[Senate Report 109-97]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 131
109th Congress                                                   Report
                                 SENATE
 1st Session                                                     109-97

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



 
         THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005

                                _______
                                

                 June 30, 2005.--Ordered to be printed

                                _______
                                

    Mr. Specter, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                         [To accompany S. 852]

    The Committee on the Judiciary, to which was referred the 
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, report favorably thereon with 
amendments, and recommend that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Purposes.........................................................1
 II. Legislative History..............................................4
III. Votes of the Committee...........................................7
 IV. Background and Need for Legislation.............................12
  V. How S. 852 Works................................................21
 VI. Section-by-Section Analysis and Discussion......................32
VII. Critic's Contentions and Rebuttals..............................79
VIII.Cost Estimate...................................................89

 IX. Regulatory Impact Statement.....................................90
  X. Additional Views................................................91
 XI. Minority Views.................................................187
XII. Changes in Existing Law........................................227

                              I. Purposes

    S. 852, the Fairness in Asbestos Injury Resolution Act of 
2005, is important legislation that responds to a badly broken 
system that lacks the capacity to resolve the claims of 
asbestos victims. The bill will create an alternative 
compensation system within the Department of Labor to better 
resolve the claims of these victims and is intended to bring 
uniformity and rationality to the system of asbestos claims 
resolution so that resources are directed toward those who are 
impaired by their exposure. It is also intended to provide 
economic stability for businesses faced with asbestos liability 
by stemming the rising tide of asbestos litigation. The 
Committee believes that it is imperative to address the current 
asbestos crisis, which has diverted resources from the truly 
sick, clogged our federal and state courts, bankrupted 
companies, and endangered the jobs and pensions of employees.
    S. 852 has five (5) key components:
    First--S. 852 compensates legitimate asbestos victims 
faster and on a ``no-fault'' basis. Under the FAIR Act, 
asbestos victims' claims are resolved under specific time 
limits that enable claims to be processed expeditiously.
    Victims currently face delay and unpredictable results.
    There is widespread agreement that the current tort system 
does not fairly compensate asbestos victims. Most unfair are 
the situations where victims receive little or no compensation 
because the defendant company is bankrupt, the source of the 
asbestos can't be identified, the workers compensation system 
prevents them from suing their employer, or where their 
employer was the Government and is immune from any liability. 
In addition, there are often years of delay before victims 
receive any compensation. Awards to victims are highly 
unpredictable, with similarly afflicted individuals receiving 
vastly different amounts. Transaction costs, including 
attorney's fees, are extremely high and reduce the amounts 
actually received by victims.\1\
---------------------------------------------------------------------------
    \1\Hearing on a Bill to Create a Fair and Efficient System to 
Resolve Claims of Victims for Bodily Injury Caused by Asbestos 
Exposure, and for Other Purposes, Before the Senate Committee on the 
Judiciary, 109th Congress (April 26, 2005) (testimony of Mr. Alan 
Reuther).
---------------------------------------------------------------------------
    Under the tort system, victims bear the burden of 
identifying a specific product, proving that the specific 
product caused their illness, and showing culpability of a 
particular defendant. Moreover, suits by unimpaired claimants 
have bankrupted companies and diminished the funds available 
for the truly ill. As a result, victims often face 
insurmountable obstacles in recovering for their injuries 
because many times there is no identifiable party for a 
claimant to sue, either because the culpable party has gone 
into bankruptcy or because it is impossible to identify the 
cause of the claimant's exposure. Furthermore, under the 
current system, there is a lag of several years between the 
filing and resolution of a suit; and, even then, there is no 
assurance that the claimant will receive compensation for their 
injuries.
    Under S. 852, victims will receive timely and certain 
compensation on a ``no fault'' basis. They will not need to 
establish the culpability of a particular solvent party in 
order to be compensated. Rather, they will only need to satisfy 
the eligibility requirements in the Act to receive medical 
monitoring or monetary compensation. S. 852 establishes an 
unprecedented $140 billion privately funded trust fund, 
identified in the bill as the Asbestos Injury Claims Resolution 
Fund (the ``Fund''), for the purpose of directing compensation 
to individuals suffering identifiable injuries as a result of 
asbestos exposure. In order to receive compensation from the 
Fund, claimants must prove that they meet the eligibility 
criteria outlined in the Act.
    The FAIR Act also provides for an expedited claims 
processing and payment system for the most seriously ill 
individuals. Further, the Act provides special exceptions for 
claimants suffering from asbestos-related injuries, but who 
cannot meet the employment exposure requirements of the Act. 
Medical monitoring will be available for those who have been 
exposed to asbestos, but who are not suffering from an 
identifiable asbestos-related illness. Finally, the streamlined 
administrative process diminishes the need for large attorney 
fees, which currently deplete that amount that a claimant 
receives by as much as forty (40%) percent.
    Second--S. 852 provides certainty to asbestos victims. 
Claimants currently filing asbestos-related claims face a 
series of problems preventing them from being assured 
compensation for their injuries. While some may receive high 
awards, others receive nothing at all depending on their 
ability to prove culpability of harm that occurred decades in 
the past. S. 852 establishes a $140 billion fund that is 
projected to be more than adequate to compensate all present 
and future eligible claims. The compensation for victims as 
provided under the bill is based on disease categories and 
corresponding awards as follows:

----------------------------------------------------------------------------------------------------------------
                Level                        Condition/disease                          Award
----------------------------------------------------------------------------------------------------------------
I....................................  Asbestosis/Pleural Disease A  Medical Monitoring
II...................................  Mixed Disease with            $25,000
                                        Impairment.
III..................................  Asbestosis/Pleural Disease B  $100,000
IV...................................  Severe Asbestosis...........  $400,000
V....................................  Disabling Asbestosis........  $850,000
VI...................................  Other Cancer................  $200,000
VII..................................  Lung Cancer with Pleural      smokers: $300,000
                                        Disease.                     ex-smokers: $725,000
                                                                     non-smokers: $800,000
VIII.................................  Lung Cancer with Asbestosis.  smokers: $600,000
                                                                     ex-smokers: $975,000
                                                                     non-smokers: $1,100,000
IX...................................  Mesothelioma................  $1,100,000
----------------------------------------------------------------------------------------------------------------

    Third--S. 852 provides economic stability and preserves 
jobs and pensions by offering certainty to defendants and 
insurers. The FAIR Act ensures that the allocation of payments 
into the Fund will be fair, rational, and predictable.
    Currently, companies are unable to plan for asbestos 
litigation costs because of the unpredictability of the current 
tort system. Since most of the original asbestos manufacturers 
have gone into bankruptcy, companies with little relationship 
to asbestos are targeted with massive suits. As a result, these 
tangential companies have begun to feel the crushing weight of 
asbestos litigation. Insurers and reinsurers are affected as 
well. In sum, the current system has driven many companies to, 
or on the brink of bankruptcy. This hurts not only employees, 
but also investors.
    S. 852 provides defendant companies and insurers with a 
means to plan for future asbestos liabilities. By requiring the 
participants to contribute set amounts of money into the Fund 
on a predetermined time table, defendant companies and insurers 
will be able to move forward and plan for the future. By 
establishing an administrative system that provides for fair, 
balanced, reasonable, and predictable allocation of payments by 
defendant companies and their insurers, the Act will preserve 
the jobs and pensions of companies that might otherwise be 
forced into bankruptcy.
    Fourth--S. 852 ensures that the fund will be administered 
simply, fairly, and efficiently. The current tort system is 
backlogged and unfair to many of the sickest victims. The flood 
of lawsuits in the tort system, moreover, has led to 
unacceptable delays. Some seriously ill plaintiffs even die 
before their suits are resolved.\2\ One such victim was Texas 
resident Ronald Bailey who died of mesothelioma in June of 
2000, about two months before his scheduled trial date.\3\
---------------------------------------------------------------------------
    \2\See Stephen J. Carroll, et al., Rand Institute for Civil 
Justice, `Asbestos Litigation Costs and Compensation: An interim 
Report,'' 35 (2002). [Hereinafter RAND 2002].
    \3\Thomas Korosec, Enough to Make You Sick: In the struggle for a 
shrinking pot of money from asbestos litigation, the sickest victims 
are getting nickels and dimes while lawyers get their millions, Dallas 
Observer, Sept. 26, 2002.
---------------------------------------------------------------------------
    Under S. 852, claims will be processed efficiently and 
fairly by the Office of Asbestos Disease Compensation within 
the Department of Labor pursuant to clear standards and 
statutory timelines. Under this system, the Administrator will 
determine a claimant's eligibility and compensation award based 
on fair and balanced criteria, including a sound medical basis 
for all claims. The awards will be paid out to eligible 
claimants over a period not to exceed four (4) years from the 
Fund that will be run by the Administrator solely for the 
benefit of asbestos victims.
    Finally--S. 852 bans harmful asbestos to help prevent 
future illnesses. Although the use of asbestos has largely been 
reduced by federal regulations it has not been eliminated. The 
FAIR Act seeks to eliminate the risks of future injuries from 
asbestos use by prohibiting any further manufacture, 
processing, and distribution in commerce of harmful asbestos-
containing products, subject to certain exceptions. S. 852 
would also require that prohibited asbestos-containing products 
be disposed of pursuant to federal, state and local 
requirements within three years of the date of enactment to 
ensure that such products are no longer in the stream of 
American commerce.
    Above all, the purposes of this legislation are to ensure 
that people who become sick as a result of exposure to asbestos 
are compensated surely, fairly, and quickly, while protecting 
the economic viability of defendants, and the employees, 
investors, and the communities that depend on them.

