proceed because they have real manifestations of asbestos-related
disease will have priority, will have their day in court, and will not
be left with pennies on the dollar, which many are today because of the
bankruptcies that have been created by this flood of litigation.
One example of the claims history of a company in Texas--we will call
it ``company A'' because we don't want to necessarily point out or talk
about a particular company, but company A, between 1980 and 1996, had
134,000 new claims. In 1987, they had 25,000. You can see the rest of
the numbers. The height of their claims experience was in 2001, when
they had 56,000 claims. In 2005, after this legislation passed in Texas
imposing strict medical criteria, creating a dormant docket for those
who

[[Page S884]]

were exposed but not impaired, while letting those who are sick go to
court, only 13,272 claimants came forward. There has been a 77-percent
decline in new filings over the last 5 years. This is due largely to
the legislation and fair enforcement of the law in States such as
Florida, Mississippi, Ohio, Texas, Georgia, and Illinois.
Company B, in Mississippi, has experienced a 90-percent decrease in
claims since their legislation was enacted. The point is, some might
say why don't we leave this up to the States? Unfortunately, we have
seen claims migrate to States that don't have similar reform
legislation, thus mandating, in my opinion, a national solution. That
is what this amendment proposes.
Company C reports a significant decrease in new litigation filings
since September 1, 2005. This is in Texas. The mix of the claims is
important because there have been zero, none, malignancy cases, and 10
mesothelioma claims--the most pernicious cancers that are caused by
asbestos exposure. In terms of the other types of claims, they have
dropped precipitously. So 34 new filings in 5 months, all malignancy
cases, which can be adjudicated in court based upon their respective
merits.
We will go through a couple more here. Company D, in 2003,
experienced 32,444 filings. In 2004, that number dropped to 5,000--from
32,000 to 5,000, roughly. In 2005, it dropped to 2,415, with 6,791
dismissals.
As we can see, there have been significant declines in the number of
claims, making way for people who truly are sick to have their day in
court, while those who have been exposed but are unimpaired and not
sick can preserve their claims for a later date, if and when they
happen to get sick.
The national solution we have crafted is designed to ensure that
those who truly are sick get their day in court, as I said. It
establishes specific medical criteria to be used to distinguish claims
between people who are physically impaired due to exposure to asbestos
and the claims of people who are not experiencing any physical
problems. This legislation will prioritize the claims of the truly sick
through the use of reasonable, objective medical criteria. It requires
physical impairment. It requires supporting documentation to verify
that the claimant can demonstrate impairment based on reasonable and
objective medical criteria. It requires that the diagnosing physician
actually have a doctor-patient relationship with the claimant, avoiding
the millions in this cottage industry doing fraudulent screenings,
which has generated problems for the current system. It allows the
claimant who acquires a nonmalignant condition to pursue a separate
recovery if the person later develops an asbestos-related cancer.
I could go on, but I think it is clear from not only the simplicity
of this approach, and due to the fact that it has broadly been embraced
among organizations such as the ABA, which has both defense lawyers and
plaintiff's lawyers and represents the legal profession generally, it
is their considered judgment that this represents a reasonable and, in
fact, a better solution to our current problem. It observes the
``Hippocratic oath'' that I submit should apply to legislation as much
as it should to the practice of medicine, that it does no harm to
the current system. In fact, it is narrowly focused on the causes of
the problems that confront our system today.

The Federal trust fund may well be a fine solution to the current
problem but only if structured appropriately and only if we can
reasonably expect that it will proceed.
I am sorry to say that S. 852, as drafted, cannot, in my opinion,
succeed. It would create an unsustainable Federal entitlement, with
costs that would likely far exceed the $140 billion price tag presently
contemplated. Enacting this legislation without significant
modification would undermine recent State reforms and would create at
least as many problems as it would solve.
I sincerely believe this alternative amendment my colleagues and I
have offered today is the best hope we have of accomplishing the goal
that I believe all of us operating in good faith share, and that is
ensuring prompt payment for victims and allowing those exposed but not
sick to have their day in court if and when they do become sick.
I invite all of my colleagues to join the 14 of us who are cosponsors
to this amendment. I predict by the close of business today we will
have a bipartisan amendment. We are continuing to reach out to our
colleagues in the Senate, and I know this is a complex issue and many
on the Judiciary Committee have spent years trying to get us to where
we are today. Frankly, I applaud their efforts, as I have the
leadership of our chairman. I believe, and the cosponsors of this
amendment believe, this is the best approach; that is, to pass this
amendment and send it to the House of Representatives so we can provide
a simple and effective solution to the current asbestos scandal.

Amendment No. 2749 to Amendment No. 2748

Mr. CORNYN. Mr. President, before I conclude, I send a second-degree
amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:

The Senator from Texas [Mr. Cornyn], for himself, Mr.
Coburn, Mr. Graham, Mr. Ensign, Mr. Crapo, Mr. Inhofe, Mr.
Martinez, Mr. DeMint, Mr. Thune, Mr. Bennett, Mr. Smith, Mr.
Craig, Mr. Bunning, Mr. Thomas, and Mr. Sununu, proposes an
amendment numbered 2749 to Amendment No. 2748.

Mr. CORNYN. Mr. President, I ask unanimous consent that further
reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The amendment is printed in today's Record under ``Text of
Amendments.'')
Mr. DURBIN. Will the Senator yield for a question?
Mr. CORNYN. Yes.
Mr. DURBIN. Mr. President, I thank the Senator for bringing this
important amendment to debate. I will ask him a question or two about
his amendment.
I think the Senator is on the right track in noting that several
States have made significant progress in dealing with the asbestos
litigation. In some States, there has been an agreement between what
are usually warring and opposing parties as to how the system can be
improved. I wish to ask the Senator from Texas whether the approach he
has suggested to the Senate today would preempt existing State laws and
standards in this area?
Mr. CORNYN. I thank the Senator for his question. It is an important
one. Our intention would not be to preempt local State laws but,
rather, to create a national forum, in a way that would provide
uniformity and would avoid the migration of claims from those States
that have reform to those that do not, thus continuing the status quo.
Mr. DURBIN. One of the more controversial parts of the amendment
relates to joint and several liability, which those of us who have
practiced law know a little more about than those who have not. If a
State already has joint and several liability in these cases, would
your amendment preempt that State's joint and several liability
standard?
Mr. CORNYN. Mr. President, I appreciate the question. This amendment
calls for several liability, not joint liability. The Senator raises a
good question and, frankly, one I want to make sure I do a little
research on and confer with him, perhaps, so I can give him a more
definitive answer.
Mr. DURBIN. Mr. President, I thank the Senator for allowing me to ask
a question. I thank him also for offering the amendment. It is a
valuable part of the debate. Parenthetically, I concur completely with
the Senator from Texas in the fact that many States are doing very
positive things to deal with this issue, and I think it would be wise
for us to look to their leadership in some of these areas. Secondly, I
think he feels as I do, that the underlying trust fund has some
fundamental flaws.
I yield the floor.
Mr. CORNYN. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from New Hampshire is recognized.
Mr. GREGG. Mr. President, I wish to speak a little bit about the
status of the points of order that have been discussed, at least in the
media, relative to this bill, that arise from the Budget Act.
There are four potential issues here. One, we have not seen the final
language, so many of these have not been resolved as to their
applicability.

[[Page S885]]

Talking about the one which has received a significant amount of
attention, there is a reserve fund that was created in the last budget,
the purpose of which was to allow this bill to come forward. The
reserve fund has a series of conditions attached to it, and the effect
of the reserve fund is that it sets up the ability of the budget
chairman to release dollars--in this case an allocation--if those
conditions have been met.
As Budget chairman, I find myself in what would be called a position
of a referee or a fair arbiter on this issue. I have views on this
bill. I don't happen to support the bill. Those views are not relevant
to the decision I need to make as chairman of the Budget Committee
relative to releasing a reserve fund.
The key issue on the reserve fund is whether at some point in the
future taxpayers will become obligated for the claims which would be
made under this asbestos claims bill.
How do I come to a conclusion as to whether taxpayers would be
obligated in my role as a fair arbiter or referee? Basically, I turn to
our professional, nonpartisan, fair whistle caller, sort of like the
referee on the football field on an instant replay going up to the guys
in the stands who just viewed the play and get their opinion. That
group is the CBO, the Congressional Budget Office. They take a look at
the bill, and they score whether the bill is fully paid for. If it is
not fully paid for, then it is arguable, of course, the taxpayers may
end up picking up some of the bill in the outyears, which would
undermine the purposes of the reserve fund.
The initial response from CBO, which was sent to the chairman of the
committee, Chairman Specter, essentially said they don't know. They
estimate the potential income to the fund is about $140 billion. That
is the number talked about around here. The potential administrative
cost of the fund is about $10 billion, but they are not sure whether
the claims will exceed $130 billion. If they exceed $130 billion,
theoretically taxpayers might become liable; if not, the taxpayers
would not become liable. So they essentially said they don't know.
Since they are dealing with outyear numbers, it is, to some degree,
guesswork.
We have not seen the final product, but the final product was
delivered to CBO last night. They are now rescoring it. I don't know
what they are going to say. They may come back and say, yes, it is
clearly outside the revenues and, therefore, taxpayers may end up with
it. They may come back and say, no, clearly it is not the final
version. Or, again, they might say they really can't tell.
Again, as referee, I have to look at this information and make a
decision. My inclination is that if there is no clear one-way-or-the-
other call from CBO, that it either, A, is under, in which case clearly
we would release, or B, it is over, in which case we clearly would not
release. If they are, rather, of the opinion this is too far out and
too difficult to call and are dealing in a range of $10 billion, which
they were in their first letter, then it would probably be unfair--to
stop this bill on that point of order--to the bill, to the manager, and
to the people who believe they have a right to get a fair hearing on
this bill. But that final decision has not been made.
There are three other points of order, however, that lie whether or
not this point of order is made ripe. Those three other points of order
are still potentially there. There has been representation that these
points of order are technical. They are not. At least one of them
certainly is not because it was put in place to address the issue of
one Congress binding later Congresses to major programmatic activity.
We will address those as we go down the road. However, I did want to
update people generally on where this specific point of order relative
to the reserve fund lies because there has been a lot of representation
in the press, as occasionally happens, that has been a little bit off
target.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. SPECTER. Mr. President, I had hoped to engage in a short colloquy
with the Senator from Texas on his amendment, but I had to leave the
floor for a moment or two. I want to make a couple of very brief
points--and I will elaborate on them more extensively later--and that
is the medical criteria bill does not do anything for the employees of
companies which have gone bankrupt. There are some 77 of those, and
more imminently, so that we have a large group of people suffering from
mesothelioma and other deadly, serious diseases who will not be
compensated.
Then we have the veterans who have had exposure to asbestos in a
variety of ways, a lot through Government work, where they do not have
anybody to sue. So a medical criteria bill will not help them.
Then we have basic consideration of the medical criteria bill that
does not really take these cases out of the court system. It does not
stop the suits from being filed. It does not stop the extensive
discovery process, the depositions, the interrogatories, the medical
examinations. When we deal with the question as to injury, it is
subject to contest and subject to litigation. So the medical criteria
bill is a diversion--I wouldn't call it a poison pill because I don't
want to engage in any inflammatory language, but it does not do what
the trust fund does, and that is provide a remedy for compensation for
thousands of very seriously ill people.
While I am on the Senate floor, I want to take up one other point
briefly while the Senator from Illinois is on the floor. He has made an
argument--an extensive argument--about knowing who is going to put up
the money.
When I pointed out yesterday that the lists were available to him to
know who is putting up the money, that his staff, in fact, had looked
at them, he then shifted his ground from not knowing who was putting up
the money to the specious argument that they were secret from the
public in general and that there is some effort to conceal something
which, of course, is not the case.

Then on a mutation, he moves from that to a contention that these
people who had to be subpoenaed have written the bill because somehow
they have provided some information as to how much money is going to be
put up, which goes into the bill.
I don't think I require any extensive reply to that. I think of my
sister Shirley in Elizabeth, NJ, who likes the Senator from Illinois,
as I do--sometimes--pointed out to me that she could see through those
arguments. But not making the materials available beyond the Senator
and the staff--and I can see they ought to be able to copy them--I will
stand by that--so that Senator Durbin doesn't have to look at them, his
staff can look at them, copy them, and show them to Senator Durbin, all
within the range of confidentiality. But that doesn't mean there is
some secret being kept from the American people, not as long as Dick
Durbin knows what they are; he will protect the American people.
Frankly, so will Arlen Specter protect the American people. But it
doesn't mean these sinister forces have written the bill because the
bill was written by the committee. Senator Durbin is on the committee.
He helped write the bill. He made amendments. I think some were even
adopted. I won't swear to that. I know one was and then it was changed
when we finally understood what it was. We adopted one in about 4
minutes one day--right?--and then we had to change it when we found out
what it really was. We do that from time to time.
I have taken a look at the issue of confidentiality because I
reserved that yesterday during the discussion. I find there are a
couple of provisions that are very problematic. One is section 1905 of
title 18 of the United States Code which makes it an offense--and I am
not sure what, with the abbreviated version I have here, the penalties
are, but it prohibits any officer or employee of the United States to
divulge information--I will have this printed in the Record--``which
information concerns or relates to trade secrets, processes,
operations, style of work, or apparatus,'' et cetera.
It is hard to interpret it without doing some more research, but I
think it may well cover this.
There is also a Senate rule, rule XXIX(5), which relates to
prohibition against any Senator, officer, or employee of the Senate
disclosing secret or confidential business proceedings of the Senate.
It does not appear on its face to conclusively cover these kinds of
records, but it may. It may be part of the records of the Senate. But I

[[Page S886]]

think there is more than a colorable prohibition against disclosure on
confidentiality. At least at this time, I wouldn't rule it out
completely. I would like to have maximum disclosure, frankly, if it can
be done consistent with the law and consistent with the rules of the
Senate and consistent with fairness to the companies which provided the
information.
Mr. President, I ask unanimous consent that this document entitled
``FAIR Act Transparency,'' which includes the references to which I
just alluded, be printed in the Record at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. DURBIN. Mr. President, will the Senator yield for a question?
Mr. SPECTER. I do.
Mr. DURBIN. Mr. President, is the Senator prepared today to tell us
who prepared this list, the entity he had to subpoena to get the
information about how the trust fund will be funded?
Mr. SPECTER. I am prepared to have the Senator told because I don't
have it at my fingertips. But I am prepared to have that information
given to the Senator from Illinois. Yes.
I yield the floor.

