[Congressional Record (Bound Edition), Volume 152 (2006), Part 1]
[Senate]
[Pages 996-997]
[From the U.S. Government Publishing Office, www.gpo.gov]




                                ASBESTOS

  Mr. KYL. Mr. President, when the Judiciary committee reported an 
asbestos-trust fund bill in 2003, I proposed three criteria for 
evaluating such a bill: the trust fund must be fair to people with 
asbestos injuries; its cost must be reasonable; and it must provide a 
permanent solution to the asbestos-litigation crisis. Last year, I 
voted to report this bill out of committee because I believe that the 
bill does meet or has the potential to meet each of these criteria. I 
also voted for the bill in no small part out of appreciation for the 
chairman's extensive efforts to address my concerns about the bill. I 
particularly appreciate his assistance in adding to the bill a 
gatekeeper mechanism for certifying exigent claims seeking an early 
settlement. Any startup provision that threatens to prematurely return 
the trust fund to court is bad for victims, bad for participant 
businesses, and bad for the U.S. Government. Once this fund is started, 
it need to work--we cannot shift victims back and forth between the 
tort system and the fund, especially those victims with malignant 
conditions, who likely do not have long to live.
  The need for this bill is obvious. Current asbestos litigation 
practices have been accurately described by Professor Lester Brickman 
as a ``massively fraudulent enterprise fit to take its place among the 
pantheon of American scandals.'' Typically, trial lawyers consolidate 
thousands of claims and file them against a series of defendants. These 
claims are generated by mass-screening recruitment companies that 
ignore all scientific standards for identifying asbestos disease and 
employ corrupt physicians who will say that anyone has asbestosis if 
the fee is right.
  In the perverse rules, plaintiffs' lawyers have a de facto veto over 
confirming the bankruptcy trust and can thus dictate its terms.
  The results are predictable: even for asbestos bankruptcy trusts 
amounting to billions of dollars, the plaintiffs' lawyers take 40 
percent off the top. These recoveries inevitably compensate lawyers in 
an amount several orders of magnitude greater than anything resembling 
a reasonable hourly rate. And all for bringing claims that no honest 
doctor would ever describe as legitimate cases of asbestos injury. It 
is easy to see where a well-crafted trust fund could improve on this 
system--how it could cut our the trial lawyer middle man and preserve 
recoveries for actual victims of asbestos disease.
  Nevertheless, when I voted for this bill in the committee, I 
expressed reservations about the final product. One concern about this 
bill looms above all others, and it directly threatens all three of the 
above-stated criteria for evaluating the bill: solvency. I remain 
deeply concerned that this fund will run out of money and prove unable 
to pay all qualifying claimants. Allow me to explain why I am concerned 
about the fund's finances.
  Here are a couple of reasons why. First, look to the bankruptcy trust 
funds previously existing and that have existed in the past. What has 
our experience been? Not very good.
  In written questions to Dr. Francine Rabinovitz, who has been 
retained by trust fund bankers to estimate future claims under the 
fund, I asked her about the experience under the asbestos bankruptcy 
funds. Those funds are about the closest analog to what we are doing 
here--no-fault funds that compensate all claimants who meet particular 
exposure and medical criteria. Indeed, the criteria for this fund 
explicitly are borrowed from the latest version of the Johns Manville 
bankruptcy fund, which is part of her study. I appreciate her candor. 
Here is what she had to say:

       To my knowledge, none of the bankruptcy trusts created 
     prior to 2002 have been able to pay over the life anywhere 
     close to 50 percent of the liquidated value of qualifying 
     claims. Of the current generation of bankruptcy trusts, the 
     expected payout of those trusts, to my knowledge, ranges from 
     a low of 5 percent (Manville) to a high of 31.7 percent 
     (Western McArthur). The only current operating Trust to pay 
     100 percent of its scheduled values in the Mid-Valley Trust. 
     These percentages are sensitive, of course, to the 
     eligibility criteria the trusts apply. Under its original 
     eligibility criteria, Manville was forced to drop its initial 
     100 percent payout first to 10 percent and then 5 percent of 
     liquidated value. There will be a reevaluation of Manville's 
     ability to pay a higher percentage in the near future by 
     virtue of the impact of its recently imposed more stringent 
     eligibility criteria.