                        II. Legislative History

    The asbestos crisis has been considered by the Congress for 
decades. The issue has been evaluated through several hearings 
and addressed by numerous legislative proposals.
    In the 107th Congress, then Chairman Leahy held a hearing 
on September 25, 2002, entitled ``Asbestos Litigation.'' At 
that time, the Committee heard testimony from Senator Max 
Baucus (D-MT) and Senator Ben Nelson (D-NE), as well as 
witnesses Fred Barron, Steven Kazan, Jonathan Hiatt (General 
Counsel of the AFL-CIO), David Austern (General Counsel of the 
Manville Personal Injury Settlement Trust), and former 
Solicitor General Walter Dellinger, III.
    During the 108th Congress, then Chairman Hatch followed up 
with another hearing on March 5, 2003, entitled ``The Asbestos 
Litigation Crisis: It is Time for Congress to Act.'' The 
Committee heard testimony from Senator Max Baucus (D-MT) and 
Senator George Voinovich (R-OH) and witnesses Melvin 
McCandless, Brian Harvey, David Austern, President-elect of the 
American Bar Association Dennis Archer, Steven Kazan, and 
Jonathan Hiatt.
    On May 22, 2003, Chairman Hatch introduced S. 1125, the 
Fairness in Asbestos Injury Resolution Act of 2003 (FAIR Act)--
legislation co-sponsored by Senator Ben Nelson (D-NE), Senator 
Mike DeWine (R-OH), Senator Zell Miller (D-GA), Senator George 
Voinovich (R-OH), Senator George Allen (R-VA), Senator Saxby 
Chambliss (R-GA) and Senator Chuck Hagel (R-NE). After its 
introduction, Chairman Hatch held another hearing on S. 1125 on 
June 4, 2003, entitled ``Solving the Asbestos Litigation 
Crisis: S. 1125, the Fairness in Asbestos Injury Claims 
Resolution Act of 2003.'' The Committee heard testimony from 
Senator Patty Murray (D-WA), Senator Chuck Hagel (R-NE) and 
from witnesses Professor Laurence H. Tribe, Dr. James Crapo, 
Dr. Laura Stewart Welch, Dr. John E. Parker, Jennifer L. Biggs 
(FCAS, MAAA), Dr. Mark A. Peterson, Prof. Frederick C. Dunbar, 
Prof. Eric D. Green and Dr. Robert Hartwig.
    The Committee then considered S.1125 during Executive 
Business meetings held on June 19, 24, 26, 2003 and on July 10, 
2003 discharged S. 1125 by a roll call vote of 10 yeas, 8 nays 
and 1 pass.
    In August of 2003, Senator Specter convened a series of 
meetings that were moderated by Third Circuit Senior Judge 
Edward Becker with the key stakeholders, including 
representatives of the defendant companies, insurance and 
reinsurance companies, the AFL-CIO, and the American Trial 
Lawyers Association (ATLA). The purpose of these meetings was 
to provide stakeholders a forum to express their views on the 
legislation and resolve contentious issues that the Committee 
identified during markup on S.1125.
    On April 7, 2004, Senator Hatch introduced S. 2290, the 
Fairness in Asbestos Injury Resolution Act of 2004, with 
Majority Leader Bill Frist (R-TN), Senator Zell Miller (D-GA), 
Senator Mike DeWine (R-OH), Senator Saxby Chambliss (R-GA), 
Senator George Voinovich (R-OH), Senator George Allen (R-VA), 
Senator Chuck Hagel (R-NE), and Senator Pete Domenici (R-NM). 
On April 20, 2004, the Majority Leader moved to proceed to the 
consideration of S.2290. That motion, however, drew objections 
whereby a Cloture Motion was filed on April 20, 2004. The 
Senate failed to invoke cloture on April 22, 2004, by a vote of 
50-47.
    After the unsuccessful cloture vote, Senator Specter 
reconvened the stakeholder meetings again under the stewardship 
of Judge Becker and in an effort to encourage progress on the 
bill. During these meetings, which were also attended by 
Republican and Democratic staff, the stakeholders expressed 
their concerns on a litany of issues involving many of the 
bill's core provisions. Between August of 2003 and January of 
2005, Senator Specter convened a total of thirty-six (36) 
meetings with Judge Edward Becker and the stakeholders.
    During the 109th Congress, Chairman Specter held a hearing 
on January 11, 2005, entitled ``The Fairness in Asbestos Injury 
Resolution Act.'' In the hearing, the Committee heard testimony 
from the Honorable Judge Edward R. Becker (U.S. Court of 
Appeals for the Third Circuit), the Honorable John Engler 
(President and CEO of National Association of Manufacturers), 
Peg Seminario (Director of Occupational Safety and Health, AFL-
CIO), Craig Berrington (Senior Vice President and General 
Counsel of American Insurance Association), Mike Forscey 
(American Trial Lawyers Association), Mary Lou Keener, Billie 
Speicher, and Jeff Robinson (Partner, Baach, Robinson, and 
Lewis).
    A little over a week later, on January 19, 2005, Chairman 
Specter circulated a discussion draft of the bill. In an effort 
to flush out outstanding concerns on the bill, Chairman Specter 
held a hearing entitled ``Asbestos: Mixed Dust and FELA 
Issues'' on February 2, 2005. At the hearing, the Committee 
heard testimony from Dr. Laura Welch (Medical Director, Center 
to Protect Worker Rights), Michael B. Martin (Partner, Maloney, 
Martin and Mitchell, L.L.P.), Dr. David Weill (Associate 
Professor of Medicine, Division of Pulmonary and Critical Care 
Sciences, Lung Transplant Program at the University of Colorado 
Health Sciences Center), Professor Lester Brickman (Professor 
of Law, Cardozo Law School of the Yeshiva University), Dr. 
Theodore Rodman (Retired Professor of Medicine, Temple 
University), Dr. Paul Epstein (Clinical Professor of Medicine 
and Chief of Pulmonary and Critical Care Medicine, Penn 
Medicine at Radnor), Paul R. Hoeferer (Vice President & General 
Counsel of BNSF Railway Co.), and Donald F. Griffin (Director 
of Strategic Coordination and Research, BMWED-Teamsters). 
Thereafter, Chairman Specter circulated another discussion 
draft on February 7, 2005, to reflect agreements reached in 
negotiations and to encourage further progress on the bill.
    On April 19, 2005, S. 852, Chairman Specter introduced the 
Fairness in Asbestos Injury Resolution Act of 2005, with 
Ranking Member Patrick Leahy (D-VT), Senator Orrin Hatch (R-
UT), Senator DeWine (R-OH), Senator Dianne Feinstein (D-CA), 
Senator Max Baucus (D-MT), Senator Charles Grassley (R-IA), and 
Senator George Voinovich (R-OH). On April 26, 2005, and at the 
specific request of Senator Durbin, Chairman Specter held yet 
another hearing entitled, ``A Bill to Create a Fair and 
Efficient System to Resolve Claims of Victims for Bodily Injury 
Cause by Asbestos Exposure, and for Other Purposes.'' The 
Committee heard testimony from Judge Becker, the Honorable John 
Engler (President and CEO of National Association of 
Manufacturers), Craig Berrington (General Counsel of the 
American Insurance Association), Peg Seminario (Director of 
Occupational Safety and Health, AFL-CIO), Dr. James Crapo 
(Chairman of the Department of Medicine, National Jewish 
Medical Research Center), Carol Morgan (President and General 
Counsel, National Services Industry, Inc.), Hershel Gober 
(Military Order of the Purple Heart), Dr. Fran Rabinovitz, Mark 
Peterson, Prof. Eric Green (Boston University Law School), Dr. 
Philip Landrigan, (the Mount Sinai Irving J. Selikoff Center 
for Occupational and Environmental Medicine), and Alan Reuther 
(United Automobile, Aerospace and Agricultural Implement 
Workers of America).
    The Committee considered S. 852 during Executive Business 
meetings held on April 28, 2005, and May 11, 12, 19, 25 and 26, 
2005. On May 26, 2005, the Committee discharged S. 852 
favorably by a roll call vote of 13 yeas and 5 nays.