Exhibit 1

FAIR Act Transparency

Funding is guaranteed. The $140 billion in defendant
participant contributions to the Fund under the FAIR Act are
guaranteed by the manufacturers and industry.
Certification. The fund cannot be deemed operational until
the Fund Administrator publishes a list of defendant
participants and their required payments in the Federal
Register.
Senator Durbin's assertions that outside groups wrote the
FAIR Act is flat wrong. S. 852 creates an allocation formula
whereby contributions are based directly on a manufacturers
``prior asbestos expenditure'' in the tort system. This was a
FORMULA created and drafted by SENATORS. Our Congressional
subpoena was directed at the corporations to identify, by
computing their ``prior asbestos expenditure'' what tiers of
the funding formula they would fall into.
Process. I have met with many Senators individually
including, at different times, Senator Cornyn (4/12/05) and
Senator Feinstein (5/10/05) on the issue of transparency. The
Judiciary Committee issued three subpoenas in an effort to
learn more about the companies likely to pay into the Fund
created by the FAIR Act. The subpoenas were dispatched
between September 30 and December 1 to groups representing
companies on both sides of this bill.
These transparency efforts led to the creation of a
spreadsheet with the names and anticipated tier assignments
of companies. The staff came up with their estimates based
upon publicly available information included in SEC filings
and data gathered through hundreds of phone calls. In light
of this information, Judiciary Staff held at least two
transparency briefings, the first of which occurred on
October 7, 2005.
All Senators and their staff can view a list compiled now.
This list is confidential because it includes confidential
information from businesses.
Confidentiality. In issuing the subpoenas and making
telephone calls, my office informed companies that the
information obtained would be held confidential pursuant to
Rule XXIX of the Standing Rules of the Senate and under 18
U.S.C. 1905. Rule XXIX (5) of the Standing Rules provides:
``[a]ny Senator, officer, or employee of the Senate who
shall disclose the secret or confidential business or
proceedings of the Senate, including the business and
proceedings of the committees, subcommittees, and offices of
the Senate, shall be liable, if a Senator, to suffer
expulsion from the body; and if an officer or employee, to
dismissal from the service of the Senate, and to punishment
for contempt.''
Similarly, Section 1905 of Title 18 of the United States
Code provides:
Whoever, being an officer or employee of the United States
. . . divulges, discloses, or makes known in any manner . . .
any information coming to him in the course of his employment
or official duties or by reason of any examination or
investigation made by, or return, report or record made to or
filed with, such department or agency or officer or employee
thereof, which information concerns or relates to the trade
secrets, processes, operations, style of work, or apparatus,
or to the identity, confidential statistical data, amount or
source of any income, profits, losses, or expenditures of any
person, firm, partnership, corporation, or association; . . .
. shall be fined under this title, or imprisoned not more
than one year, or both; and shall be removed from office or
employment.
In light of the foregoing, the Senate Judiciary Committee
reiterates what we have said from the beginning of this
exercise: we are prepared to share the spreadsheet with any
Senator or designated member of their staff. The staff may
even make a copy of the spreadsheet so long as they sign an
acknowledgement form indicating they understand the
information is to remain confidential pursuant to Rule XXIX
and 18 U.S.C. 1905.

The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I thank the Senator from Pennsylvania, and
I say with genuineness that I respect him more often than not. I go
beyond ``sometimes'' which he said of me, and say I respect him more
often than not. I respect his great work on this issue. This is not
easy.
What the Senator is trying to do is nothing short of revolutionary.
He wants to close down the court system of America for hundreds of
thousands of individuals who otherwise would go to court, to a judge or
a jury, and ask for fair compensation for their injuries.
The Senator from Pennsylvania has decided that system is wrong or
inadequate or broken and has suggested that we are going to do away
with the court system in America for these victims and create a brand
new system.
That is a daunting task. I am not sure, given the 2 or 3 years that
the Senator has put into it, that I could even come up with a
suggestion that I would have confidence would work.
This is what we know about the trust fund and the system we are being
asked to vote for in the Senate.
First, the cost of this is being estimated over a period of 50 years.
Over 50 years, what are we likely to pay to those Americans who have
been injured and died from asbestos exposure? If you will follow some
of the best prophets and predictors in Washington, you will find them
woefully inadequate to predict what is going to happen next year, let
alone in 50 years.
So I have challenged the Senator from Pennsylvania and those in his
corner, including my friend, the Senator from Vermont, Mr. Leahy, to
tell me where you came up with the figure of $140 billion. The response
we have been given is: Why, that is what Senators have been talking
about for a long time, $140 billion.
I think that falls short of the kind of certitude that we should have
before we close down the court system of America to hundreds of
thousands of injured people and their families.
The second question I asked yesterday, which we again explored today,
is; Who is going to pay for this? Who is going to provide the $140
billion, if it is not the taxpayers, to pay the people who were
injured?
I am afraid today the Senator from Pennsylvania continues along the
same line of reasoning. Someone--an undisclosed company--which he has
promised he will now tell me, some undisclosed private entity decided
which businesses in America would pay into this trust fund and how much
they would pay. A curious thing: I don't know who contacted this
private group to create this information. It is certainly essential to
this concept of a trust fund. But the group that created the
information was so loathe to share it with the Congress which is
considering this bill that the chairman of the committee had to
subpoena the information from the company that created it for his bill
which we are now considering.

It is a strange process. On the one side, the chairman of the
committee would rely on this private company to determine who will pay
into the trust fund and how much they will pay, and then having relied
on them to write this bill to close down our court system for millions
of Americans exposed to asbestos, he couldn't get the information from
them unless he sent them a subpoena demanding it under his power of the
Judiciary Committee. At some moment in time, they produced it. Then
when it came in, this information, essential to know whether this trust
fund will work, it turns out it was marked ``committee confidential.''
I have been around the Senate for a few years. I was on the
Intelligence Committee. I know when things are marked classified and
top secret and confidential, it is clear that they are secret. They are
not to be shared with the public. But what is it about this bill and
who is going to pay into it that is so classified and so confidential
and so secret that the American people have no right to know? That is
the question I asked yesterday. Because if we are going to say to
millions of Americans and their families: Give up your day in court,
what has been your constitutional and legal right for the 200-plus
years America has been in existence; give it up, trust us, we will

[[Page S887]]

create a trust fund that is going to be more fair and more generous,
shouldn't we share with the American people the basic information that
was used to create this alternative to a day in court?
No. The chairman comes before us today and tells us he thinks it is
illegal, it may be illegal, it may even violate Senate rules to share
this information.
I struggle with it because I think this gets to the heart of the
matter. If we cannot justify the cost of this trust fund over 50 years,
if we cannot say to the American people: ``Here is how it will be paid
for,'' then I am afraid we are asking too much. We are asking them to
walk away from their American-given right for redress in our courts for
a trust fund that cannot be explained, a trust fund that was created by
some private company that did not even want to share the information
that led to its creation. That is not a confidence builder.
Despite my admiration for the chairman of the committee--and it is
truly something I would say on this floor without reservation. He is a
man I respect very much, in a variety of ways, for his service in the
Senate. Despite that, this bill should not be passed. This bill, which
will literally change the system of justice in America, should not be
passed on such a flimsy foundation.
A moment ago, the Senator from New Hampshire, the chairman of the
Budget Committee, came to the floor and made an interesting statement.
He said he will rely on the Congressional Budget Office to determine
whether this trust fund will work. But if the Congressional Budget
Office comes back and says: We don't know, we can't tell you--maybe it
will and maybe it will not--I think I heard the Senator from New
Hampshire say that is good enough. If they say it will not work, OK.
But if they are not sure, that is good enough.
Is it good enough? Is it good enough for the millions of Americans
who are counting on us not to take away their rights as American
citizens to go to court when a wage earner and his or her family have
been exposed to asbestos, unwillingly, unknowingly exposed and now
cannot breathe and has a limited amount of time left on this Earth and
believes that the company that sold the asbestos product should be held
responsible and accountable--is it good enough for us to say: No, we
are not going to let you go to court any longer?
Is it fair for us to say to the housewife who--and this is a real
case; I am not making this up--who literally had a husband who worked
in the asbestos industry, brought home his work clothes, piled them up
in the laundry room, and before she stuck them in the washer she shook
his clothes, not knowing that she was breathing in asbestos fibers, and
she contracted mesothelioma, the deadly lung disease from asbestos,
simply by being exposed that much--is it wrong for us to say she should
not hold a company such as W.R. Grace and Company responsible for the
fact that for more than 70 years they refused to disclose the danger of
this asbestos fiber to their workers and people who used their
products?
I know how I feel about it. All we are asking is that that family
have a chance to argue their point of view in a court and let a jury of
that woman's neighbors and peers decide what is fair and what is just.
That is what is at issue here; to close the courthouse door to her and
her family and say, no, you can no longer go before the courts of
America, the courts of your State, you have to go to a trust fund, a
trust fund that may get around to considering your claim, may end up
paying your claim--all of these possibilities.
I am also troubled by the fact that when you take a hard look at this
trust fund of $140 billion over 50 years, you realize what is going to
happen as soon as this bill passes. Should it pass, there will be a
rush of people filing under the trust fund, asbestos victims. Why?
Because the instant this bill is signed into law, anyone who has a
claim pending in American courts is stopped. They cannot move forward.
They cannot take their case any further. If they are not arguing their
case in trial before a jury or a judge, they are finished; closed down
and stopped. They could have the trial scheduled that they have been
working for years to start next week, and they are finished the day
this bill is signed.
What will they do--all that work, all that preparation, gathering all
the medical records? They will start over. Sick people, dying people in
America will start over, filing the paperwork for the new system. We
expect a lot of them, if this bill passes, to rush in and say: Pay us,
for goodness sakes. We have been working at this for years. Why
wouldn't they do that?
As they do, they will swamp the system. This trust fund is not
designed to collect all this money from all these corporations and
insurance companies in a hurry. It collects it over a 30-year period of
time. So at the outset, if the trust fund is going to actually pay the
victims, they have to borrow money to do it.
We have had some calculations that if they borrow the money to pay
the claims in a timely fashion, more than a third of the $140 billion
trust fund will be spent on interest payments for borrowed money--more
than a third: $52 billion will be spent over the life of this trust
fund.

When the Senator from Pennsylvania addressed this issue the other
day, he was brutally frank and candid. What would we do if we ran out
of money? What would happen if $140 billion did not compensate all the
asbestos victims we know are out there? I have to say over the course
of the history of asbestos that we have underestimated the potential
claimants time and time again. What happens if $140 billion does not
work? The Senator from Pennsylvania came to the floor and said: We will
adjust the payments to the victims; the medical criteria for
eligibility. In layman's language, we will cut the victims'
compensation.
When the Senator comes to the floor and suggests that an alternative
from the Senator from Texas will leave some people in the lurch, it may
not be as inclusive as the underlying bill, I hope he will recall his
own words on the floor when he said if $140 billion is not enough,
those same victims will be shortchanged and will receive less.
I am going to close at this moment and say, as I said at the outset,
the Senator from Pennsylvania accepted a Herculean assignment to try to
replace the court system in America. If you are going to do that for
hundreds of thousands and maybe millions of Americans, it is a task
that many Senators would never accept. I salute him for trying. But I
say in all honesty that, as we stand here today, this will not work.
This trust fund will fail.
It will not be the first time a legislative effort will fail. Many of
our efforts do. We try our best, but we are human. Men and women try to
create laws that will make America better. Sometimes they do and
sometimes they don't. The Medicare prescription drug plan, Part D, is a
good indication of something that doesn't work. It was passed 2 years
ago by this Senate and the House, was signed by the President--2 years
to get ready to get 40 million Medicare recipients into prescription
drug coverage, which we all support, and we created a system which has
been nothing short of a disaster, an unsalvageable fiasco. So our best
efforts will leave some poor senior citizens without the drugs they
need and many others completely confused and perplexed by this
bureaucratic mess we created called the Medicare prescription drug
plan, Part D.
I think we will learn our lesson quickly, and I hope we change that
law. But think about this law. What if we get this law wrong? What if
we say to thousands of American families with someone deathly ill in
their home: You are finished in court. Walk away from all of your
efforts for compensation. Trust us that we will create a new system
that will be as just and even more fair than the court system in
America.
If we are wrong on that one, if we make a mistake on that one, the
human suffering and misery that will result goes far beyond what we
have seen on the Medicare prescription drug plan, Part D.
I don't think it is worth the risk. I think we ought to look at this
in more modest terms and honest terms and realize that a trust fund
whose total amount we cannot justify, from sources that are still on a
secret list that cannot be seen by the American public, is not the best
way to go.
I yield the floor.
The PRESIDING OFFICER. The Senator from Pennsylvania.