  These figures should disturb us all.
  We are legislating a $140 billion trust--one that must work, because 
the costs of failure would be catastrophic. And yet the model for this 
fund is one that has failed every time that it has been tried. The 
miserable performance of the bankruptcy trusts should, at the very 
least, make us very cautious in proceeding down the same no-fault 
trust-fund path. While I recognize that this Fund is not exactly like 
the bankruptcy trusts--that it is designed better in some ways--in 
other ways the compensation criteria employed by this Fund are a change 
for the worse.
  Another example that ought to give us some pause is the black lung 
fund, which is designed to compensate miners with CWP, a coal-mining-
induced lung disease. That fund is now $8.7 billion in debt. It is now 
finally bringing in enough revenue to pay current claimants, but it is 
unable to service its debt. Each year's interest is simply added to the 
total debt. This is no way to run a trust fund.
  It is telling to read the story of the black lung fund and hear why 
it has become so overburdened. The narrative should sound familiar to 
anyone who has closely followed the committee proceedings for the 
asbestos fund. There is a June 12, 2002 report from the Congressional 
Research Service. I wanted to quote from part of it, but the bottom 
line is that the crafters of the black lung fund ignored medical 
science when they set up the fund's compensation criteria. As is 
predictable for Congress, criteria were developed in the spirit of 
political compromise rather than under the guidance of hard science. 
The results have been very unfavorable.
  The report basically said:

       Virtually all of the expectations for the Black Lung 
     Benefits Act when it was enacted in 1969, e.g., the numbers 
     of claims submitted or approved, were contradicted by 
     subsequent experience. Corrective legislation was adopted in 
     1972, 1977, and 1981, including the establishment of trust 
     fund financing in 1977, but results have continued to be at 
     variance with expectations. As a consequence, the trust fund 
     has perennially been in a position of growing deficit.

  In other words, even at a time when the black lung fund's liberal 
compensation criteria were generating a surplus of claims, political 
pressures nevertheless pushed Congress to further liberalize those 
criteria and further bankrupt the fund.
  In the asbestos arena, I fear that we already have repeated the first 
part of the black lung fund story. Our concern is that as we continue 
down this path, we risk repeating the rest of the story as well.
  But this fund is different from black lung in one key respect: it is 
much, much more expensive. This fund has the potential to burn through 
scores of billions of dollars, rack up $30 billion in debt, and throw 
us back into the tort system--all within one decade. Such a result 
truly would make the black lung fiasco seem insignificant. It would be

[[Page 997]]