                      III. Votes of the Committee

    Pursuant to paragraph 7 of rule XXVI of the Standing Rules 
of the Senate, each Committee is to announce the results of 
roll call votes taken in any meeting of the Committee on any 
measure or amendment. The Senate Judiciary Committee, with a 
quorum present, met on April 28, 2005, and May 11, 12, 19, 25 
and 26, 2005 at 9:30 am to markup S. 852. The following votes 
occurred on S. 852:
    A Kennedy Amendment offered on May 11, 2005, to restore 
Level VII cases relating to lung cancer. Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley                 ......................
Kohl                     Kyl                      ......................
Feingold                 DeWine                   ......................
Durbin                   Sessions                 ......................
                         Graham                   ......................
                         Cornyn                   ......................
                         Brownback                ......................
                         Coburn                   ......................
                         Leahy                    ......................
                         Feinstein                ......................
                         Specter                  ......................


    A Manager's Package offered on April 28, 2005, by Chairman 
Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). 
Accepted by voice vote.
    A Feinstein Amendment offered on April 28, 2005, to clarify 
that expedited judicial review of constitutional challenges 
shall be modeled after the McCain-Feingold campaign finance 
law. Accepted by voice vote.
    A Durbin Amendment offered on April 28, 2005, to provide 
for equal treatment of spouses and children of deceased exigent 
claimants. Accepted by voice vote.
    A Feinstein Amendment offered on May 11, 2005, to modify 
the processing of claims and procedures relating to the stay of 
claims and return to the tort system, to establish timely 
payments for asbestos claimants, and for other purposes. 
Accepted by voice vote.
    A Specter/Leahy Amendment offered on May 11, 2005, to 
provide for the expedited resolution of claims brought by the 
spouses and children of deceased exigent claimants. Accepted by 
voice vote.
    A Coburn Amendment offered on May 11, 2005, to provide 
guidance to the Institute of Medicine in their study of Level 
VI cancers. Defeated 7-9, 2 pass.


          YEAS                     NAYS                    PASS

Hatch                    DeWine                   Schumer
Grassley                 Leahy                    Graham
Kyl                      Kennedy                  ......................
Sessions                 Biden                    ......................
Cornyn                   Kohl                     ......................
Brownback                Feinstein                ......................
Coburn                   Feingold                 ......................
                         Durbin                   ......................
                         Specter                  ......................


    A Feingold Amendment offered on May 11, 2005, to eliminate 
the limitation on the amount of certain exigent health claims. 
Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Kohl                     Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Feinstein
                         Specter


    A Manager's Package offered on May 11, 2005, by Chairman 
Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). 
Accepted by voice vote.
    A Kennedy Amendment offered on May 19, 2005, to provide for 
an Institute of Medicine Study to determine whether there is a 
causal link between asbestos exposure and lung cancer for 
individuals who have had substantial occupational exposure to 
asbestos but have no evidence of pleural disease or asbestosis. 
Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Kohl                     Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Feinstein
                         Specter


    A Manager's Package offered on May 19, 2005, by Chairman 
Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). 
Accepted by voice vote.
    A Kennedy Amendment offered on May 25, 2005, to allow 
persons with lung cancer who had substantial exposure to 
asbestos but are not eligible for compensation from the Fund to 
pursue their asbestos claims in Federal or State court. 
Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Kohl                     Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Feinstein
                         Specter


    A Biden Amendment offered on May 26, 2005, to ensure that 
asbestos claims are not stayed until the Administrator has met 
its public notice requirements, defendant participants have 
made their initial payments, and the Administrator has 
certified that defendant participants have made sufficient 
minimum annual payments to the Fund. Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Kohl                     Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Feinstein
                         Specter


    A Biden Amendment offered on May 26, 2005, to provide that 
if the Act is stayed that asbestos claims shall continue in the 
court system. Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Kohl                     Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Feinstein
                         Specter


    A Biden Amendment offered on May 26, 2005, to provide that 
settlement agreements between plaintiffs and defendants are not 
abrogated, if the settlement agreement was authorized by the 
settling defendant, and confirmed by, or with, counsel for the 
settling defendant, and to clarify the rules for settlement 
agreements dealing with 1 or more asbestos claims. Defeated 
without a quorum, by rule of the Chairman and consent of 
Senator Biden, 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley
Feinstein                Kyl
Feingold                 DeWine
Durbin                   Sessions
                         Graham
                         Cornyn
                         Brownback
                         Coburn
                         Leahy
                         Kohl
                         Specter


    A Manager's Package offered on May 26, 2005, by Chairman 
Specter (R-PA) and Ranking Member Patrick Leahy (D-VT). 
Accepted by voice vote.
    A Kennedy Amendment offered on May 26, 2005, to extend 
benefits for claimants of Libby, Montana to certain other 
residents subject to community exposure to asbestos. 
Effectively vitiated by acceptance of substitute amendment 
presented by Senator Specter and Senator Leahy.
    A Graham Second Degree Amendment to the Kennedy Amendment 
offered on May 26, 2005, to create provide for Libby, Montana 
recovery model for future sites of community-wide 
contamination. Defeated 6-11, 1 pass.


          YEAS                     NAYS                    PASS

Graham                   Hatch                    Schumer
Kennedy                  Grassley                 ......................
Biden                    Kyle                     ......................
Kohl                     DeWine                   ......................
Feingold                 Sessions                 ......................
Durbin                   Cornyn                   ......................
                         Brownback
                         Coburn                   ......................
                         Leahy                    ......................
                         Feinstein                ......................
                         Specter                  ......................


    A Specter/Leahy Substitute Amendment to the Kennedy 
Amendment offered on May 26, 2005, to create a Libby, Montana 
recovery model for future sites of community-wide 
contamination. Accepted 11-6, 1 pass.


          YEAS                     NAYS                    PASS

Hatch                    Graham                   Schumer
Grassley                 Kennedy                  ......................
Kyl                      Biden                    ......................
DeWine                   Kohl                     ......................
Sessions                 Feingold                 ......................
Cornyn                   Durbin                   ......................
Brownback                .......................  ......................
Coburn                   .......................  ......................
Leahy                    .......................  ......................
Feinstein                .......................  ......................
Specter                  .......................  ......................


    A Kennedy Amendment offered on May 26, 2005, to provide 
that certain exposure presumptions shall be based on asbestos 
exposure being a contributing factor and not a substantial 
contributing factor, and for other purposes. Defeated 5-12, 1 
pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley                 ......................
Kohl                     Kyl                      ......................
Feingold                 DeWine                   ......................
Durbin                   Sessions                 ......................
                         Graham                   ......................
                         Cornyn                   ......................
                         Brownback                ......................
                         Coburn                   ......................
                         Leahy                    ......................
                         Feinstein                ......................
                         Specter                  ......................


    A Kennedy Amendment offered on May 26, 2005, to provide for 
exigent health claims to continue in court until the Fund is 
operational, and for other purposes. Defeated 5-12, 1 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Schumer
Biden                    Grassley                 ......................
Kohl                     Kyl                      ......................
Feingold                 DeWine                   ......................
Durbin                   Sessions                 ......................
                         Graham                   ......................
                         Cornyn                   ......................
                         Brownback                ......................
                         Coburn                   ......................
                         Leahy                    ......................
                         Feinstein                ......................
                         Specter                  ......................


    A Biden Amendment offered on May 26, 2005, to revise and 
strengthen the sunset provisions. Defeated 4-12, 2 pass.


          YEAS                     NAYS                    PASS

Kennedy                  Hatch                    Kohl
Biden                    Grassley                 Schumer
Feingold                 Kyl                      ......................
Durbin                   DeWine                   ......................
                         Sessions                 ......................
                         Graham                   ......................
                         Cornyn                   ......................
                         Brownback                ......................
                         Coburn                   ......................
                         Leahy                    ......................
                         Feinstein                ......................
                         Specter                  ......................


    A Motion to Report Favorable S. 852 offered on May 26, 
2005. Accepted 13-5.