[[Page S888]]

Mr. SPECTER. Mr. President, when the Senator from Illinois talks
about doing it in an honest way--we have done that. We have been
honest.
When he talks about, if we make a mistake, there will be a lot of
human suffering, there is a lot of human suffering right now. It would
be hard to structure a substitute system which would have more human
suffering than you have now. We are looking at a system which is
totally debilitating and decimating, with the courts clogged and with
thousands of people suffering from deadly diseases and not being
compensated.
When the Senator from Illinois makes a reference to saluting me for
trying, I appreciate salutes of any kind, but I am looking to the
possibility of a salute for succeeding. I don't know how this debate is
going to turn out or what is going to happen in the final vote. But I
do know that for more than 3 decades, nobody has been able to bring a
bill to the floor and nobody has been able to move past a determined
effort by the minority to block this bill with a filibuster.
When that effort failed late in the afternoon on Tuesday, they wanted
to withdraw the motion, and we defeated it very soundly.
The Senator from Illinois says I have undertaken a Herculean
assignment. It is a Herculean problem. I wish Hercules was around to
handle it. I would be glad to defer to Hercules were he here.
When the Senator from Illinois refers to cutting payments, that does
not happen unless the Congress agrees. When the administrator evaluates
the trust fund and finds that there may be insufficient funds to pay
the claims, the administrator then reports to a committee of 20,
selected by the leaders of the House and Senate, and then they make a
recommendation to the Congress.
So it isn't a cut without having congressional action. As wise as we
may think we are today, there will be Senators here into the indefinite
future; we hope forever. They will have the wisdom, they will make a
judgment, and they will have the determination as to what payments are
going to be made. So it is not an automatic or easy cut in payments.
Bear in mind that the basic remedy is to go back to the tort system,
to go back to court. So the claimants are no worse off under the tort
system than they are today, if no plan is adopted.
The Senator from Illinois has repeatedly challenged the establishment
of the trust fund of $140 billion. Yesterday, he referenced a letter
which he sent to me to which he has not gotten an answer. I checked
about the letter and I checked about what we did about the questions
raised in the letter, and the answer was we had a briefing 2 days
later. We answered the questions, not by written letter but by a more
detailed statement from a briefing.
When the Senator talks about the $140 billion which was established,
all the information was available in that briefing, and still is to the
Senator from Illinois about projections based upon experience with
asbestos.
When we talk about the Bates White report, that has been thoroughly
refuted. They took into account people such as manicurists and taxi
drivers who did not have an occupational exposure to asbestos.
The Congressional Budget Office came up with an analysis of Bates
White, and left the Bates White report in ruins. We had a detailed
hearing on that as we have had every time an issue has arisen.
The Congressional Budget Office then issued a supplemental report
showing that Bates White was wrong and their initial figures were
correct. On page 8 of the report submitted by the Congressional Budget
Office, dated August 25, 2005, they have a chart where it supplements
their analysis that there could be costs in the range of $120 billion
to $150 billion, and then they come to a net conclusion of the
projection at $132 billion. These are projections; they are not
guesses; they are not speculations; but they are not mathematics,
either. They are based upon the best information available and they are
judgment calls.
In the letter from the Congressional Budget Office dated December 19,
they included this statement after analyzing a great number of factors:

The final outcome cannot be predicted with great certainty.

I don't know what can be predicted with great certainty. I know for
many years I was a district attorney prosecuting criminal cases and
handled first-degree murder cases. The death penalty is imposed in
America is if it is proved beyond a reasonable doubt. But on a level of
great certainty, that is not an attainable level, and I would say
almost in any field of human endeavor. I don't want to be too expansive
in that assertion, but great certainty is not something you come by in
the ordinary affairs of men and government.
Mr. DURBIN. Mr. President, will the Senator yield for a question?
Mr. SPECTER. Yes.
Mr. DURBIN. Through the Chair, I wish to ask the Senator if he would
agree with the following: If we can't say beyond a reasonable doubt or
great certainty, if we reach the point where $140 billion is
inadequate, and it cannot compensate as we called for in this bill, is
it not true at that point there are only three options? One option is
to go back to the businesses that contributed to the trust fund and ask
for more; the second is for the Government to assume the liability; and
the third is to reduce the payments to the victims as called for in the
existing legislation.
Is there another option I am missing?
Mr. SPECTER. Mr. President, the answer to the first question is no.
The answer to the second question is yes. OK?
Mr. DURBIN. Would the senator be kind enough to give me a few more
words? I know he has a lot.
Mr. SPECTER. I do not know if it is possible for this Senator to give
a few words. I will try.
The answer is no, those are not the only options. The answer is yes,
there is another option. The ``yes'' answer is to go back to the tort
system. Senator Biden offered that amendment in July of 2003. I am on
it because it seemed to me that claimants should not bear the risk of
the failure of the trust fund, and in this bill you go back to the tort
system. So the claimants are no worse off than they are now.
Mr. President, these letters may be part of the Record, but I want to
be sure they are.
I ask unanimous consent that the letters from the Congressional
Budget Office, dated August 25, 2005 and December 19, 2005, be printed
in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

U.S. Congress,

Congressional Budget Office,

Washington, DC, August 25, 2005.
Hon. Arlen Specter,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 852, the Fairness
in Asbestos Injury Resolution Act of 2005.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mike
Waters (for federal costs), Barbara Edwards (for revenues),
and Paige Piper/Bach (for the private-sector impact).
Sincerely,
Douglas Holtz-Eakin,
Director.
S. 852--Fairness in Asbestos Injury Resolution Act of 2005
Summary: S. 852 would establish the Asbestos Injury Claims
Resolution Fund (the Asbestos Fund) to provide compensation
to individuals whose health has been impaired by exposure to
asbestos. Under the bill, the Administrator of a new Office
of Asbestos Injury Claims Resolution (the Office) within the
Department of Labor would administer the Asbestos Fund and
manage the collection of federal assessments on certain
companies that have made expenditures for asbestos injury
litigation prior to enactment of this legislation. A separate
Asbestos Insurers Commission would allocate other payment
obligations among insurers with asbestos-related obligations
in the United States. The Asbestos Fund also would absorb all
private asbestos trust funds already existing at enactment.
Under the bill, individuals affected by exposure to asbestos
could no longer pursue awards for damages in any federal or
state court and would submit claims to the Administrator, who
would then evaluate such claims and award compensation
according to criteria and amounts specified in the
legislation.
CBO estimates that net receipts and expenditures of the
Asbestos Fund would increase projected budget deficits over
the 2006-2015 period by about $6.5 billion (excluding debt
service costs).
We expect that sums paid into the fund would be treated in
the budget as federal revenues and that amounts expended to
pay claims and administer the fund would be considered new
federal direct spending. During periods when surplus amounts
would be collected by the fund, CBO assumes that

[[Page S889]]

most of its assets would be invested in nongovernmental
securities. The net cash flows associated with such
investments would also be direct spending.
Over the 2006-2015 period, we estimate that payments to
eligible claimants, start-up costs, investment transactions,
and administrative expenses would total nearly $70 billion.
Over the same 10-year period, we estimate that the fund would
collect about $63 billion from firms and insurance companies
with past asbestos liability and certain private asbestos
trust funds.
Consequently, we expect the Administrator of the fund would
need to exercise the borrowing authority authorized under the
bill to meet the fund's obligations during this period.
Assuming enactment of S. 852 by the end of calendar year
2005, CBO estimates that almost $8 billion would be borrowed
during the first 10 years.
To evaluate the long-term financial viability of the fund,
CBO projected cash flows over the life of the fund--assumed
to be about 50 years--using a variety of assumptions about
the number, type, and timing of future claims likely to be
submitted to the fund, and alternative assumptions about
future inflation and interest rates. The legislation is
designed to produce collections totaling about $140 billion
over the first 30 years. CBO expects that the value of valid
claims likely to be submitted to the fund over the next 50
years could be between $120 billion and $150 billion, not
including possible financing (debt-service) costs and
administrative expenses. The maximum actual revenues
collected under the bill would be around $140 billion, but
could be significantly less. Consequently, the fund may have
sufficient resources to pay all asbestos claims over the next
50 years, but depending on claim rates, borrowing, and other
factors, its resources may be insufficient to pay all such
claims.
A more precise forecast of the fund's performance over the
next five decades is not possible because there is little
basis for predicting the volume of claims, the number that
would be approved, or the pace of such approvals.
Epidemiological studies of the incidence of future asbestos-
related disease and the claims approval experience of private
trust funds set up by bankrupt firms can be used to indicate
the range of experience of the federal asbestos trust fund
might face, but those sources cannot reliably indicate the
financial status of the fund over such a long time period.
CBO estimates that the fund would face more than half of
all anticipated claims expenses in its first 10 years, while
it would receive roughly constant collections from insurers
and defendant firms over its first 30 years. This conclusion
is consistent with other forecasts that we have reviewed.
Because expenses would exceed revenues in many of the early
years of the fund's operations, the Administrator would need
to borrow funds to make up the shortfall. The interest cost
of this borrowing would add significantly to the long-term
costs faced by the fund and contributes to the possibility
that the fund might become insolvent. Under the provisions of
section 405, the fund would have to stop accepting new claims
(a process known as ``sunset'') if its current and future
resources become inadequate to fulfill all existing and
anticipated obligations, including its debt obligations.
Pursuant to section 407 of H. Con. Res. 95 (the Concurrent
Resolution on the Budget, Fiscal Year 2006), CBO estimates
that enacting S. 852 would cause an increase in direct
spending greater than $5 billion in at least one 10-year
period from 2016 to 2055.
S. 852 contains two intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates
that the cost of complying with those mandates would be
insignificant and well below the threshold established in
that act ($62 million in 2005, adjusted annually for
inflation).
S. 852 would impose new private-sector mandates, as defined
in UMRA, on certain individuals filing claims for
compensation for injuries caused by exposure to asbestos;
certain companies with prior expenditures related to asbestos
personal injury claims; certain insurance companies; trusts
established to provide compensation for asbestos claims;
health insurers; and persons involved in manufacturing,
processing, or selling certain products containing asbestos.
Based on information from academic, industry, government, and
other sources, CBO concludes that the aggregate direct cost
to the private sector of complying with all of the mandates
in the bill would well exceed the annual threshold
established by UMRA ($123 million in 2005, adjusted annually
for inflation).
Estimated Cost to the Federal Government: The estimated
budgetary impact of S. 852 over the 2006-2015 period is shown
in Table 1. The effects of this legislation fall within
budget functions 600 (income security) and 900 (interest).
CBO estimates that the bill would have little net effect on
the budget over the first five years but would add about $6.5
billion to deficits from 2011 through 2015. (The longterm
budgetary impact of the bill is discussed in the section
following the ``BASIS OF ESTIMATE'' section.)
Basis of Estimate: For this estimate, CBO assumes that S.
852 will be enacted by the end of calendar year 2005. Based
on information from the Department of Labor, we expect that
the Asbestos Fund could become fully operational during
fiscal year 2007 and that certain pending exigent asbestos
claims would be paid by the fund in 2006.
CBO expects that the fund's assessments on firms and
insurers would be treated in the budget as revenues and that
payments to satisfy claims would be considered direct federal
spending. In addition, because the Administrator would be
authorized to invest the fund's balances, certain cash flows
associated with investments in nongovernmental financial
instruments also would be reflected in the budget.
Specifically, under the Administration's current procedures
for budget presentation, government funds invested in
nongovernmental financial instruments are recorded as
expenses (outlays), and the redemption of such investments is
recorded as a receipt (negative outlay). Under the bill, any
noncash assets received from 4 existing private asbestos
bankruptcy trust funds (such as the Manville Trust) would
have no budgetary impact until they were liquidated by the
Administrator. At that point, both the assets and any gains
or dividends on those assets would be recorded on the budget
as revenues.

TABLE 1.--ESTIMATED BUDGETARY IMPACT OF S. 852
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in billions of dollars
-----------------------------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

Claims and Administrative
Expenditures of the Asbestos
Fund:
Estimated Budget Authority.. 8.7 21.9 11.1 5.3 5.3 5.3 5.0 4.9 4.7 4.6
Estimated Outlays........... 8.7 5.6 8.4 9.5 10.8 6.7 5.2 5.1 5.0 4.8
Investment Transactions of the
Asbestos Fund:
Estimated Budget Authority.. 0 1.1 0 0 -1.0 -0.2 0 0 0 0
Estimated Outlays........... 0 1.1 0 0 -1.0 -0.2 0 0 0 0
Total Direct Spending:
Estimated Budget Authority.. 8.7 23.0 11.1 5.3 4.3 5.1 5.0 4.9 4.7 4.6
Estimated Outlays........... 8.7 6.7 8.4 9.5 9.8 6.5 5.2 5.1 5.0 4.8

CHANGES IN REVENUES

Collected from Defendant Firms.. 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9
Collected from Insurer 1.3 4.1 5.0 5.0 5.0 1.1 1.1 1.1 1.1 1.1
Participants...................
Collected from Bankruptcy 4.5 0 0.4 1.6 1.6 0 0 0 0 0
Trusts\1\......................
Total Estimated Revenues.... 8.7 7.0 8.4 9.5 9.6 4.0 4.0 4.0 4.0 4.0

CHANGES IN THE DEFICIT

Estimated Net Increase or 0 -0.3 0 0 0.3 2.5 1.2 1.1 0.9 0.8
Decrease (-) in the Deficit
from Changes in Revenues and
Direct Spending................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ CBO estimates the total value of cash and financial assets of the asbestos bankruptcy trust funds would be $7.5 billion in 2006 and $8.1 billion
when liquidated. The federal budget would record the cash value of those trust assets when they are liquidated by the Administrator to pay claims. CBO
estimates that assets of asbestos bankruptcy trust funds would not be fully liquidated until 2010.
Note: Numbers in the table may not add up to totals because of rounding.