an utter disaster. We cannot let it happen.
  I wish that the Judiciary Committee had learned more from the black 
lung experience--that we could at least recognize that a no-fault trust 
fund must be run as a tight ship, with rigorous compensation criteria 
and no leakage of claims. Unfortunately, that does not describe the 
bill that has been produced by the Judiciary Committee.
  In his recent testimony before this committee, Dr. James Crapo 
described how we are repeating the same mistake made in the black lung 
fund: we are compensating diseases that are not caused by occupational 
exposure to asbestos. Dr. Crapo criticized the fund's compensation of 
persons with pleural reactions, which are not regarded as a disease and 
are not even a predictor of future disease. He also criticized the 
fund's claim level for persons with colorectal, stomach, and other 
cancers, noting that it would ``result in large compensation to large 
numbers of individuals who develop a cancer for which there is no 
established causal relationship to asbestos exposure.''
  And just as was the case with black lung, despite the asbestos fund's 
use of criteria that are far more liberal than what can be justified by 
medical science, we already are hearing arguments that the fund should 
go further, that its compensation criteria should be even more liberal. 
For example, the medical literature strongly demonstrates that the only 
marker for asbestos-related lung cancer is clinically significant 
asbestosis. The cohort studies overwhelmingly show that unless a person 
has at least some asbestosis, asbestos exposure played no role in his 
lung cancer. But in this bill, we go further than compensating lung 
cancer in the presence of asbestosis. We also compensate lung cancer 
with pleural plaques. Pleural plaques are evidence of asbestos exposure 
but are not a valid marker for asbestos-related lung cancer.
  And yet, even this has not satisfied some fund critics. This 
committee was even forced to vote several times on an amendment that 
would have obligated the fund to pay compensation for lung cancer when 
the claimant did not even have pleural plaques. The committee did 
defeat that amendment by a vote of more than 2 to 1, showing some 
respect for medical science. Nevertheless, the amendment is a harbinger 
of the political pressures that this Fund ultimately will face over its 
life.
  Several other aspects of this bill also cause me concern. Let me 
summarize some of those.
  For example, the sunset: The bill still contains a provision that 
would prematurely terminate the fund and return all claims to State and 
Federal court, with no mechanism for fixing problems even if the reason 
that the fund is running out of money is because it is paying non-
meritorious claims. Once the fund is started, it must work. Going back 
to court is not a realistic option. As the bill now stands, the fund 
would borrow $30 billion prior to any sunset. Once companies are back 
in court defending against asbestos claims, they would also be paying 
down this debt. This would require full trust fund assessments for at 
least a decade. These payments, combined with renewed litigation and 
no, or heavily eroded, insurance policies, would be unaffordable for 
many companies. The effects of such a sunset likely would be so 
devastating that companies would demand that the Federal Government 
begin directly subsidizing the fund. This is a prospect that we should 
do all that we can to avoid. The fund should have a self-correction 
mechanism that makes sure that a sunset will never happen.
  Another problem is allocation. This is an emerging problem, the scope 
of which we are only gradually becoming aware of, and, frankly, one to 
which I will devote my primary attention. The bill requires companies 
to pay into the fund based on their past asbestos expenditures, 
judgments, settlements, and litigation costs, even if those payments in 
the past were all absorbed by insurance. Companies' insurance will not 
cover their trust fund payments; insurers pay into the fund separately. 
The fact that the bill effectively invalidates the company's insurance 
contracts creates colorable takings claims against the fund. It also 
creates some serious inequities. Companies that found their asbestos 
liabilities to be manageable will find themselves facing unaffordable 
fund assessments. I am going to insist we have language in this bill 
that will address these inequities.
  Another problem is startup. Much progress was made during the last 
days of markup toward fixing the so-called startup provisions. 
Nevertheless, the fund still ultimately allows claims to return to 
court if there are delays in startup, with no limits on award and no 
offsets in future fund payments for participants. Other, much simpler 
trust funds, such as those for radiation workers, have taken 18 months 
to start functioning. We cannot dismiss the possibility that this fund 
will require more than 2 years to begin paying all claims. Without an 
offset in limits, such a startup reversion would be disastrous for many 
companies.
  Another issue relates to pending claims. The fund allows claims that 
already have advanced to trial to remain in the tort system with no 
offsets and no limits on damages. Already, some trial lawyers have 
begun seeking acceleration of their trial dates in order to take 
advantage of this provision. For the same reasons as applied to the 
startup provisions, such continued litigation could be very damaging.
  A final problem is the problem of medical criteria which I alluded to 
earlier. Although improved over the 2003 committee bill, especially 
with regard to removal of level VII smokers, the fund still pays people 
with very common diseases that were not caused by exposure to asbestos. 
Credible medical experts had expressed the view to the committee that 
these problems will bankrupt the fund. These flaws in the bill would be 
less severe if the fund contains some self-correction mechanism that 
allowed tightening the million-dollar criteria in the event of 
insolvency caused by nonmeritorious claims, but it currently contains 
no such mechanism.
  In summary, the bottom line is this is a bill which remains very much 
a work in progress. I am committed to addressing its problems as the 
bill advances through the Congress. I want to see it advance through 
the Congress. The bill is so important to so many people: the asbestos 
victims seeking compensation--at least it might help take care of their 
families, the businesses with only marginal connections to asbestos 
that nevertheless face bankruptcy through litigation, and workers and 
pensioners who see their jobs and retirement accounts destroyed by the 
litigation juggernaut. This bill is important. I look forward to 
working on the legislation with the chairman of the committee, the 
ranking member, and others who are supporting it. I will support the 
cloture motion and motion to proceed to the consideration of the bill.
  The PRESIDING OFFICER. The Senator from Kentucky.

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