                YEAS                                 NAYS

Hatch                                 Kennedy
Grassley                              Biden
Kyl                                   Feingold
DeWine                                Schumer
Sessions                              Durbin
Graham                                ..................................
Cornyn                                ..................................
Brownback                             ..................................
Coburn                                ..................................
Leahy                                 ..................................
Kohl                                  ..................................
Feinstein                             ..................................
Specter                               ..................................


                IV. Background and Need for Legislation

          I first saw the asbestos issue back in 1984, more 
        than 20 years ago, when then-Senator Gary Hart of 
        Colorado brought in Johns-Manville. And this very tough 
        issue has been very elusive for more than two decades, 
        and it has mounted in problems, reaching a situation 
        where we now have some 74 companies which have gone 
        into bankruptcy, thousands of individuals who have been 
        exposed to asbestos, with deadly diseases--mesothelioma 
        and cancer--and who are not being compensated. And 
        about two-thirds of the claims, oddly enough, are being 
        filed by people who are unimpaired.
          The number of asbestos defendants has risen sharply 
        from about 300 in the 1980s to more than 8,400 today, 
        and most are users of the product. It spans some 85 
        percent of the U.S. economy. Some 60,000 workers have 
        lost their jobs. Employees' retirement funds are said 
        to have shrunken by some 25 percent. And beyond any 
        question, the issue is one of catastrophic 
        proportions.--Chairman Arlen Specter, at a January 11, 
        2005, Senate Judiciary Committee Hearing.
          We have tried to protect the ultimate goal of fair 
        compensation to the victims. That is the lodestar of 
        our efforts. * * * This is the most lethal substance 
        ever to be widely used in the workplace. Between 1940 
        and 1980, more than 27.5 million workers were exposed 
        to asbestos on the job. Nearly 19 million of them had 
        high exposure over long periods of time. We even know 
        of family members who have suffered asbestos-related 
        diseases just because they lived with the person, 
        because they washed the clothes of loved ones. The 
        economic harm caused by asbestos is real. The 
        bankruptcies that resulted are a different kind of 
        tragedy for everyone, for workers and retirees, for the 
        shareholders, and for families who built these 
        companies.--Ranking Member Patrick Leahy, at a April 
        26, 2005, Senate Judiciary Committee Hearing.

    Each year, 10,000 victims will die of mesothelioma as a 
result of occupational asbestos exposure and tens of thousands 
of victims will suffer from lung conditions which make 
breathing so difficult that they cannot engage in the routine 
activities of daily life. Many have become unemployable due to 
their medical condition. These are the real victims of the 
asbestos nightmare and must be the first and foremost focus of 
our concern. And, because of the long latency period of these 
diseases, not only will the damage done by asbestos continue 
for decades but many of the exposed live in fear of a premature 
death due to asbestos-induced disease.
    Not only do the victims of asbestos exposure continue to 
suffer, and their numbers to grow, but the businesses involved 
in the litigation, along with their employees and retirees, are 
suffering from the economic uncertainty created by this 
litigation. More than 70 companies have filed for bankruptcy 
because of their asbestos-related liabilities. As Senator Leahy 
observed at the Committee's March 5, 2003, hearing on asbestos 
litigation: ``These bankruptcies created a lose-lose situation. 
Asbestos victims deserving fair compensation do not receive it 
and bankrupt companies do not create new jobs nor invest in our 
economy.''
    The testimony presented at multiple hearings on the 
asbestos issue and studies written by independent research 
organizations confirm the fact that the asbestos crisis in the 
United States is real. It has failed the victims of 
occupational exposure. The current system forces claimants to 
wait years for their claims to be resolved. Even when their 
claims are resolved, many of these claimants are faced with the 
ultimate denial of compensation because the defendant 
responsible for their injuries has become bankrupted by 
previous lawsuits brought by unimpaired claimants. In the event 
that claimants do receive compensation, that compensation is 
often arbitrary and inequitable. For example, compensation can 
be dependant on a matter as arbitrary as the jurisdiction in 
which the suit is filed. People who bring their claims in 
certain jurisdictions can receive huge awards, even when they 
are not sick--while people fatally injured by asbestos exposure 
may receive far less and often nothing. Further, only a small 
percentage of the amount of money defendants and insurers spend 
on asbestos litigation actually reaches the claimants suffering 
from the ill effects of exposure to asbestos. In fact, 
statistics from the 2005 RAND report reveal that only forty-two 
(42 cents) cents of every dollar spent on asbestos litigation 
actually go to asbestos victims. The rest of the money is split 
between plaintiff and defense attorneys fees. Specifically, 
thirty-one (31 cents) cents of every dollar goes to defense 
costs and twenty-seven (27 cents) cents to plaintiff 
attorneys.\4\
---------------------------------------------------------------------------
    \4\RAND Institute for Civil Justice, ``Asbestos Litigation'' May 
2005, at 109 (RAND 2005).
---------------------------------------------------------------------------
    The current asbestos litigation system does not serve the 
public interest. According to the 2005 RAND Institute Study, 
asbestos litigation has driven 73 asbestos defendant 
corporations into bankruptcy between 1982 and 2004.\5\ This 
number is expected to grow exponentially, especially 
considering the fact that more asbestos litigation pushed more 
asbestos defendant corporations into bankruptcy between the 
years of 2000 and 2004 than in all of the 1970s, 1980s, and 
1990s.\6\ These bankruptcies have had tragic consequences for 
employees, who have lost their jobs and often their savings, 
and for the communities that depended on the bankrupt firms. 
Moreover, this litigation is no longer confined to a few 
asbestos manufacturers. Asbestos litigation today touches 
thousands of companies in almost every sector of the American 
economy.
---------------------------------------------------------------------------
    \5\Id.
    \6\Id. (citing statistics that only one asbestos defendant entered 
bankruptcy in 1976, twenty in the 1980s, and fifteen in the 1990s--for 
a total of thirty-six bankruptcies between the years of 1976 and 1999--
while thirty-seven were filed between 2000 and 2004).
---------------------------------------------------------------------------
    Our nation's state and federal courts simply cannot 
adequately manage the problems in the current asbestos 
litigation system. As the United States Supreme Court stated in 
Ortiz v. Fibreboard Corporation, 527 U.S. 815, 821 (1999), 
``the elephantine mass of asbestos cases * * * defies customary 
judicial administration and calls for national legislation.'' 
The Court has called upon the Congress three times since 1997 
to address this issue: in Amchem Products Inc., v. Windsor, 521 
U.S. 591 (1977), in Ortiz, and most recently in Norfolk & 
Western Railway. Co. v. Ayers, 123 S. Ct. 1210 (2003). It is 
time to answer this call.
    Today, asbestos is seldom used in comparison to its 
widespread use in the early 1970s. Nonetheless, the Committee 
believes that continued asbestos use, however limited it may 
be, should be banned except in those instances where it 
presents no reasonable risk to health and it has no reasonably 
safe substitute, or where it is among others necessary to 
critical functions.