To estimate the cost of processing claims, CBO reviewed
prior government experience with similar compensation funds
and operations of privately run asbestos funds. We also
discussed the potential costs of administering the fund with
the Department of Labor. To estimate the number and types of
claims the Asbestos Fund would receive and when they would be
received, CBO reviewed a number of projections of asbestos
injury claims that were prepared for different purposes by
several private groups and individuals, including those
developed by the Asbestos Study Group, Navigant Consulting,
the National Association of Manufacturers, and Legal Analysis
Systems during consideration of this bill and of similar
legislation considered by the 108th Congress. In addition, we
studied the history of claims paid and projections of those
anticipated to be paid by the Manville Trust and considered
the inaccuracy of past projections of future asbestos injury
claims. Finally, to determine whether the Asbestos Fund could
be expected to collect the amount of assessments from
defendant companies and insurance companies that are
anticipated in the legislation, CBO examined financial
information for some of the public companies that would
likely be contributors to the fund and the reserves held by
insurance companies for asbestos claims.
Direct spending: To estimate the amount and timing of new
direct spending under S.

[[Page S890]]

852, CBO considered the cost of administering the Asbestos
Fund and the length of time it would take following enactment
for the fund to be fully operational and processing claims.
We projected the number of claims that would be submitted to
the fund over the 2006-2015 period, including those claims
that have been filed or will be filed in federal or state
courts or with existing trusts but not settled by the time
the bill is enacted (these claims are known as pending
claims). To estimate the cost of paying valid claims
submitted to the fund, we considered the number of claims
likely to be submitted by persons with malignant and
nonmalignant medical conditions due to asbestos exposure. We
also estimated the net disbursements and receipts associated
with the fund's investment activity. Finally, we considered
the borrowing that might be required in each year in order
for the fund to pay claims.
Administration and Start-up of the Asbestos Fund. Based on
the cost of operating existing government compensation funds,
the operation of privately run asbestos trusts, and
information from the Department of Labor, CBO estimates that
administration of the Asbestos Fund would require a staff of
over 700 employees for the 2006-2015 period, costing a total
of nearly $1 billion over 10 years. Such administrative costs
would be paid from the Asbestos Fund and would not require
further appropriation action. For this estimate, CBO expects
that the Office would start accepting claims in 2006, shortly
after enactment. During the first three years of operation,
CBO estimates that the Office would receive around 185,000
claims per year, but that this number would fall to an
average of around 60,000 for the next seven years, once all
currently pending claims are resolved by the fund.
Individuals seeking compensation from the Asbestos Fund
would need to file a claim with the Office within the time
specified by the legislation (five years from the date of
enactment for pending claims or five years from the date of
diagnosis for future claims). The Administrator would then
have 90 days to present a proposed decision concerning the
appropriate award according to the medical criteria and
awards values specified in the legislation. If the claimant
chooses to accept the award, the Administrator would issue a
final decision, and the Asbestos Fund would pay the claimant
over the next one to four years. A claimant could appeal a
decision by the Administrator within 90 days of its issuance
by requesting either a hearing or a review of the written
record. In those cases, a decision on the appeal would be
required within either 180 days or 90 days, respectively.
Under the bill, any claim pending on the date of enactment
would be stayed, unless it were already before a court. Of
the stayed claims, exigent claims (defined by S. 852 as those
claims brought by a living claimant with either mesothelioma
or less than one year to live, or by the spouse or child of a
claimant who died after either filing of his or her claim or
enactment of the bill) would receive the earliest attention
by the Administrator. Within 60 days of receipt, the
Administrator would be required to either approve or
disapprove such a claim as exigent. The bill would require
the Administrator to pay exigent claims within one year for
cases of mesothelioma, and in no more than two years for all
other exigent claims.
CBO expects that the fund would not be fully operational
until at least a year following enactment of the legislation.
Even after appointing an Administrator and Insurers
Commission, this start-up period would be needed to
promulgate detailed operating rules and procedures and to
recruit, hire, and train personnel to process claims and
manage the fund's operations. (The Energy Employees
Occupational Illness Compensation Program--a similar federal
fund serving a much smaller population--took slightly more
than a year to become fully operational.) During this start-
up period, the Administrator and the Insurers Commission
would also need to collect financial information from
thousands of firms and insurers that have made prior
expenditures for asbestos injury claims to set appropriate
assessment rates for those insurers and firms.
Payments to Claimants. To estimate the cost of paying
compensation claims under the bill, CBO reviewed projections
of asbestos injury claims that were presented to the Senate
Committee on the Judiciary during its consideration of S. 852
and for similar legislation considered by the 108th Congress.
Such projections were based on a combination of
epidemiological data, projections of disease incidence for
the affected population, historical experience of bankruptcy
trusts, and projections of the number of injured that
would apply for compensation given the bill's medical
criteria and compensation award values.
S. 852 defines nine levels of medical impairment that
persons exposed to asbestos have suffered and specifies a
dollar amount of compensation that the fund would pay to
individuals who demonstrate both adequate exposure to
asbestos and specified medical conditions. Over time, those
award values would be adjusted for inflation. For the lung
cancer levels, the bill stipulates different awards,
depending on whether a claimant, currently or in the past,
does or does not smoke tobacco. (For example, claimants
having lung cancer with asbestosis would qualify for
compensation under level VIII; awards at this level would
range from $600,000 to $1.1 million, depending on the
claimant's history of tobacco use.)
To estimate the cost to the fund of compensating claimants,
CBO considered four categories--future claims that would be
made by individuals with malignant conditions, future claims
that would be made by those with nonmalignant conditions, and
claims pending on the date of enactment of the bill for both
malignant and nonmalignant conditions. As detailed below, CBO
used information from available projections and studies to
estimate the number of claims in each category that would
qualify for compensation under the medical conditions
specified in the bill. Individuals who are eligible for an
award would receive payments from the fund over a one- to
four-year period. For this estimate, we assumed that payments
for nonexigent claims would be spread equally over a four-
year period. We assume that claims pending for mesothelioma
at the time the bill is enacted would represent the exigent
claims and would be paid in 2006.
Table 2 summarizes the number of claims and total award
value for those claims that CBO projects for each category of
claims under the legislation.
Pending claims. Individuals who have an outstanding claim
with any firm filed in a court on the date of enactment of S.
852 would have five years to submit a claim for compensation
from the fund. CBO estimates that, over the first five years
that the fund is operational, more than 320,000 pending
claims would receive an award from the fund.
There is no comprehensive information regarding the numbers
and types of asbestos injury claims that individuals have
filed in federal and state courts or with existing trusts
under current law. Nor is there reliable information on the
numbers and award values of such claims that are settled each
year. In 2003, Navigant Consulting prepared an estimate of
the number and type of asbestos injury claims then pending in
federal and state courts. That information was collected to
inform the consideration of legislation similar to S. 852 in
the 108th Congress.

TABLE 2.--SUMMARY OF ESTIMATED ASBESTOS CLAIMS AND AWARD VALUES
----------------------------------------------------------------------------------------------------------------
Initial 10-year period Life of fund
---------------------------------------------------------------
Award Value of Award Value of
Number of claims (in Number of claims (in
claims billions of claims billions of
dollars) dollars)
----------------------------------------------------------------------------------------------------------------
Pending Claims for:
Malignant Conditions........................ 21,000 14 21,000 14
Nonmalignant Conditions..................... 301,000 11 301,000 11
---------------------------------------------------------------
Total Pending Claims.................... 322,000 25 322,000 25
Future Claims for:
Malignant Conditions........................ 42,000 34 78,000 74
Nonmalignant Conditions..................... 620,000 16 1,184,000 32
---------------------------------------------------------------
Total Future Claims......................... 662,000 51 1,262,000 106
Total for All Claims........................ 984,000 76 1,585,000 132
----------------------------------------------------------------------------------------------------------------

For this estimate, CBO used the information collected by
Navigant in 2003 and adjusted the data to reflect
developments since then. Using projections about the number
of claims expected to be filed in 2004 and 2005 and
assumptions about the pace of settlements for asbestos injury
cases, we concluded that the number of pending cases in 2006
is likely to be larger than estimated in 2003--about 7
percent larger.
For this estimate, CBO did not take into account the number
of claims that are still technically pending with at least
one company but have been inactive for several years. If the
claimants' lawyers actively seek out those individuals to
file a claim against the fund, the number of claimants
seeking compensation from the fund in the first four years
could be significantly higher. An award from the Asbestos
Fund for such individuals would be reduced by the value of
any other awards received for a given claim. CBO estimates
that the average award from the fund over the 2006-2015
period for pending malignant claims would be about $650,000
and

[[Page S891]]

that awards for such claims would total $14 billion. We
estimate that awards for pending nonmalignant claims would
average around $38,000; total awards for those claims would
be $11 billion over the next 10 years.
Future claims for malignant conditions. CBO examined
several projections of malignancies associated with asbestos
exposure. While all of those projections included claimants
with asbestos exposure and lung cancer but with no evidence
of pleural disease or asbestosis, such claimants would
receive no compensation under S. 852. CBO assumes that the
total number of claims for malignant conditions that would be
compensated by the fund would be near the average of the
various projections we examined (excluding those lung cancer
claimants who would not be eligible for compensation).
Adjusting for the time that has elapsed since the performance
of the studies that we examined, those studies varied from
65,000 to 100,000 claims for malignant diseases that would be
compensated by the Asbestos Fund. This estimate assumes that
there would be about 78,000 such claimants. We distributed
those cases across the categories of malignant diseases
specified in the bill based on the various projections and on
the historical distributions of such claims received by the
Manville Trust. On this basis, CBO estimates that the average
award for malignant conditions over the next 10 years would
be $800,000 and that the total value of awards for such
conditions over that period would reach $34 billion.
Future claims for nonmalignant conditions. The different
projections available to CBO of the number of nonmalignant
cases and their distribution among the categories specified
in the bill vary greatly. CBO expects that the ratio of
nonmalignant claims to malignancies under the bill would be
similar to the historical ratio of claims compensated by
existing bankruptcy trusts. For example, since 1995, the
Manville Trust has received an average of eight claims for
nonmalignant conditions for every claim for a malignant
condition. Based on those historical data and because
nonmalignant claimants could receive larger awards under S.
852 than those provided by existing trust funds, CBO
estimates that during the first 10 years after enactment, the
fund would compensate, on average, 10 new claims for
nonmalignant conditions for every new malignancy (including
claimants exposed to asbestos with lung cancer who would not
be eligible for compensation under the bill). CBO expects
that this ratio would decrease over time because of
reductions in the use of and exposure to asbestos. (Other
analysts have estimated the ratio of claims for nonmalignant
conditions to malignancies to be as low as 7:1 or as high as
17:1.) In total, CBO anticipates about 1.2 million future
claims for nonmalignant conditions.
CBO estimates that around 85 percent of claims for
nonmalignant conditions filed with the Asbestos Fund would be
eligible for medical monitoring reimbursement (level I) from
the fund. Such reimbursement, roughly $1,000, is the lowest
rate of payment specified for nonmalignant conditions. This
claims estimate is based on available research involving a
sample of the exposed population with nonmalignant conditions
and the history of claims filed with the Manville Trust. To
evaluate the history of such claims, CBO reviewed the trust's
estimate of how claims received under its 1995 trust
distribution process (TDP) would have been compensated under
the 2002 TDP. (The later TDP contains categories for
nonmalignant conditions more similar to those under S. 852.)
Overall, CBO estimates that, over the next 10 years, the
average payment for nonmalignant conditions would be about
$26,000 and total awards for such conditions would amount to
$16 billion.
Investments of the Asbestos Fund. Section 222 would
authorize the Administrator to invest amounts in the fund to
ensure that there are sufficient sums to make payments to
claimants. That section appears to imply that the fund's
Administrator could invest surplus amounts in private
securities. For this estimate, CBO assumes that the managers
of the fund would keep 20 percent of the investments in
Treasury securities and 80 percent in non-Treasury
securities. The current budgetary treatment of federal
investments in non-Treasury instruments is specified in the
Office of Management and Budget's (OMB's) Circular A-11,
which states that the purchases of such securities should be
displayed as outlays and the sales of such securities and
returns, such as dividends and interest payments, should be
treated as offsetting receipts or collections.
CBO estimates that investing 80 percent of fund balances in
private securities would result in net receipts of $200
million over the 2006-2015 period. The fund would make net
investments in 2007, when its collections would exceed its
expenditures. In subsequent years when expenditures would
exceed collections, the difference would be made up by
drawing down assets from the fund, starting with any assets
received from other asbestos trust funds. Liquidated assets
and earnings from private trust funds would be considered
revenue in the federal budget, while the value of assets
privately invested by the Administrator would be recorded as
offsetting receipts upon liquidation.
For this estimate, CBO used its projections of the return
on Treasury securities to predict investment earnings of the
fund for both private securities and government securities.
Although private securities may well yield higher gains over
the long term, such investments carry much greater risk than
government securities. The difference between projected
returns on private securities and government bonds can be
seen as the cost investors must be paid to bear the
additional risk of holding private securities instead of
government bonds. Thus, adjusted for the additional cost of
risk associated with private securities, the net expected
returns on private securities are the same as those on
government securities.
Revenues. Receipts to the fund would come from three
sources: defendant companies that have spent more than $1
million on asbestos injury litigation, insurance companies
that have made more than $1 million in such payments, and
existing private trust funds formed to settle asbestos
claims. Over the life of the fund, defendant companies would
be expected to contribute $90 billion, less any credits
granted for the establishment of private bankruptcy trust
funds set up after July 31, 2004 (known as bankruptcy trust
credits); insurance companies would be called upon to
contribute just over $46 billion, less bankruptcy trust
credits. CBO is aware of one bankruptcy trust that would be
eligible for such credits--the Halliburton Bankruptcy Trust.
CBO estimates that the bankruptcy trust credits of defendant
companies would total $2.4 billion over the 30-year period,
or $80 million per year, with the credits being apportioned
to all defendant companies based on their share of the total
amounts of payments for the year. Insurers would have an
estimated $1.5 billion in bankruptcy trust credits; those
credits would go to the insurers who paid into trusts set up
after July 31, 2004. All assets of existing asbestos trusts
(about $7.5 billion) would be transferred to the fund.
Defendant companies. Section 202 would specify $90 billion,
less any bankruptcy trust credits under section 222, as the
amount to be collected from defendant companies. The minimum
aggregate annual payment would be $3 billion, less any
bankruptcy credits. CBO estimates that annual payments would
total $2.9 billion over 30 years. For the purpose of
determining each firm's contribution, each one is assigned to
a tier based on its prior asbestos expenditures and whether
it is in bankruptcy proceedings.
The actual amounts paid by firms might differ from that
implied by their tier assignments because the bill would
allow certain exemptions for small businesses and
modifications of assessments, based on financial distress or
inequity or based on whether a firm meets the criteria for
being classified as a distributor. The bill also would allow
the Administrator to increase the amount that defendants
would pay if the total payments fall short of the minimum
aggregate annual payment amount.
The defendants' contributions could decline over the 30-
year period for two reasons. First, if more defendant
companies exist and make payments than CBO estimates, the
payments in the earlier years would exceed the minimum
required payment. Because the aggregate payments cannot
exceed $90 billion less bankruptcy credits (or a net of $87.6
billion), any excess amounts paid in earlier years would
reduce the amounts needed to be paid in the future years.
Second, the required total payments could decline in later
years if the Administrator determines that full payment is
not required, and each company's assessment would decline
proportionately.
The amount the fund would collect from defendant companies
depends on a number of unknown factors:
The number of subject companies and the tiers into which
they would fall;
Which of those companies would be subject to exemption or
modification of their contributions and whether some
affiliated entities would elect to be treated separately or
jointly;
The size and nature of the assets of firms in liquidation;
The number and characteristics of subject firms that may go
into bankruptcy during the assessment period; and
How much funding is needed to satisfy claims and other
expenses of the fund.
Some sources have indicated that as many as 8,400 firms may
have paid sufficient prior asbestos claims to be covered by
the legislation. CBO could not verify this figure. Based on
information that CBO could obtain about firms that have
incurred asbestos litigation expenses, we estimate that about
1,700 defendant firms would be required to make contributions
to the fund under the bill. It was possible to determine the
likely tiers for about 500 of those firms. The remaining
firms were assigned equally to the two lowest tiers, based on
the assumption that firms with unknown tier assignments were
those with lower asbestos claims payments. No reduction in
the number of firms was made for those exempt due to size.
Similarly, CBO made no upward adjustment to account for
defendant firms not identified.
Tier I firms are firms that have filed for bankruptcy.
Revenues for tier I firms expected to emerge from bankruptcy
were obtained, where possible, from public sources. No
reliable information could be obtained about the possible
contributions of tier I firms that are likely to liquidate.
Firms that securities analysts expect to earn revenues in
2006 were assumed to make the required payments, and no
reduction in contribution was made for firms that would
receive hardship or inequity adjustments in their
contributions or for consolidated payments made by affiliated
groups.
Insurers. Section 212 would specify just over $46 billion,
less any bankruptcy trust

[[Page S892]]

credits, as the amount to be collected from insurers over a
28-year period. In the case of insurers, no allocation or
formula for payments is specified in the legislation,
although the legislation does specify how much in aggregate
would be collected for each of the 28 years. The bill would
create an Asbestos Insurers Commission to determine an
allocation among the insurance companies. The bankruptcy
trust credit would represent a dollar-for-dollar reduction in
the amount of liability an insurer would pay under the bill
for any contributions to bankruptcy trusts established after
July 31, 2004. CBO estimates that the value of the bankruptcy
trust credits would be $1.5 billion. Either the allocation
determined by the Asbestos Insurers Commission or one agreed
upon by the subject companies would determine how much each
insurer would pay of the $46 billion total.
S. 852 would direct insurers to contribute an aggregate
initial payment of no more than 50 percent of the first
year's required $2.7 billion within 90 days after enactment.
The bill would authorize the Administrator to calculate the
initial payment obligations of insurers and handle other
matters related to the collection of the funds. However, the
initial payment amounts would not be considered final until
the Insurers Commission has been formed, promulgated its
allocation methodology, and issued its final determination of
liability of the insurers. Based on the procedural steps
specified in the bill, CBO expects that such determination
would be made in fiscal year 2007.
The participating insurers would pay interest on any
difference between their ultimate liability and the amount of
the interim payment. Any insurers who paid more than their
ultimate liability would receive interest on the excess
amount. The bill specifies that the interest rate on any
overpayments or underpayments would be the same rate. CBO
estimates that the fund would be able to collect the initial
payment from insurers by the end of fiscal year 2006 and that
the demands on the fund for payments would prompt the
Administrator to seek to collect the maximum allowed for the
initial payment--50 percent of the first year obligation. CBO
further assumes that the remaining 50 percent of the first
year's payment would be collected in the second year with the
associated interest and the second year's contribution.
Existing asbestos trust funds. Based on publicly available
information, CBO determined that the existing private trust
funds set up to compensate claimants currently contain about
$7.5 billion in assets. Under the bill, those assets would be
transferred to the new Asbestos Fund in the first year
following enactment. Until that transfer occurs, we assume
that claims paid by these funds would roughly equal
investment income. The assets of existing trusts are invested
in a variety of financial instruments, and only the cash and
U.S. obligations in these trusts would be recorded in the
federal budget as revenues of the government when
transferred. The private securities in the trusts (together
with any earnings) would be recorded as revenues only when
converted to cash or U.S. obligations.
Based on the financial reports of the Manville Trust, CBO
estimates that 56 percent of transferred trust assets (about
$4.5 billion) would be recorded as revenues in 2006. For this
estimate, we assume that the remainder of the assets would
only be sold as needed to finance spending in later years.
The proceeds of those sales would be recorded as revenues to
the fund at that time.
Offsets and guaranteed payment surcharge. The bill would
allow firms and insurers to reduce their individual
assessments by the value of any asbestos claims paid after
the enactment date of S. 852 and before 2007, when CBO
expects the fund's full operations would start. It also would
authorize certain payments by subject companies to guarantee
collection of the mandated amounts. For the purpose of this
estimate, CBO assumes that these provisions would have no net
effect on annual payments by firms and insurers.
Offsets for exigent claims paid during start-up of the
Fund. In the interim between enactment of S. 852 and the time
when the fund would begin full operations, defendants and
insurers may settle or face judgments on exigent asbestos
claims that the fund is unable to process or pay. Firms and
insurers could use those settlement amounts as a dollar-for-
dollar offset against their assessments, reducing the
payments required to be made to the fund.
Guaranteed payment surcharge and guaranteed payment
account. The Administrator of the fund could impose on each
defendant participant a surcharge to offset any shortfalls in
the annual aggregate payment amounts. If the payments by
defendant participants exceed the minimum aggregate annual
payment of $3 billion, less bankruptcy trust credits, the
excess amount, up to $300 million, would be set aside in the
guaranteed payment account as a form of self-insurance by the
fund, with any excess funds being carried forward to the next
year. For this estimate, CBO assumed that the Administrator
would assess a surcharge on all firms when necessary. If the
funds in the guaranteed payment account are insufficient to
ensure that the minimum annual payment is raised in any year,
the Administrator of the fund would be able to levy a
guaranteed payment surcharge on the defendant participants on
a pro rata basis.
Secondary effects on other revenue sources. The payments
made by defendants and insurers and the sums received by
claimants could affect taxable income under the federal
corporate and individual income tax systems. This cost
estimate includes no effects of those transactions on federal
income taxes paid by claimants or businesses. Those secondary
effects are likely to be insignificant in any event.
Payments made into the fund would be tax-deductible and
would thus reduce the corporate income tax liability of
participating firms. But in the absence of this legislation,
firms would have to pay asbestos damages set in the courts,
which would also be tax-deductible. It is impossible to say
with any confidence whether the amounts that would be paid
out by defendant firms and insurers under this legislation
would be higher or lower than what they would expend in its
absence through the tort system. The best assumption under
the circumstances is that the bill would have no significant
effect on corporate taxable income or on the government's
receipts from corporate income taxes.
Similarly, the tax treatment of payments received by
claimants would be unchanged from what it is now--effectively
excluded from taxable income and therefore having no effect
on taxes paid by individuals. There might be some reduction
in income tax receipts if a significantly larger proportion
of payments goes to claimants rather than to their attorneys,
who would pay tax on the income. But this would depend on
whether more claimants think they can navigate the new system
set up under the legislation without legal assistance than is
the case under the existing one--a circumstance that cannot
be known. CBO expects that any change in the allocation of
awards between attorneys and claimants would be too small to
significantly affect income tax receipts.
Budgetary impact of the Asbestos Fund after 2015: To assess
the long-term financial viability of the Asbestos Fund, CBO
considered several possible projections of the fund's cash
flows beyond the normal 10-year estimate of the legislation's
budgetary impact. When estimating such cash flows, the
provisions of section 405 are critical. That section of the
bill would sunset the fund's operations by directing the
Administrator to reject new claims if the fund's resources
(including borrowing authority) prove inadequate to pay
additional obligations. Under S. 852, claimants could seek
compensation in federal courts if the fund were to sunset. In
determining whether or not to sunset, the Administrator would
consider the unpaid costs of any approved claims and previous
borrowing against future revenues. Section 405 also would
require the Administrator to return remaining assets to
certain nongovernmental trust funds--but only in the event of
a sunset.
CBO estimates that total receipts to the Asbestos Trust
Fund over its lifetime would amount to about $140 billion,
including a small amount of interest earnings on its
balances. We estimate that the fund would be presented with
valid claims worth between $120 billion and $150 billion in
addition to any financing (debt-service) costs and
administrative expenses. Under the legislation, receipts to
the fund would be fairly evenly distributed over its first 30
years. However, even if receipts exceed claims, CBO estimates
that more than half of the fund's expenditures for claims
would be paid in the first 10 years of its life. Such an
imbalance between when the fund's anticipated claims payments
would be made and when receipts would be collected would
require the Administrator to borrow to pay claims. Under the
bill, the borrowed amounts (including interest costs) would
have to be repaid from the fund's own budgetary resources.
Depending upon the precise timing and value of claims
presented to the fund as well as the exact revenue collected,
investment returns, and interest rates, the fund might or
might not have adequate resources to pay all valid claims.
For example, if the value of valid claims totaled $130
billion, interest costs on the fund's borrowing might amount
to $10 billion, and interest earned on investments could
approach $2 billion, while administrative costs would add
another $1 billion to $2 billion. If the value of such claims
were significantly more than $130 billion, the fund's
revenues might be inadequate to pay all claims.
Because of the uncertainty and sensitivity of the variables
that affect the fund's balances, any long-term projection
over five decades must be viewed with considerable caution.
Operating the Asbestos Fund would be an entirely new
governmental task, and CBO and other analysts have little
basis for judging how the Administrator would implement
the legislation. The discretion available to the
Administrator and insurance commission with respect to the
allocation of costs, provision of adjustments, and levying
of surcharges makes the flows into and out of the fund
hard to predict with much reliability. Furthermore, the
projections that have been made in recent decades of the
number of asbestos claims likely to be filed were, in
hindsight, much too low, suggesting that there might be a
significant risk of underestimating the number of future
asbestos claims. In addition, receipts to the Asbestos
Fund would depend on the continued viability of the firms
required to pay into it, which is also uncertain.
The Asbestos Fund's operations are uncertain: Contributing
to the uncertainty of the cost to resolve claims under the
bill are some significant features of the claims process that
would only be defined after enactment of the legislation. For
instance, the bill