                   A. HISTORY OF ASBESTOS LITIGATION

    Asbestos is a fibrous mineral used in many products due to 
its resistance to fire, corrosion, and acid. In the early part 
of the 20th Century, asbestos was regarded as a miracle fiber 
because it was versatile enough to weave into textiles, 
integrate into insulation, line the brakes of automobiles, and 
construct flame-retardant hulls for naval and merchant ships. 
Annual asbestos production climaxed approximately thirty (30) 
years ago, and was incorporated into thousands of products by 
that time.
    This Committee received testimony from a number of 
witnesses regarding the scope and effects of asbestos 
exposure.\7\ Asbestos is ubiquitous in the environment. 
Although practically all Americans are exposed to asbestos to 
some degree, such everyday exposures do not usually result in 
health problems. However, substantial occupational exposure to 
asbestos can lead to a variety of medical conditions. The 
diseases caused by asbestos can have long latency periods, 
sometimes up to thirty (30) or forty (40) years.
---------------------------------------------------------------------------
    \7\See, e.g., Hearing on A Bill to Create a Fair and Efficient 
System to Resolve Claims of Victims for Bodily Injury Caused by 
Asbestos Exposure, and for Other Purposes, Before the Senate Committee 
on the Judiciary, 109th Congress (April 26, 2005) (prepared testimony 
of the Honorable Judge Edward Becker and prepared statement of Dr. 
Francine Rabinovitz); Hearing on Solving the Asbestos Litigation 
Crisis: S. 1125, the Fairness in Asbestos Injury Resolution Act of 
2003, Before the Senate Committee on the Judiciary, 108th Cong. (June 
4, 2003) (prepared testimony of Dr. James D. Crapo and prepared 
testimony of Dr. John E. Parker).
---------------------------------------------------------------------------
    The first wave of lawsuits began in the late 1960s, when 
victims brought actions against asbestos manufacturers and 
suppliers. These lawsuits increased significantly in 1973 when 
the 5th Circuit Court of Appeals decided the Borel case, which 
applied strict liability in asbestos lawsuits. Borel v. 
Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973). 
By the early 1980s, the principal asbestos defendant, Johns-
Manville filed for chapter 11 bankruptcy in 1982. Six years 
later, the Manville bankruptcy resulted in the formation of a 
trust to pay asbestos claims, but after a rush of claims on the 
trust in 1988-89, the trust was forced to reorganize and reduce 
benefits to claimants to ten (10 cents) cents on the dollar in 
1995 and then was forced to reduce the amount again in 2001 to 
five (5 cents) cents on the dollar.\8\ Today, the Manville 
Trust has had to pay claims on a sliding scale--with payments 
to less seriously injured claimants reduced more than payments 
to more seriously injured claimants.\9\
---------------------------------------------------------------------------
    \8\http://www.mantrust.org/history.htm.
    \9\RAND 2005 at 114.
---------------------------------------------------------------------------
    Experts estimate that over seventy (70) more companies have 
followed Manville into bankruptcy in the last twenty (20) 
years--with more than a third of them filing in the last three 
years alone.\10\ Some of these bankruptcies have resulted in 
trusts for the payment of victims, and some have not. None of 
the existing trusts pay claims at their full value. By now, 
practically all of the former asbestos industry is bankrupt. As 
a result, asbestos litigation today affects companies that 
never made asbestos.
---------------------------------------------------------------------------
    \10\RAND 2005 at 109 (citing statistics that seventy-three 
defendant corporations have declared bankruptcy since 1976).
---------------------------------------------------------------------------
    The heaviest asbestos exposures occurred decades ago. After 
the federal government began regulating the use of asbestos in 
the early 1970s, and with the sharp decline in asbestos use 
towards the end of that decade, occupational exposure to 
asbestos has been drastically reduced in recent years. This has 
greatly reduced the incidence of significant non-malignant 
disease, especially asbestosis. A leading pathologist of 
asbestos diseases stated that the ``progressive lowering of 
standards for permitted occupational exposure to asbestos has 
markedly decreased the incidence and severity of 
asbestosis.''\11\ Although serious asbestosis cases, which 
still occurred in the early 1990s, have now become exceedingly 
rare, because of the long latency period, there will be 
significant numbers of mesothelioma and lung cancer claims for 
many years to come.
---------------------------------------------------------------------------
    \11\Neoplastic Asbestos-Induced Disease, in Pathology of 
Occupational Lung Disease (Churg & Green, ed., 2nd 1998) at 339, cited 
in ``Babcock & Wilcox Company Report to the Court Regarding Asbestos 
Developments Generally and The Proofs of Claims Filed Here,'' In re: 
The Babcock & Wilcox Company, et al., Civil Action No. 00-0558, 2000 
U.S. Dist. Lexis 5626, Eastern Dist. Louisiana, decided April 17, 2000.
---------------------------------------------------------------------------
    Asbestos claims steadily increased during the 1990s, and 
then exploded during the end of the decade. The vast majority 
of those claims, however, were filed by people who claimed non-
malignant diseases such as asbestosis--the very diseases that 
had become less and less common during the 1990s. Many of these 
non-cancer claims were brought by people with no impairment. 
Such a trend threatens to deplete the amount of funds available 
to compensate future, legitimately impaired asbestos victims. 
This is exacerbated by the fact that parties involved and the 
courts have yet to reach a comprehensive agreement regarding 
the settlement and treatment of asbestos claims. Rather, 
``litigation has not only persisted over a long period of time 
but also continually reshaped itself, in the process presenting 
new challenges to parties and courts.''\12\
---------------------------------------------------------------------------
    \12\RAND 2005 at Summary xx.
---------------------------------------------------------------------------

        B. COURTS UNABLE TO HANDLE VOLUME OF ASBESTOS LITIGATION

    The tens of thousands of asbestos claims filed every year 
have overwhelmed the ability of the courts to provide fair, 
individualized justice in a timely manner. The result has been 
disastrous for deserving claimants and defendants alike. For 
claimants, the flood of cases has meant delay, inequitable 
compensation, and increasing uncertainty that the defendants 
responsible for their injury will remain solvent and able to 
compensate their claims. For defendants, the overwhelmed tort 
system has caused companies who never manufactured asbestos to 
face the possibility of devastating liabilities against which 
they have little practical defense. Asbestos litigation has 
touched almost every sector of American industry, and no 
company can be sure it is not at risk.
    Defendants' rights are further compromised when courts lack 
the resources to monitor the medical evidence submitted by 
plaintiffs. A study by neutral academics showed that forty-one 
(41%) percent of audited claims of alleged asbestosis or 
pleural disease were found by trust physicians to have either 
no disease or a less severe disease than alleged by the 
plaintiffs' experts (for example, pleural disease rather than 
asbestosis).\13\
---------------------------------------------------------------------------
    \13\Bell, at 18.
---------------------------------------------------------------------------
    The current asbestos litigation system is failing all of 
the parties involved. It is slow, expensive, and inequitable 
for both plaintiffs and defendants alike. The courts have used 
a variety of judicial management techniques to cope with the 
influx of asbestos cases and none have succeeded. Furthermore, 
all of the attempts to solve the problem within the present 
tort system have been rejected by the Supreme Court. In one 
case, the Supreme Court rejected a class action settlement that 
was agreed to by the parties that would have provided an 
alternative dispute resolution mechanism for asbestos claims 
against all defendants. Amchem Products, Inc. v. Windsor, 521 
U.S. 591 (1997). The Supreme Court also rejected a class action 
settlement that would have required all claimants against the 
defendant company to seek compensation from a fund established 
by the defendant's insurer. Ortiz v. Fibreboard, 527 U.S. 815 
(1999). And in 2003, the Supreme Court rejected an attempt to 
limit damages in asbestos cases under Federal law. Norfolk & 
Western Railway Co. v. Ayers, 123 S. Ct. 1210 (2003). The 
Supreme Court held that a defendant that played only a small 
part in the victim's total exposure could be held liable for 
the entire damage where the firms primarily responsible were 
bankrupt or otherwise unreachable, and that a person with only 
mild impairment due to asbestosis could receive a very large 
award based only on fear of developing cancer at some future 
date. Id.
    The Supreme Court has continually recognized that the 
asbestos problem ``defies customary judicial administration and 
calls for national legislation.'' Norfolk & Western, 123 S. Ct. 
at 1228, quoting Ortiz, 527 U.S. at 821. As far back as 1997, 
Justice Ruth Bader Ginsburg wrote for the Court that ``[t]he 
argument is sensibly made that a nationwide administrative 
claims processing regime would provide the most secure, fair, 
and efficient means of compensating victims of asbestos 
exposure.'' Amchem, 521 U.S. at 628. Specifically, the Court 
has endorsed the Judicial Conference's recommendation that 
``[r]eal reform * * * require[s] federal legislation creating a 
national asbestos dispute-resolution scheme.'' Id. at 598. The 
FAIR Act is the ``real reform'' called for by the Supreme 
Court.