[[Page S893]]

would require the Institute of Medicine of the National
Academy of Sciences to conduct a study to examine the causal
link between asbestos exposure and cancers other than lung
cancer or mesothelioma. If that study were to determine no
causal link between asbestos exposure and any of those
cancers, the number of claims for such conditions (level VI
under the bill) could decline significantly. The bill would
also require the Agency for Toxic Substances and Disease
Registry (ATSDR) to conduct a study to determine if any other
contaminated sites pose dangers similar to those observed in
Libby, Montana. Because claimants from Libby would receive
higher minimum awards than other claimants and because the
bill would mandate similar treatment for any sites so
identified, the costs could rise depending upon which sites
might be judged similar to Libby and on how many claimants
would be affected. Also, this estimate does not take into
account the impact of approving any exceptional medical
claims, which are claims that do not fit into the defined
criteria but which might still receive compensation depending
upon the findings of specific panels of physicians. It is
difficult to assess how many such claims might be filed and
how liberally those panels might rule on the claims.
Past estimates of the number and value of Asbestos claims
have been inaccurate: Forecasts of asbestos claims made over
the past decade have failed to accurately predict the
magnitude, scope, and evolution of asbestos claims. According
to one witness that testified on similar legislation
previously before the committee, ``in every instance where
companies or trusts have attempted to project future asbestos
claims, they have always seriously underestimated.'' Most
estimates of future claims rely on a combination of
epidemiological information and statistical estimation
techniques using historical data. Such models contain a
number of potential sources of error in forecasting.
In 1988, experts estimated that the number of future claims
against the Manville Trust would range from 50,000 to
200,000. By January of 1991, the trust had already received
more than 171,000 claims. Through the summer of 2005, the
Manville Trust had received 690,000 claims. The most recent
claims forecast performed for the trust estimated that the
trust may receive up to 1.4 million additional claims.
CBO's estimates of the number and distribution of claims
that would be compensated by the Asbestos Fund under S. 852
are based on forecasts similar to those that have been
prepared for the Manville Trust. Therefore, it is possible
that the number of claims that would be compensated under S.
852 could deviate in significant respects from our estimates
in terms of cost, timing, or both.
Revenue collections are uncertain: The revenue stream that
would be generated by the legislation is highly uncertain.
Although the aggregate amount of the levy on defendant firms
and insurers is fixed over the first 30 years, a number of
factors described earlier make it difficult to project the
annual receipts with much reliability.
First, identifying the defendant participants and where
they would fall in the different payment tiers is difficult,
if not impossible, without legislation requiring the
information to be disclosed. (Tier placement directly affects
the amount a defendant company would pay into the fund.) Many
of the prior asbestos settlements were made outside of the
court system and, as such, are not public record. This lack
of information means that the number of defendant companies
in each tier and the resulting payments could be either
higher or lower than the numbers used in preparing this
estimate.
If the number of defendants is significantly higher than
assumed in this estimate and if claims remain at or about the
level estimated, the likelihood of insufficient funding
available to settle claims would be reduced. At the end of
the first 10 years, if excess monies existed, the
Administrator could decrease the payments required by the
defendants by up to 10 percent.
Similar stepdowns in payments could also occur after 15,
20, and 25 years should funding exceed claims levels
sufficiently to warrant such a reduction.
To determine the impact of a significantly higher number of
defendant companies making payments, CBO estimated the
revenues and the resulting effects on cash flow if there were
an additional 650 companies in each of the two lowest tiers.
This scenario would result in approximately 3,000 defendant
companies paying into the fund and, assuming that the number
of claims projected by CBO is correct, the fund would be able
to pay all claims projected by CBO and there would be no
early sunset due to lack of funds to pay claims.
Conversely, significantly fewer defendant participants who
meet the criteria for payments under this bill would result
in higher levies on the existing defendant participants to
ensure the minimum aggregate annual payment of $3 billion
less bankruptcy trust credits. This continuing drain on
firms' resources could lead to more bankruptcies and even
higher levies on the remaining firms.
Thirty years is a long time-span for a business. Even under
ordinary conditions, economic circumstances lead many firms
to liquidate over time. Normal attrition will be exacerbated
by the costs of dealing with asbestos liability--either under
the current system of litigation or under the legislation
itself. The legislation's provisions for adjustments based on
inequity or financial distress might mitigate business
bankruptcies, but at the cost of even greater uncertainty in
the value of the fund's future revenue stream. The
legislation also would allow the Administrator to impose a
surcharge to guarantee payment of amounts that some firms
would be unable to pay. The success of this surcharge
depends, in turn, on estimating the attrition among firms.
The bill proposes no absolute deadlines concerning the
establishment of the Asbestos Insurers Commission. Some of
the tasks involved in promulgating a methodology and
producing final billings to the insurers are well defined and
have specific time frames, while time frames for other
activities are not clearly specified. CBO expects that
appointing and confirming the five members and establishing
the final allocation methodology for participating insurers
would take at least 12 months. If the process were to take
longer, it could delay the payments from insurers and
possibly necessitate more borrowing than CBO has projected.
Federal liability if the trust fund's resources are
inadequate to pay claims: So long as the fund's Administrator
does not borrow from the U.S. Treasury beyond the means of
the fund to repay such borrowing, the government's general
funds would not be used to pay claims. Furthermore, section
406 states that the legislation would not obligate the
federal government to pay any part of an award under the bill
if amounts in the Asbestos Fund are inadequate.
Estimated long-term direct spending effects: Pursuant to
section 407 of H. Con. Res. 95 (the Concurrent Resolution on
the Budget, Fiscal Year 2006), CBO estimates that enacting S.
852 would cause an increase in direct spending greater than
$5 billion in at least one 10-year period from 2016 to 2055.
Estimated impact on state, local, and tribal governments:
S. 852 contains two intergovernmental mandates as defined in
UMRA. First, it would preempt state laws relating to asbestos
claims and prevent state courts from ruling on those cases.
Second, the bill would require state governments to comply
with requests for information from the Asbestos Insurers
Commission. CBO estimates that any cost associated with this
mandate would be insignificant and well below the threshold
established in that act ($62 million in 2005, adjusted
annually for inflation).
The bill would authorize $15 million from the Asbestos
Trust Fund for state, local, and tribal governments to
monitor and remedy naturally occurring asbestos. Any related
costs to those governments would be incurred voluntarily as a
condition of receiving federal aid.
Estimated impact on the private sector: S. 852 would impose
new private-sector mandates, as defined in UMRA, on:
Certain individuals filing claims for compensation for
injuries caused by exposure to asbestos;
Certain companies with prior expenditures related to
asbestos personal injury claims;
Certain insurance companies; Trusts established to provide
compensation for asbestos claims;
Health insurers; and
Persons involved in manufacturing, processing, or selling
certain products containing asbestos.
Based on information from academic, industry, government,
and other sources, CBO concludes that the aggregate direct
cost to the private sector of complying with all of the
mandates in the bill would well exceed the annual threshold
established in UMRA ($123 million in 2005, adjusted annually
for inflation) during the first five years those mandates
would be in effect. CBO cannot determine the direction or
magnitude of the net impact of the bill's mandates on
claimants, defendant companies, or insurance companies over
the long term.
Asbestos injury claims: The bill would prohibit an
individual from bringing or maintaining a civil action
alleging injury due to asbestos exposure. Currently,
individuals can file asbestos injury claims against any
number of defendants in state or federal court. Under S. 852,
individuals would only be able to receive compensation for
asbestos-related injury by filing a claim with the federal
Asbestos Fund established by the bill. A claimant would be
able to recover from the fund if that person could meet the
bill's medical criteria, which are based on the severity of
the asbestos-related disease. Claims pending as of the date
of enactment would be stayed, except for certain pending
civil actions.
Some individuals who would receive compensation under
current law would not be qualified to receive compensation
under the bill. Further, some individuals would receive more
compensation for their asbestos injury claims under current
law, while others would receive more if S. 852 is enacted.
The direct cost of the mandate to claimants would be the
difference between the total settlements and judgments that
would be obtained under current law and the compensation that
would be obtained by claimants under S. 852.
Based on information from academic, industry, and other
sources, CBO assumes that claimants who would be deemed
ineligible for compensation under the bill would be
predominantly from the ``unimpaired'' category. Because
comprehensive data relating to asbestos exposure, litigation,
and compensation are not available, it is difficult to
predict the number of claimants who would receive
compensation and the amount of the settlements they would
receive under current law. Unimpaired claimants historically
receive multiple settlements of a few thousand dollars each
from as many as half-a-

[[Page S894]]

dozen defendants. According to several expert sources,
settlements for unimpaired claimants may range in value from
$3,000 to $50,000 per claimant. Also, according to several
sources, a large proportion of claims currently pending could
have their settlements precluded or delayed under the bill.
Further, experts predict that many individuals would
probably receive less compensation in the first five years
under S. 852 than under current law. Consequently, CBO
expects that the direct cost to claimants of complying with
this mandate could amount to hundreds of millions of dollars
over the 2006-2010 period.
Assessments on defendant companies: Section 202 would
impose a new mandate on defendant participant companies,
defined in the bill as certain companies with prior
expenditures related to asbestos personal injury claims. Such
defendant companies would be required to pay an annual
assessment to the Asbestos Fund totaling a minimum of $3
billion in each of the first five years, less any bankruptcy
trust credits. Defendant participants would be required to
pay over the life of the fund a total of not more than $90
billion, less any credits.
Section 204 would require the Administrator of the Asbestos
Fund to impose a surcharge on each participant required to
pay contributions into the fund to make up for any shortfalls
in a given year due to nonpayment by some participants. The
amount of surcharge to be paid would be determined by the
Administrator. CBO expects that the Administrator would
assess a surcharge on all firms sufficient to compensate for
this loss and that the surcharge would be imposed
differentially on defendant companies to reflect their
different risks and to maintain their roughly equivalent
contributions. However, CBO expects that there would be no
surcharge on defendant companies during the first five years
of the mandate.
The amount the fund would receive from defendant companies
would depend on a number of factors, including the number of
subject companies and the tiers into which they would fall.
Based on data from industry and other sources, CBO estimates
that the defendant companies would pay $2.9 billion per year
into the fund over the 2006-2010 period. According to
industry and academic sources, defendant companies in
aggregate currently pay asbestos litigation and settlement
costs on an annual basis close to the amounts that would be
required by the bill in the next five years. Thus, CBO
estimates that the incremental costs, if any, for those
companies to comply with those mandates would not be
significant over the first five years the mandates would be
in effect.
Assessments on insurance companies: Section 212 would
impose a mandate on insurers with asbestos-related
obligations. The bill would require those insurance companies
to contribute to the fund, and specifies that their
contribution would satisfy their contractual obligation with
the defendant companies to compensate claimants for injuries
caused by asbestos. The bill does not, however, specify any
allocation or formula for such payments to the fund. The
amount of the contribution to the fund for individual
insurance participants would be determined by the Asbestos
Insurers Commission established under the bill.
The aggregate contributions to the fund of all
participating insurers would average $2.7 billion in the
first and second year and $5 billion in years three through
five. Participating insurers would be required to pay over
the life of the fund a total of $46 billion, less any
bankruptcy trust credits. Based on information from industry
sources, CBO estimates that insurers would pay a total of
about $20.4 billion into the fund during fiscal years 2006
through 2010. According to industry information on asbestos
liability costs, insurance companies in aggregate would have
expected costs for asbestos claims under current law close to
the amounts that would be required by the bill over the next
five years. Thus, CBO estimates that the incremental costs
for those insurance companies to comply with the mandates
would not be significant over the 2006-2010 period.
Asbestos settlement trusts: Section 402 would require
asbestos settlement trusts, established to provide
compensation for asbestos claims, to transfer their assets to
the Asbestos Fund no later than 90 days after the enactment
of the bill. Such a requirement is an enforceable duty, and
therefore, a mandate under UMRA. Based on information from
the trusts and industry sources, CBO expects that such trusts
would transfer approximately $7.5 billion in assets to the
fund in 2006. The cost to the trusts of the mandate for the
trusts in that year would be the value of the assets net of
amounts that the trusts would otherwise pay for compensation
and administrative costs in that year.
Health insurance: Section 409 would impose a private-sector
mandate by prohibiting health insurers that offer a health
plan from denying, terminating, or altering coverage of any
claimant or beneficiary on account of participation in a
medical monitoring program under this bill or as a result of
any information discovered as a result of such monitoring.
This mandate would have no direct cost because such a medical
monitoring program does not exist under current law.
Ban on products containing asbestos: Section 501 would
prohibit persons from manufacturing, processing, or
distributing in commerce certain products containing
asbestos. The bill would require the Administrator of the
Environmental Protection Agency, not later than two years
after the enactment of the bill, to promulgate final
regulations prohibiting commerce in such products (with some
exceptions). In addition, the bill would require persons who
possess a product for the purpose of commerce that is subject
to the prohibition, not later than three years after the
enactment of the bill, to dispose of that product by means
that meet federal, state, and local requirements. A number of
products and processes still use asbestos, including brake
pads and linings, roofing materials, ceiling tiles, garden
materials containing vermiculite, and cement products.
According to industry and government sources, products are
readily available to replace products containing asbestos,
and the disposal of such asbestos products would not be
difficult. Therefore, CBO expects that the direct cost of
complying with this mandate would not be large.
Estimate prepared by: Federal Spending: Mike Waters and Kim
Cawley. Federal Revenues: Barbara Edwards. Impact on State,
Local, and Tribal Governments: Melissa Merrell. Impact on the
Private Sector: Paige Piper/Bach.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis. G. Thomas Woodward, Assistant
Director for Tax Analysis.
U.S. Congress,

Congressional Budget Office,

Washington, DC, December 19, 2005.
Hon. Arlen Specter,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: As you requested, the Congressional
Budget Office (CBO) has studied the report prepared by Bates
White, LLC, concerning S. 852, the Fairness in Asbestos
Injury Resolution Act of 2005. In particular, you asked CBO
to evaluate the Bates White projection of the claims against
the proposed asbestos trust fund from individuals with lung
and other cancers (identified in the legislation as disease
levels VII and VI). In light of that evaluation, you also
asked whether CBO would modify the conclusions reached in its
August 25, 2005, cost estimate for S. 852.
CBO has discussed the Bates White report with its authors
and officials of that firm. It has also met or spoken with a
number of other experts with varying views on the asbestos
legislation, including Judge Edward Becker, trial lawyers
with extensive experience in asbestos litigation, and
representatives of NERA Economic Consulting, the Asbestos
Study Group, the AFL-CIO, and Legal Analysis Systems. As a
result of that review and assessment process, CBO has reached
the following conclusions:
The Bates White report contains no new information that
would cause CBO to revise its cost estimate.
The Bates White report is not a cost estimate; its results
are therefore not directly comparable with those of the CBO
cost estimate. Bates White estimated the value of claims that
could be eligible for compensation; CBO estimated the value
of claims that would receive compensation. This distinction
is important because many potential claimants would probably
not file claims and not all of the claims filed would be
approved.
Two elements of the Bates White analysis are particularly
important, and contribute significantly to its estimate of
potential costs. Bates White assumes that one eligibility
requirement in the legislation (weighted work-years of
occupational exposure) would not constrain potential claims;
Bates White also estimates a prevalence of pleural
abnormalities (an eligibility requirement for claimants with
lung and other cancers) that is higher than other researchers
believe is likely.
The Bates White report highlights some factors that pose
potential risks to the financial viability of the asbestos
trust fund that S. 852 would establish--including the
possibility that the financial incentives created by the bill
could lead to a substantial number of claimants with disease
levels VII and VI. Those risks are real, but CBO believes
that claims of the magnitude suggested by Bates White are
unlikely to occur.
After further reviewing S. 852, studying the Bates White
report, and consulting with a wide range of experts on
asbestos legislation, CBO reaffirms the findings presented in
its August cost estimate:
The proposed trust fund might or might not have adequate
resources to pay all valid claims. There is a significant
likelihood that the fund's revenues would fall short of the
amount needed to pay valid claims, debt service, and
administrative costs. There is also some likelihood that the
fund's revenues would be sufficient to meet those needs. The
final outcome cannot be predicted with great certainty.
CBO projects that the proposed fund would be presented with
valid claims worth between $120 billion and $150 billion,
excluding certain potential costs or savings that CBO could
not estimate; total costs would be higher because the fund
must also cover administrative expenses and any financing
costs. The revenues collected under the bill would be, at
most, about $140 billion, but could be significantly less. If
the value of valid claims was significantly more than $130
billion, the fund's revenues would probably be inadequate to
pay all claims.
CBO could not estimate any costs or savings that might
result from several features or consequences of the
legislation. A number of those features could add to the cost
of the legislation. In particular, CBO's estimate does not
include potential claims by individuals with older, so-called
dormant, asbestos

[[Page S895]]

claims pending in the court system, who might seek additional
compensation from the fund. It also does not encompass:
possible claims by family members of workers who were exposed
to asbestos; the costs of any exceptional medical claims that
could be made under the bill; the potential costs for
residents of other areas of the country who might be deemed
eligible to receive the same special treatment given to the
residents of Libby, Montana, under the legislation; and the
impact on costs of allowing CT scans to serve as
documentation of pleural abnormalities. On the other hand,
CBO's estimate does not reflect the possibility that medical
studies required by the legislation might preclude
individuals with certain diseases from obtaining compensation
from the fund.
A more detailed discussion of CBO's review of the Bates
White report is enclosed. I hope this information is helpful
to you.
If you wish further details on this analysis, we would be
happy to provide them. The CBO staff contact is Mike Waters.
Sincerely,
Douglas Holtz-Eakin,
Director.

Analysis of Potential Claims Under S. 852, the Fairness in Asbestos
Injury Resolution Act of 2005

As requested by Senators Specter, Leahy, and Feinstein, the
Congressional Budget Office (CBO) has analyzed the report
prepared by Bates White, LLC, concerning S. 852, the Fairness
in Asbestos Injury Resolution Act of 2005, regarding the
potential cost of claims against the asbestos trust fund that
would be established by that act. In its cost estimate for
that legislation, dated August 25, 2005, CBO estimated that
the value of valid claims against the fund would total
between $120 billion and $150 billion. The Bates White
report, which was issued on September 19, 2005, suggested
that the cost of claims could be much greater.
CBO has discussed the Bates White report with its authors
and officials of that firm. It has also met or spoken with a
number of other experts with varying views on the asbestos
legislation, including Judge Edward Becker, trial lawyers
with extensive experience in asbestos litigation, and
representatives of NERA Economic Consulting, the Asbestos
Study Group, the AFL-CIO, and Legal Analysis Systems. As a
result of that review and assessment process, CBO has reached
the following conclusions:
The Bates White report contains no new information that
would cause CBO to revise its cost estimate.
The Bates White report is not a cost estimate; its results
are therefore not directly comparable with those of CBO's
cost estimate. Bates White estimated the value of claims that
could be eligible for compensation; CBO estimated the value
of claims that would receive compensation. This distinction
is important because many potential claimants would probably
not file claims and not all of the claims filed would be
approved.
Two elements of the Bates White analysis are particularly
important, and contribute significantly to its estimate of
potential costs. Bates White assumes that one eligibility
requirement in the legislation (weighted work-years of
occupational exposure) would not constrain potential claims;
Bates White also estimates a prevalence of pleural
abnormalities (an eligibility requirement for claimants with
lung and other cancers) that is higher than other researchers
believe is likely.
The Bates White report highlights some factors that pose
potential risks to the financial viability of the asbestos
trust fund that S. 852 would establish--including the
possibility that the financial incentives created by the bill
could lead to a substantial number of claimants with disease
levels VII and VI. Those risks are real, but CBO believes
that claims of the magnitude suggested by Bates White are
unlikely to occur.
After a careful review of the Bates White report and
further analysis of the legislation, CBO reaffirms the
findings presented in its August cost estimate:
The proposed trust fund might or might not have adequate
resources to pay all valid claims. There is a significant
likelihood that the fund's revenues would fall short of the
amount needed to pay valid claims, debt service, and
administrative costs. There is also some likelihood that the
fund's revenues would be sufficient to meet those needs. The
final outcome cannot be predicted with great certainty.
CBO projects that the proposed fund would be presented with
valid claims worth between $120 billion and $150 billion,
excluding certain potential costs or savings that CBO could
not estimate; total costs would be higher because the fund
must also cover administrative expenses and any financing
costs. The revenues collected under the bill would be, at
most, about $140 billion, but could be significantly less. If
the value of valid claims was significantly more than $130
billion, the fund's revenues would probably be inadequate to
pay all claims.
CBO could not estimate any costs or savings that might
result from several features or consequences of the
legislation. A number of those features could add to the cost
of the legislation. In particular, CBO's estimate does not
include potential claims by individuals with older, so-called
dormant, asbestos claims pending in the court system, who
might seek additional compensation from the fund. It also
does not encompass: possible claims by family members of
workers who were exposed to asbestos; the costs of any
exceptional medical claims that could be made under the bill;
the potential costs for residents of other areas of the
country who might be deemed eligible to receive the same
special treatment given to the residents of Libby, Montana,
under the legislation; and the impact on costs of allowing CT
scans to serve as documentation of pleural abnormalities. On
the other hand, CBO's estimate does not reflect the
possibility that medical studies required by the legislation
might preclude individuals with certain diseases from
obtaining compensation from the fund.

The Methodology of the Bates White Report

The Bates White analysis of S. 852 is based on an
epidemiological analysis of the population employed in
industries with some potential exposure to asbestos. To
estimate how many claims could be presented to the fund under
S. 852 by individuals with both malignant conditions and
asbestos exposure, Bates White first estimated the size of
the population working in industries and positions in which
asbestos exposure was probable. Using estimates of the
lifetime incidence for individuals of developing lung and
other cancers that could be compensated under S. 852, the
authors estimated how many people could make such claims
under the bill by further estimating how many of those
individuals would develop pleural abnormalities. Evidence of
such abnormalities is one of the qualifying requirements for
compensation for disease levels VII and VI under S. 852.
For one of the cost scenarios in the Bates White analysis,
the authors reported that they estimated that the value of
claims from all individuals that could seek compensation from
the fund would sum to $300 billion over the next several
decades. That figure does not include any costs or savings
from most of the same features of the bill, mentioned above,
that CBO could not quantify. Bates White also presented an
alternative estimate that includes some of those costs,
bringing the total value of potential claims to nearly $700
billion. Because the Bates White estimate of the value of
claims that could be presented to the fund far exceeds the
resources likely to be available to the fund, the authors
concluded that the fund would have to be terminated without
paying all valid claims.
The Bates White estimate includes a large number of
potential claims against the asbestos trust fund from
individuals suffering from lung and other cancers, many of
which would not have been caused by exposure to asbestos. The
report's authors believe that such claims are significantly
under-represented in the experience to date in the tort
system and existing asbestos trusts. Nevertheless, CBO
remains convinced that the number of such claims that would
be submitted to the trust fund and approved for payment under
S. 852 would be far fewer than suggested by Bates White. In
CBO's judgment, the historical experience of the Manville
Trust and that trust's current projection of future claims
against it are a more reliable basis for estimating the
number of future valid claims that would be filed with the
asbestos fund under S. 852.

Comparing the Bates White Report on S. 852 and CBO's Cost Estimate for
the Bill

The Bates White report and the CBO cost estimate cannot be
directly compared because the estimates address different
questions. CBO estimated the value of valid claims that would
be presented to the fund's administrator. Bates White
estimated the value of claims that could be presented to the
administrator; its figures are not adjusted to indicate how
many individuals actually would seek and receive compensation
from the fund. If such adjustments were made, the Bates White
cost analysis might be much more in line with other estimates
of the likely cost for compensating claims for malignant
conditions.
In attempting to answer different questions, the two
analyses used different methodologies. CBO's estimate relies
on the projections of claims from other analyses prepared
with regard to S. 852 and similar legislation. Those
projections are grounded, in part, on the historical
experience of claims paid by the Manville Trust. That
approach reflects the observation that the Manville Trust
receives claims from nearly all of the individuals that have
brought asbestos tort claims, and the expectation that it
provides a reasonable model to use for projecting the number
and types of future valid claims likely to be filed with the
asbestos trust fund that would be established under S. 852--
particularly claims for malignant conditions.
The Bates White analysis of S. 852 rejects the notion of
using the experience of the Manville Trust to project the
number of claims that could be made against the proposed
fund, because the authors observe that not all individuals
with malignant conditions that could make asbestos tort
claims choose to do so. Bates White notes that engaging in
tort litigation can be costly and burdensome, and that many
individuals with potential asbestos tort claims choose not to
make such claims. The authors expect that replacing the
asbestos tort system with the administrative settlement
process specified in S. 852 would encourage many of those
individuals with malignant conditions and asbestos exposure
to make claims against the federal asbestos fund. (Bates
White also estimates fewer claims for nonmalignant conditions
than CBO projects, but the financial

[[Page S896]]

impact of that decrease is much smaller than the impact of
its much larger estimate of the number of claims for
malignant conditions.)

Evaluation of the Bates White Approach

During the Senate Judiciary Committee's November hearing on
S. 852, several witnesses voiced concerns about the Bates
White estimate of the number of individuals with lung and
other cancers that could make claims for compensation under
S. 852. CBO has discussed many of these issues with Bates
White and others who have studied the legislation, and shares
some of those concerns. They include:
Bates White may have overestimated the incidence of pleural
abnormalities. Pleural abnormalities are one of the
conditions that claimants with lung or other cancers must
exhibit under S. 852 to qualify for compensation. Although
there is broad agreement about the incidence of lung and
other cancers in the asbestos exposed population, there does
not appear to be a consensus about the extent of pleural
abnormalities within that population. The Bates White report
cites several studies as the basis for its estimate that
about 10 percent of its exposed population of 27 million
people could be expected to have pleural abnormalities. Among
the more heavily exposed population of-about 9 million,
however, Bates White estimated that the incidence of
abnormalities would be higher--around 24 percent.
NERA presented CBO with an evaluation of the studies cited
by Bates White for its estimate of the incidence of pleural
abnormalities. NERA concluded that the report overstated the
incidence of pleural abnormalities by at least half. The
incidence among the asbestos-exposed population appears to be
in dispute because the sample population used in some studies
that have measured it may not be representative of the
population in question. In addition, some of the studies
measured the incidence of pleural abnormalities based on
their presence in only one lung, whereas eligibility under
the bill would require the presence of such abnormalities in
both lungs. CBO has not attempted to independently estimate
the incidence of pleural abnormalities in the exposed
population, but a proportion that differed significantly from
that estimated by Bates White would change the results of
that study substantially.
The Bates White study does not explicitly account for the
work-years of occupational exposure specified by the bill.
Under S. 852, claimants with lung or other cancers would be
required to demonstrate that they experienced asbestos
exposure for a specific number of years, weighted by the
intensity of exposure and when it occurred. By not accounting
for the bill's weighted work-year exposure criteria, Bates
White has overestimated the number of individuals that could
file a successful claim under S. 852. CBO believes that a
significant percentage of potential claimants might be unable
to demonstrate a sufficient number of work years of exposure
to asbestos to qualify for compensation under the bill.
Meeting the bill's required weighted work-years of
occupational exposure to asbestos is one of the key
qualifying criteria--along with exhibiting pleural
abnormalities--for an award under the legislation. The Bates
White study did not directly account for this requirement.
The authors told CBO that most individuals in the exposed
population typically had long careers in the same occupation
or industry and that the presence of pleural abnormalities
was likely to indicate sufficient years of asbestos exposure
to meet the bill's criteria.
However, pleural abnormalities can occur in individuals
with fewer years of exposure than are required to qualify for
disease levels VII and VI under the bill. Consequently,
applying the work-year criteria could eliminate a significant
number of claimants who might otherwise qualify.
The Bates White report attempts to estimate the number of
individuals that could make successful claims under S. 852,
but does not attempt to estimate how many individuals would
seek to do so. There is general agreement that individuals
exposed to asbestos that have developed mesothelioma and
asbestosis have a high propensity (probably well above 70
percent) to file tort claims and apply to the Manville Trust
for compensation. There appears to be much less agreement on
the propensity of individuals that have been exposed to
asbestos and have developed lung or other cancers to take
such actions. That is, in part, because there is no consensus
on how many individuals with lung or other cancers could
demonstrate that asbestos exposure was a substantial
contributing factor to their disease (the basis for
estimating a claiming rate). Many researchers agree that
claiming rates for such individuals today are much lower--
certainly less than half, perhaps much less--than for people
with mesothelioma or asbestosis. Applying a claiming rate of
much less than 100 percent for the Bates White estimates of
level VII and VI claims would substantially reduce the costs
presented in the Bates White analysis.
Bates White estimates a much larger population exposed to
asbestos than most other analyses. Bates White reported that
its estimate considered a working population of about 27
million that was exposed to asbestos, a much larger number
than many other studies have assumed. However, the authors
noted that about 9 million of those people, who had medium-
to-heavy exposure to asbestos, accounted for about 90 percent
($270 billion) of the potential claims. An asbestos-exposed
population of around 9 million is similar to the estimates of
other researchers, and CBO does not consider the size of the
exposed population to be a significant issue with the report.
How the key participants in the process--the fund's
administrator, claimants, and attorneys or others who assist
claimants--behave would have a significant impact on the
number of successful claims filed with the proposed asbestos
trust fund. The authors of the Bates White report have
suggested that the behavior of claimants and attorneys under
S. 852 would differ greatly from their behavior under the
current system. They expect that under the no-fault
administrative process outlined in the legislation, many more
claimants with asbestos exposure and lung or other cancers
would pursue claims than have done so or filed with the
Manville Trust. They anticipate this outcome because they
expect that the cost of seeking an administrative claim from
the fund would be much less than pursuing litigation, and
that the rewards for claimants would be much greater than
those obtained from the Manville Trust (though perhaps not as
large as awards obtained in some tort settlements).
CBO reaches a different conclusion--that the system
specified in S. 852 bears sufficient similarity to the
operations of the Manville Trust that the latter's experience
is a sound basis for projecting the number of most types of
claims under the bill. CBO's estimate of the number of future
claims for malignant conditions expected under S. 852 is very
similar to the most recent claims projection prepared for the
Manville Trust.
A number of factors make that analogy appropriate. For
example, whether pursuing an asbestos tort claim under
current law or an administrative settlement under the
legislation, a claimant would need to demonstrate that
asbestos exposure was a substantial contributing factor to
his or her cancer. Thus, just as under the current system,
claimants could not necessarily assume that the fund's
administrator under S. 852 would approve all claims. This is
particularly true for level VI claims, which would be
individually evaluated by a medical panel. The Manville Trust
also requires applicants to demonstrate a specific number of
work-years of exposure to asbestos to qualify for an award.
The number of work-years needed to qualify for an award from
the Manville Trust is generally less than would be required
under S. 852, so in that respect, the experience of the
Manville Trust could imply more claims than the federal fund
might actually face. Also, CBO believes that claimants to the
proposed federal asbestos fund would face costs and
procedural burdens similar to those that applicants to the
Manville Trust face.
Although the financial incentives for some claimants might
be greater under the bill than under the current tort system,
the financial incentives for attorneys to assist claimants
would be weaker. Attorneys play a significant role in
identifying claimants and pursuing their claims under the
current system, and would probably do so under S. 852. Most
claimants would probably need help preparing a claim under S.
852, and the bill would cap attorneys' fees at 5 percent of
individual awards made by the fund. By contrast, under the
current tort system, attorneys typically receive fees of up
to 40 percent of the amount awarded. Because attorneys or
others who might assist claimants would play such a key role
in the claims process, the bill's cap on fees makes it less
likely that the legislation would lead to a substantial
influx of claims that are not represented in the current
system.
Some of the attorneys whom CBO consulted suggested that
asbestos tort claims have recently shifted away from
relatively straightforward settlements, and that asbestos
cases today involve a significant time commitment and large
up-front costs to prepare for litigation, factors that may
deter some individuals from pursuing claims. If so, the
number of potential claimants to the fund proposed under S.
852 might be under-represented in the current tort
environment. But because asbestos litigation has been under
way for many years, CBO believes that the long historical
experience of the Manville Trust is the best available
indicator of claimants' behavior under the bill, even if the
current tort environment differs somewhat.
Mr. SPECTER. Mr. President, before yielding the floor, let me say
what a constructive role Senator Coburn has played in the Judiciary
Committee. Senator Coburn has been in this body since 2004. He had been
in the House of Representatives. He has brought his expertise as a
medical doctor and he has made great contributions.
We address some very tough medical procedures. I have said this to
him privately, what a contribution he has made, and there is no reason
I shouldn't say it publicly.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. COBURN. Mr. President, I want to spend a few minutes talking
about the bill.
There is one thing that is an absolute certainty: There are a ton of
people in this country who have bad diseases from asbestos who aren't
getting treatment and aren't getting cared for. That is what certainty
is. You can bet on