            C. VICTIMS FACE LONG DELAYS, UNCERTAIN OUTCOMES

    On April 26, 2005, a representative of the AFL-CIO 
testified that ``many victims are not being well served by the 
current system and that hundreds of thousands of victims who 
will develop asbestos disease in the future could be better 
served by an alternative system that provides compensation to 
sick individuals in a more efficient and equitable 
manner.''\14\ A flood of asbestos cases is overwhelming the 
courts, causing delays for victims. An estimated 300,000 cases 
are currently pending.\15\ More than 600,000 individuals have 
brought claims. Some experts estimate that as many as 2.7 
million additional claims will be filed by people who were 
exposed to asbestos.\16\
---------------------------------------------------------------------------
    \14\Hearing on A Bill to Create a Fair and Efficient System to 
Resolve Claims of Victims for Bodily Injury Cause by Asbestos Exposure, 
and for Other Purposes, Before the Senate Comm. on the Judiciary, 109th 
Cong. (April 26, 2005) (prepared statement of Peg Seminario, AFL-CIO) 
(Seminario April 26, 2005).
    \15\Hearing on Solving the Asbestos Litigation Crisis: S. 852, the 
Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate 
Comm. on the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony 
of Jennifer Biggs, at 5) (Biggs June 4, 2003).
    \16\Austern Sept. 25, 2002, at 4.
---------------------------------------------------------------------------
    Some fatally ill victims die before their claims are 
resolved. As discussed above, one worker whose claim against 
Avondale shipyard in a consolidated case involving more than 
1,000 plaintiffs, died of mesothelioma before the Louisiana 
trial involving his claim even got underway.\17\ While some 
courts give priority to plaintiffs with mesothelioma, elsewhere 
plaintiffs with mesothelioma may die before they get to 
trial.\18\ Senator Kohl noted at our September 25, 2002, 
hearing that, ``[s]imply put, some of the most seriously 
injured are just not getting their day in court quickly 
enough.''
---------------------------------------------------------------------------
    \17\16-7 Mealey's Litig. Rep. Asb. 2 (May 4, 2001) at 1.
    \18\RAND 2002, at 35.
---------------------------------------------------------------------------
    The flood of asbestos litigation has resulted in seventy-
three (73) bankruptcies, which further diminish the prospect 
that truly ill victims will be timely and adequately 
compensated. The average amount of time between filing a 
bankruptcy petition and approval of a reorganization plan is 
about six years, during which time victims are not paid.\19\
---------------------------------------------------------------------------
    \19\Austern March 5, 2003, at 2.
---------------------------------------------------------------------------
    Too many seriously ill victims do not fare so well, and 
many find that the defendants have filed for bankruptcy and 
will only pay pennies on the dollar, if anything. Senator 
DeWine noted at our September 25, 2002 hearing that ``[t]he 
status quo is just not fair. It is grossly unfair to the 
victims. What you find is an inconsistency in how victims are 
treated--a horrible inconsistency that I don't think you'll 
find anyplace else in our country or our judicial system.''
    Asbestos-related bankruptcies severely diminish the 
prospects that sick victims will be adequately compensated. 
Overwhelmed by the enormous number of claims by the unimpaired 
in recent years, the Johns-Manville bankruptcy trust now pays 
claims on a sliding scale--with less severely injured claimants 
having their payments reduced more than claimants with severe 
injuries.\20\ Moreover, sixty-three (63%) percent of the funds 
paid out by the Manville trust have gone toward claims by those 
with non-malignant conditions.\21\ The General Counsel of the 
Manville Personal Injury Trust, David Austern, testified before 
this Committee that none of the existing asbestos trusts, nor 
any of the 20 trusts pending in bankruptcy court, will pay any 
more than a fraction of the value of claims submitted to 
them.\22\
---------------------------------------------------------------------------
    \20\RAND 2005 at 114.
    \21\Claims Resolution Management Corporation, Hearing Exhibit No. 8 
at 5, In re: Asbestos Litigation, (E.D.N.Y., Hearing on Dec. 13, 2001) 
(Nos. CV-91-875, CV-90-3973).
    \22\RAND 2005 at 114.
---------------------------------------------------------------------------
    According to New York Senior District Judge Jack B. 
Weinstein, the flood of new claims, the reduction in amounts 
paid pro rata by the Johns-Manville bankruptcy trust on claims, 
and the increasing number of bankruptcy filings ``suggests that 
there may be a misallocation of available funds, inequitably 
favoring those who are less needy over those with more pressing 
asbestos-related injuries.''\23\
---------------------------------------------------------------------------
    \23\Order of Judge Jack B. Weinstein, Senior District Judge, 
E.D.N.Y., In re: Johns-Manville Corporation et al., Nov. 7, 2001, 
Brooklyn, New York.
---------------------------------------------------------------------------
    Even for those sick victims who are able to recover monies, 
those awards are diminished by high transaction costs. As 
stated before, awards can be broken down in the following 
manner--amounts are the number of cents per dollar: forty-two 
(42 cents) cents to victims, thirty-one (31 cents) in defense 
costs and twenty-seven (27 cents) in plaintiff costs. Today's 
system is very costly. An alternative system would provide 
victims with a more efficient means of compensation. The 
current tort system will only provide victims with $61 billion 
in compensation. Taking these numbers into account, it is 
apparent that S. 852 is the far superior option.

              D. ECONOMY, JOBS SUFFER UNDER CURRENT SYSTEM

    The growth in litigation against this expanding list of 
defendants threatens jobs, workers' 401(k) and retirement 
accounts, and the American economy. As Senator Leahy noted at 
the Committee's April 26, 2005, hearing, ``The economic harm 
caused by asbestos is real. The bankruptcies that resulted are 
a different kind of tragedy for everyone, for workers and 
retirees, for the shareholders, and for families who built 
these companies. In my own State of Vermont, the Rutland Fire 
Clay Company is among more than 70 companies nationwide to have 
declared bankruptcy.''\24\
---------------------------------------------------------------------------
    \24\Hearing on A Bill to Create a Fair and Efficient System to 
resolve Claims of Victims for Bodily Injury Cause by Asbestos Exposure, 
and for Other Purposes, Before the Senate Comm. on the Judiciary, 109th 
Cong. (April 26, 2005) (prepared statement of Senator Patrick Leahy (D-
VT)) (Leahy April 26, 2005).
---------------------------------------------------------------------------
    Given that seventy-three (73) defendant corporations have 
filed for bankruptcy related to asbestos litigation, and as 
many as 2.7 million asbestos claims still may be filed, 
bankruptcies are likely to continue. More than thirty-seven 
(37) of the seventy-three bankruptcies have been filed since 
2000; as many asbestos-related bankruptcies have been declared 
in the last two years as in either of the past two decades.\25\ 
Bankruptcies occurring within the last five years include 
Armstrong World Industries, Owens Corning, Pittsburgh Corning, 
G-I Holdings Inc. (the successor to GAF Corp.), W.R. Grace & 
Co., U.S. Gypsum Co., Federal Mogul, Babcock & Wilcox, and 
Kaiser Aluminum.\26\ Asbestos liabilities accounted for eighty-
four (84%) percent of total contingent liabilities for Owens 
Corning, sixty-seven (67%) percent for W.R. Grace, and ninety-
three (93%) percent for USG.\27\
---------------------------------------------------------------------------
    \25\RAND 2005 at 109.
    \26\Keith M. Buckley, Asbestos: Impact on the U.S. Insurance 
Industry, Fitch Ratings, July 25, 2002, at 13.
    \27\Joseph E. Stiglitz, The Impact of Asbestos Liabilities on 
Workers in Bankrupt Firms, Sebago Associates, Dec. 2002, at 10 
(Stiglitz).
---------------------------------------------------------------------------
    As the first wave of asbestos defendants filed for 
bankruptcy and their resources dried up, the number of 
companies named as defendants in asbestos suits began to rise. 
Increasingly, companies with a limited link to asbestos 
liability are being targeted. Senator Hatch noted at the 
Committee's September 25, 2002, hearing that ``[b]ecause of 
this surge in litigation, companies--many of whom never 
manufactured asbestos nor marketed it--are going bankrupt 
paying people who are not sick and may never be sick, and who, 
therefore, may not need immediate compensation.'' Approximately 
8,400 firms have been named defendants in asbestos suits,\28\ 
up from the 300 listed in 1983.\29\
---------------------------------------------------------------------------
    \28\Hearing on Solving the Asbestos Litigation Crises: S.852, the 
Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate 
Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared 
testimony of Robert P. Hartwig, Insurance Information Institute, at 2).
    \29\RAND 2002, at 49.
---------------------------------------------------------------------------
    The negative impact of asbestos liability is so serious 
that the mere specter of it has the effect of chilling or even 
halting transactions. Goldman Sachs Managing Director Scott 
Kapnick testified before the Committee that ``the large 
uncertainty surrounding asbestos liabilities has impeded 
transactions that, if completed, would have benefited 
companies, their stockholders and employees, and the economy as 
a whole.''\30\ The asbestos problem also has serious 
consequences for insurers, who now pay about fifty-seven (57%) 
percent of the cost of asbestos liability.
---------------------------------------------------------------------------
    \30\Hearing on Solving the Asbestos Litigation Crises; S. 1125, the 
Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate 
Committee on the Judiciary, 108th Cong. (June 4, 2003) (prepared 
testimony of Scott Kapnick, at 2).
---------------------------------------------------------------------------
    A national economic research specialist testified before 
this Committee on the economic effects caused by asbestos 
litigation: ``Asbestos-related bankruptcies and the associated 
layoffs will have ripple effects that harm many groups beyond 
company stockholders. Workers will suffer in many ways, 
including temporary or long-term unemployment, lower long-term 
earnings, and inadequate and/or more expensive interim health 
coverage.''\31\
---------------------------------------------------------------------------
    \31\Hearing on Solving the Asbestos Crisis: S. 1125, the Fairness 
in Asbestos Injury Resolution Act of 2003, Before the Senate Committee 
On the Judiciary, 108th Cong. (June 4, 2003) (prepared testimony of 
Frederick C. Dunbar, of the National Economic Research Associates, at 
1).
---------------------------------------------------------------------------
    Asbestos-related bankruptcies have a devastating impact on 
workers' jobs and their economic security. Companies that have 
declared bankruptcy related to asbestos litigation employed 
more than 200,000 workers before their bankruptcies. Asbestos-
related bankruptcies led to the direct loss of as many as 
60,000 jobs. Each displaced worker will lose an average of 
$25,000 to $50,000 in wages over his or her career.\32\ The 
need for congressional intervention is clear, testified former 
U.S. Solicitor General Walter Dellinger: ``We need to stop the 
hemorrhaging of hundreds of millions of dollars going to those 
who are not sick, to protect American jobs, pensions and 
shareholders.''\33\
---------------------------------------------------------------------------
    \32\Stiglitz, at 3.
    \33\Dellinger Sept. 25, 2002.
---------------------------------------------------------------------------
    When asbestos defendant Federal-Mogul declared bankruptcy 
in 2001, employees reportedly lost more than $800 million in 
their 401(k)s.\34\ For example, one 82-year-old Federal-Mogul 
employee saw his $1 million retirement nest egg shrivel to 
$20,000.\35\ Bankrupt Owens Corning saw its shares lose ninety-
seven (97%) percent of their value in the two years before its 
filing. Approximately fourteen (14%) of those shares were held 
by employees.\36\
---------------------------------------------------------------------------
    \34\Hearing on Asbestos Litigation, Before the Senate Committee on 
the Judiciary, 107th Cong. (Sept. 25, 2002) (FNS Unofficial Transcript 
of oral testimony of The Honorable Senator Benjamin Nelson, United 
States Senator, Nebraska) (Nelson Testimony).
    \35\Mark Truby, Asbestos Ruined Federal-Mogul, The Detroit News, 
Mar. 31, 2002.
    \36\Hearing on Asbestos Litigation, Before the Senate Committee on 
the Judiciary, 107th Congress, September 25, 2002. The Honorable 
Benjamin Nelson, United States Senator, Nebraska.
---------------------------------------------------------------------------
    The AFL-CIO has told Congress that ``[u]ncertainty for 
workers and their families is growing as they lose health 
insurance and see their companies file for bankruptcy 
protection.''\37\ Many companies had high unionization rates 
when they filed for bankruptcy: Johns-Manville, 42%; Eagle-
Picher, 33%; Federal-Mogul, 33%; Armstrong, 57%; and Todd 
Shipyards, 75%.\38\
---------------------------------------------------------------------------
    \37\Hearing on Asbestos Litigation Crisis: S. 852, the Fairness in 
Asbestos Injury Resolution Act of 2003, Before the Senate Committee on 
the Judiciary, September 25, 2002, Jonathan Hiatt at 2.
    \38\Stiglitz, at 22.
---------------------------------------------------------------------------
    There is no question that the escalating numbers of claims 
and costs is a threat to workers' jobs and retirement savings.
    Six years ago, the Supreme Court endorsed a ``national 
dispute resolution scheme'' to remedy this crisis, and the FAIR 
Act is the vehicle to implement this mechanism.

            E. ASBESTOS BAN AND NATURALLY OCCURRING ASBESTOS

    Dangers associated with exposure to asbestos fibers are 
well known, and have prompted efforts to reduce and in some 
cases ban asbestos use. EPA and OSHA have severely restricted 
the use of asbestos since 1986. In 1989, EPA attempted to 
finalize a ban on asbestos use in the United States; however, 
that ban was subsequently overturned on non-substantive 
grounds, by the United States Court of Appeals for the Fifth 
Circuit in 1991. A number of products and processes still use 
asbestos. Today, asbestos may be present in such products as 
brake pads and linings, roofing materials, ceiling tiles, 
garden materials containing vermiculite, and cement products. 
According to the United States Geologic Survey, approximately 
13,000 to 15,000 metric tons of asbestos are consumed in the 
United States every year. Numerous countries have banned, or 
are working to ban, the manufacture and importation of 
asbestos. Despite its continued (albeit limited) use in the 
United States, some types of asbestos remain a dangerous 
substance. Therefore, a ban on the import and manufacture of 
harmful forms of asbestos and asbestos containing products is 
needed to prevent the well known risks associated with these 
products, and to reduce the number of future victims of 
asbestos-related diseases. The only exceptions are for uses 
that present no unreasonable risks to health (e.g., diaphragms 
in chlorine solvent) and for national security (e.g., use in 
missile liners).
    Exposure to naturally occurring asbestos can occur when 
asbestos contained in rock or soil is released into the air by 
human activities, such as construction, or by normal erosion. 
The risks associated with exposure to naturally occurring 
asbestos have not been quantified.
    The potential for exposure to naturally occurring asbestos 
is a result of the rapid development and growth in areas where 
veins of asbestos exist in the natural rock. In the case of 
California, it is present in the ultramafic and serpentine rock 
found in many of the Sierra foothill counties. Naturally 
occurring asbestos has been reported at over 780 sites, 
including in 44 of California's 58 counties, in parts of 
Oregon, Washington, Montana, Wyoming, Arizona and along the 
Appalachian Mountain range in the eastern United States.
    Left undisturbed, naturally occurring asbestos is believed 
to pose little threat to human health. The reality of growing 
development in areas where asbestos is present in the rock and 
soil, however, warrants the development of precautionary 
measures to limit the potential for asbestos exposure and to 
protect public health. This section provides that where 
naturally occurring asbestos has been detected at levels of 
potential concern in schools and public areas, the affected 
communities should receive financial assistance in the form of 
Federal matching grants, in order to remediate the asbestos 
contamination.
    In certain circumstances, environmental exposure to 
naturally occurring asbestos may pose health risks. This 
section focuses on efforts to assess the risks of exposure to 
naturally occurring asbestos; to standardize methods of 
sampling and measuring naturally occurring asbestos; to develop 
dust management guidelines for new construction in areas 
containing naturally occurring asbestos in order to minimize 
asbestos exposure; to understand where asbestos is naturally 
occurring; and to provide funds to communities for asbestos 
cleanup and for the development, implementation, and 
enforcement of State and local dust management regulations that 
States and localities may choose to adopt.

                             F. CONCLUSION

    It is evident that the current system is fundamentally 
flawed. Victims and defendants alike face inequity and 
uncertainty, which will only get worse. The Supreme Court has 
concluded that only federal legislation can create a fair and 
efficient asbestos resolution system. The FAIR Act offers just 
such a resolution.

                          V. How S. 852 Works 

    S. 852 takes asbestos claims out of the existing system and 
processes them through a federally administered trust fund that 
compensates current and future asbestos claimants on a no-fault 
basis according to standardized medical criteria and 
corresponding claims awards. Reduced to its essence, and as 
discussed further below, the trust fund operates on two fronts: 
(i) through the collection and management of contributions 
received from defendant and insurer participants and existing 
asbestos compensation trusts; and (ii) through the payment of 
such funds to compensate claimants who can show eligibility 
based on standardized medical criteria.
    The Committee believes that a national trust fund is the 
best answer to the current asbestos litigation crisis. By 
funneling existing asbestos tort claims into an administrative 
funding system, claimants should see quicker compensation while 
defendants and insurers benefit from increased economic 
certainty and stability--an outcome that the current tort 
system is ill-suited to provide.
    Claimants would benefit because the FAIR Act eliminates 
expensive and time consuming litigation. A claimant can recover 
from the trust fund if that person can meet the Act's 
standardized medical criteria, which is categorized in various 
funding levels based on the severity of the asbestos-related 
disease. Unlike the current tort system, claimants would not be 
required to prove causation with respect to a pool of 
defendants or show that their claim was somehow not caused by 
their own negligence.
    Defendants and insurers would also benefit from a trust 
fund because their future asbestos liabilities become more 
predictable. The trust fund will be financed through a 
structured payment scheme involving defendants and insurers 
with asbestos liabilities.