[[Page S897]]

that, that the problem is made worse because the trial bar is clogging
the courts with cases of people who do not have diseases from asbestos,
claiming they do. That is one of the reasons the courts want reform.
Having been on the Judiciary Committee during the process of this and
voting this bill out of committee, even though I have significant
reservations about this bill. Let me talk a couple of minutes about
that.
It doesn't matter to me what the Congressional Budget Office says
because their track record in estimating everything from the cost of
Medicare to the benefits in capital gains taxes is usually 180 degrees
off what actually happens. Having CBO's estimate about what is going to
happen with this trust fund I don't think lends any credence or
undermines it one way or the other. Because I think they do not know,
and I don't think anybody can know.
There is a second problem in this bill; that is, the problem we face
today is this bill will allow people who do not have injury from
asbestos to receive hundreds of thousands of dollars for an asbestos
claim when they do not have it. That deals with the medical criteria.
It will allow smokers who have some exposure to asbestos who develop
lung cancer--smoking is the No. 1 cause of lung cancer--who have no
evidence of significant disease caused by asbestos causing their lung
cancer to be compensated for a disease that they themselves were
responsible for by smoking tobacco products.
The intended purpose of the FAIR Act is to compensate those who are
truly sick from asbestos exposure, without destroying the companies and
jobs and opportunities in the future. My worry with this bill is the
defendants and the plaintiffs will end up back in the tort system in a
very short period of time.
I am rising today to support Senator Cornyn's alternative, the
Asbestos and Silica Claims Priorities Act. I am doing that because I
think it addresses the real problem.
If you look at the abuse in the courts and if you look at what is
wrong with this bill, it has to do with putting people in court who do
not have disease from asbestos. The Cornyn Amendment has a very defined
medical criteria which the courts will have to follow when making
judgments about who is eligible to file a claim on this bill.
A major reason the FAIR Act won't have enough money--and the major
reason people can attack the FAIR Act in terms of the amount of the
trust fund--is because the medical criteria is going allow too many
people to be in the process who do not have disease related to
asbestos. There have not been significant changes in the medical
criteria associated with this bill.
I tried to amend this in committee. I could not win. I have a
significantly different level of knowledge on the committee than the
rest of the members in terms of medical knowledge, having continued to
be a practicing physician, and I know it is going to be very difficult
to explain all those medical issues to Members of this body to try to
get them changed. That is why I think Senator Cornyn's approach is a
better alternative.
We have to create a fair system in the courts for allowing those who
are truly sick from asbestos exposure to seek compensation from those
who are truly responsible, rather than creating another Federal
bureaucracy that is likely to fail.
More than 73 companies have already gone bankrupt, and many others
have suffered a great deal of financial difficulty, not because many
sick people have sought compensation for their injuries but because
smart trial lawyers have learned to game the system and file phony
claims. These aren't faceless companies with unlimited resources. And
the people who are truly injured are not faceless people who didn't
contribute something good to the companies they worked for. The
businesses, by and large, are ready and willing to right the past
wrongs. The question is, Should they be paying when nobody is injured?
With the medical criteria in this bill today, a third of the claims, in
my estimation, will be paid to people--$50 billion will be paid to
people--who will file under the medical criteria, as written, who have
no injury whatsoever from asbestos but yet these companies will be
paying them for a perceived injury from asbestos.
Ninety percent of the claimants out there in the courts today who
have filed claims that allege to have impairment from asbestos have no
impairment. If you read the press stories about how the game has been
played, how the B-Readers have falsely read, for payments from trial
lawyer organizations, the chest x-rays, and the pulmonary function
tests have been manipulated illegally to claim benefits from some of
these companies, you can see we cannot have loose medical criteria and
ever expect to have this trust fund survive.
The other thing to mention--it is not mentioned much--there is a
background caseload in this country of mesothelioma, cancer of the
lining of the lung, of about 800 people a year. If there had never been
any asbestos, 800 people a year would develop mesothelioma.
At my age, and for most people somewhat younger who went to any
public school where the ceiling tiles had asbestos components, we can
qualify under this bill not because asbestos truly caused it. There is
no causal effect in that low an exposure. There is no particle load
count at all in terms of measuring exposure, which is what we know is
important. A small amount of asbestos exposure is harmless, a large
amount of asbestos exposure is terribly disease causing. When we don't
look at load factors, we are going to have medical criteria that make
people eligible who are truly not diseased from asbestos.
For example, there are 174,000 new cases each year in this country of
lung cancer.
This is kind of a wordy chart. I don't think it is going to project
well. But the important thing about that is they may have no true,
actual asbestos exposure but could claim under this system asbestos
exposure from environmental background exposure. Most of these people
have lung cancer because they are smokers, and they are going to have
lung impairment, and they are going to meet some of the requirements
under the medical criteria but have no true asbestos exposure.
If you look at that, and take 10 percent of the cases based on lung
cancers alone, you are talking $5 billion a year. Just lung cancer
alone times 30 years, at $5 billion a year, is more than the trust fund
has in it.
I will guarantee we will see an approach for compensation by anybody
who has ever had any exposure or been around asbestos, and they will
qualify to a certain extent more or less under this bill. What if it is
5 percent? You are still talking $78 billion. The numbers are massive.
If you are going to have a trust fund, you are going to have to have
adequate medical criteria that truly reward those people and compensate
those people who are truly injured. If you have good medical criteria,
the trust fund system will work. If you do not have good medical
criteria, if you have very loose medical criteria, the trust fund will
fail. We will not have solved the problem.

Either we have to get away from a trust fund program and design
medical criteria the courts will use, or we have to keep a trust fund
program and tighten up the medical criteria in this bill.
The bill as written today, I believe, will fail. It will fail because
it will be overwhelmed with claims against this trust fund by people
who do not have asbestos-related true disease.
I will give a couple of examples. Nonmalignant level 2 under the fund
allows individuals who have obstructive pulmonary disease--people with
emphysema, people with chronic bronchitis--to receive compensation by
the fund even when they do not have restrictive pulmonary diseases.
That is what asbestos causes, a restrictive disease, not an obstructive
disease. Under the criteria written in this bill, smokers who have had
exposure to asbestos, who do not have a disease related to asbestos,
will be compensated under this bill.
Consequently this fund allows a smoker--the No. 1 cause of
obstructive airway disease, not asbestos, but smoking--asbestos causes
restrictive lung disease--to receive compensation. That cannot work
with the fund as we see it today.
This fund also will compensate people for cancers where there is no
scientific evidence whatever that their cancers are caused by asbestos.
For example, for colorectal cancer, there are 130,000 cases of colon
cancer a year.

[[Page S898]]

There are tons of scientific studies that show there is no connection
between that and asbestos, but we have this in the bill. It is
dependent on an IOM study, but it should not be in the bill. If new
science sometime later shows some connection between colorectal cancer,
stomach cancer, or esophageal, laryngeal, and pharyngeal cancer, we can
put it back. We are putting it in, when there is no science
whatsoever--and the small studies on laryngeal and pharyngeal cancer
that show some connection were not modified for smoking and alcohol
use, the No. 1 and No. 2 causes. So it is not good science.
Therefore, we have a large group. If you take lung cancers combined
with all the other cancers and put them together and you say 10 percent
of those who are coming through will try to go to the trust fund, you
have $267 billion that will blow this thing wide open.
This trust fund, with the medical criteria it has today, will not
work. That is why having a bill that has specific medical criteria in
it will work.
Let me be clear why I support the Cornyn substitute. The Cornyn
substitute does not shut anyone out of the courts. If you think you
have asbestos exposure, and you want to sue, you can. But you will have
to meet the medical criteria for it to be related to asbestos or
silicosis. There is no unreasonable requirement; there is just upfront
medical criteria that must be met to have application and that
requirement must apply.
It does not mean you cannot have your day in court. You can. You have
to demonstrate your disease matches the medical criteria which are
recognized medical criteria associated with asbestos disease.
The other thing that is good about this bill is if you have had
asbestos exposure and have no disease now, this does not cut you off
from the future. If you develop disease that is truly related to
asbestos, you will be able to have your day in court years--30, 40
years--down the road if, in fact, you develop impairment related to
asbestos within this medical criteria that the medical community and
the scientific community recognize is accurate.
Under this substitute, as compared to the present bill, physicians
will have to comply with strict scientifically sound requirements.
There is no room for doctors and x-ray B readers to fudge the data
under the Cornyn substitute. The substitute makes sense. The trust fund
concept will work if we have good medical criteria. We do not, so it is
not going to work.
The answer is to keep people in the court system but define the
medical criteria where they can win when they truly have a disease that
is caused by asbestos, and they lose when they do not have a disease
caused by asbestos.
The science is not that hard. But we cannot take care of the trial
lawyers and take care of all the executives who want this problem
solved the way they want it. They want an answer now. The answer is,
use what this country has used in the past: the judgment of courts
based on sound criteria that cannot be manipulated. Then we will get
this problem solved and the people who are suffering today, who cannot
get into court because of false claims--hundreds of thousands of them
by people who do not have asbestos-related illness--the people who are
injured will get compensated.
I thank Senator Cornyn for, first, his courage to offer a substitute.
He is on the Judiciary Committee. We have a great chairman. He has done
a lot of hard work on this. He has brought a bipartisan bill to the
Senate. The bill will fail. It takes a great deal of courage on Senator
Cornyn's part to offer a commonsense alternative to this. It is my hope
that the many Members in this Senate will look at the trust fund with
the medical criteria as set out today, and reject it as it is written.
Either modify this bill or take the Cornyn substitute and put it in its
stead.
This is an issue we will spend a lot of time on. I know people are
considering points of order against the legislation. In fairness to the
Senate and also the public, if that is going to happen, they ought to
do it so we do not continue to spend time. Part of the process around
here is to make things not happen so you can have a political
advantage. If people are going to offer a point of order, they ought to
offer it. Let's go on to the next thing on the agenda for the American
people. If they are not going to offer it, let's have a real debate,
file cloture, get a vote on this bill and move on.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Graham). The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. FRIST. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________