                  A. THE FAIR ACT'S FUNDING MECHANISMS

1. Mandatory payments from defendants and insurers

    The Fund will be financed through allocated mandatory and 
guaranteed contributions of $90 billion from defendant 
participants and $46 billion from insurer participants that 
have been exposed to asbestos claims in the tort system. 
Although insurers and defendants have specific aggregate sums 
earmarked towards the Fund, the mechanics of how these amounts 
will be assessed towards each contributing group differ.
            For defendants
    With respect to the defendants, the Administrator, after 
receiving company specific data as required by the Act, must 
first designate companies into tiers that are defined by prior 
company expenditures incurred defending asbestos claims in the 
tort system. These expenditures include defense, indemnity, 
judgment and settlement costs. In addition, the FAIR Act 
establishes separate tiers for debtor companies currently in 
bankruptcy and companies subject to claims under the Federal 
Employer's Liability Act.
    Once companies have been designated to tiers, the 
Administrator's next step is to designate companies into 
subtiers based on revenue levels--amounts calculated by each 
company's reported earnings for the most recent fiscal year 
ending before December 31, 2002. After a company is assigned to 
a subtier, the Administrator can then identify a corresponding 
annual contribution amount that the assigned company is 
obligated to pay into the Fund. In other words, each subtier 
identifies the annual contribution amount into the Fund.
    In the event a tiering assignment unduly burdens a 
contributing company, the FAIR Act gives the Administrator the 
authority to adjust a defendant participant's payment based on 
financial hardship or exceptional cases of demonstrated 
inequity. These adjustments in the aggregate can be made up to 
$300 million annually through a Guaranteed Payment Account, 
which the defendant participants guarantee in addition to the 
$3 billion mandatory annual funding figure. The Administrator 
is authorized to exceed the $300 million cap on hardship and 
inequity adjustments (and assuming that this cap is exhausted) 
in the event a defendant participant is faced with insolvency 
as a result of their payment obligations to the Fund.
            For insurers
    Unlike the assessment formula for defendants, the FAIR Act 
takes a different approach with respect to the asbestos 
insurers. Rather than establish an allocation formula, the FAIR 
Act creates a separate Asbestos Insurers Commission, which 
holds responsibility to determine the amount that each insurer 
is obligated to pay into the Fund. The Committee believes that 
delegating such a task to a separately commissioned entity 
makes sense given the necessary technical expertise that is 
required in developing a fair and appropriate allocation 
formula. The FAIR Act requires the Commission to determine 
contributions based on several factors, including premiums from 
asbestos policies, losses paid, reserve levels, and future 
liability. However, if the insurers agree on a fair division of 
contributions among themselves, such an agreement may be used 
to determine the insurer allocation. This agreement is subject 
to approval by the Commission after a finding that the agreed 
upon allocation formula meets all of the requirements of the 
Act.

2. The $4 billion contribution from existing bankruptcy trusts

    In addition to the aggregate $136 billion collected from 
defendant and insurer participants, the Administrator is 
authorized to collect roughly $4 billion from existing asbestos 
compensation trusts that have been established to compensate 
asbestos claims, including but not limited to those established 
under section 524(g) of the Bankruptcy Code. The Committee 
understands that the total amount of all existing bankruptcy 
and other asbestos compensation trusts is valued to be at least 
$4 billion. Because the FAIR Act requires that all trust assets 
be transferred to the Fund within months of the date of 
enactment pursuant to the provisions of the Act, these trusts 
represent an immediate source of funding for the Administrator 
to begin processing claims.
    In the unlikely event that the transfer of these trust fund 
amounts are held up through litigation or otherwise, the bill 
obligates defendant and insurer participants to guarantee an 
additional payment to the Fund equivalent to the amount of the 
declared assets of any non-paying bankruptcy trust.

3. The administrator's borrowing authority

    The FAIR Act gives the Administrator the authority to 
borrow from commercial lending sources and the Federal 
Financing Bank. The Committee deems such authority necessary 
especially during the start-up of the Fund. S. 852 also 
expressly obligates defendant and insurer participants to repay 
any amounts borrowed by the Administrator.

                       B. FAIR ACT CLAIMS PROCESS

    S. 852 creates a no-fault system to compensate those who 
meet sound, fair and balanced eligibility criteria to establish 
the existence of a legitimate asbestos-related disease. The 
eligibility criteria include diagnostic, latency, medical and 
exposure requirements. Flexibility is built into the system, 
providing for exceptional claims and special cases. The FAIR 
Act then provides fair and equitable claim values to eligible 
claimants. To ensure the integrity of the system, however, 
auditing procedures and independent reviews by objective, 
experienced physicians are also provided.
    S. 852's nationalized, streamlined claims processing system 
provides compensation to eligible claimants promptly without 
creating a new or large bureaucracy. It works as follows:

1. Office of asbestos disease resolution

    Victims of asbestos exposure with pending cases in the tort 
system that are preempted by the FAIR Act and those with new 
claims arising after enactment will file their claims with the 
Office of Asbestos Disease Compensation (``the Office'').
    The Department of Labor was selected to house the Office 
because of its institutional experience with administering 
compensation programs and for its ability to utilize its 
existing technology, claims templates, and infrastructure to 
effectuate a quick start up period. The Department currently 
administers programs that involve the supervision of outside 
contractors who process claims for compensation. The Department 
has experience in establishing administrative appeals 
procedures and auditing programs for these compensation 
programs. It is the Committee's belief that such experience 
will greatly assist the Department in quickly resolving 
asbestos claims in the early months after enactment.
    The Committee designed the administrative claims procedure 
in S. 852 to ensure a truly ``no-fault'', non-adversarial 
system with minimized transaction costs. The Office will assist 
claimants to receive the compensation to which they are 
entitled regardless of whether the claimant has outside 
representation. The Office should produce and post on-line 
``user-friendly'' claims forms and filing guidelines to assist 
in prompt compensation for asbestos victims.
    Deadline to file claims with the Office--Victims of 
asbestos exposure with new asbestos claims have five (5) years 
from the date of a medical diagnosis and medical test results 
sufficient to satisfy the relevant criteria to file an asbestos 
claim with the Office. Victims with pending court claims that 
are preempted by this Act have five (5) years from the date of 
enactment to file an asbestos claim with the Office.
    Claims Processing--The Administrator shall promulgate 
regulations to establish the contents of claims filed with the 
Office. The intent of the Committee is that the claims process 
be streamlined and efficient. The enumerated information in the 
FAIR Act is sufficient to establish qualification under the 
medical criteria and exposure criteria. It was not the intent 
of the Committee to require claimants to bear the same 
evidentiary burdens they currently have in the tort system when 
seeking recovery within the Fund.
    If a claim filed with the Office is found to be incomplete, 
the Administrator will explain to the claimant the additional 
information necessary to complete the claim and will see that 
the claimant receives help completing the claim so it can be 
processed.
    The Administrator may request the submission of medical 
evidence in addition to the minimum requirements of the medical 
criteria if necessary or appropriate. This discretion should 
not be exercised to intentionally delay or to place 
unreasonable burdens on claimants. Audits of claims submitted 
by victims and claims processing conducted by outside 
contractors and other quality control measures should be 
conducted by the Administrator by reviewing a statistically 
significant sampling of claims submitted and claims 
determinations.
    Once a claim is completed, a claims processor will review 
the claim to determine if it satisfies the medical criteria and 
other requirements for eligibility for an award and, if so, the 
value of the award. Within ninety (90) days of the filing of a 
complete claim, the Administrator or the Administrator's 
designee will issue a proposed decision accepting or rejecting 
the claim in whole or in part and specifying the amount of the 
proposed award. This written decision will contain findings of 
fact and conclusions of law. It will also explain to the 
claimant how to appeal the decision. If the claimant waives 
appeal or 90 days passes and no appeal is filed, it will become 
the final decision and the claimant will be eligible to receive 
the relevant award.
    If the Administrator fails to issue a proposed decision 
within one hundred and eighty (180) days of a claimant's filing 
with the Office, that claim shall be deemed to be accepted for 
the award level requested. Claimant will then be entitled to 
payment in accordance with the payment installments contained 
in the FAIR Act. This provision is incorporated as a safeguard 
so that claims do not languish for years without any processing 
or determination of eligibility.
    Administrative Review Process--If a claimant is not 
satisfied with the proposed decision, there are two possible 
avenues for administrative appeal. Both must be requested in 
writing within ninety (90) days of the proposed decision. The 
claimant may request a hearing or a review of the written 
record before a representative of the Administrator. The 
Committee envisions this representative to play the role of an 
administrative law judge and therefore the representative will 
be someone different than the person who initially reviewed the 
claim and issued the proposed decision.
    If a hearing is requested, the representative will receive 
the claimant's oral evidence and written testimony to ascertain 
the claimant's right to receive an award from the Fund and 
issue a final decision on the record as a whole within one 
hundred and eighty (180) days from the date of the hearing 
request. Alternatively, if a review of the written record is 
requested, the representative will receive any additional 
evidence or arguments that the claimant chooses to submit and 
issue a final decision on the record as a whole within ninety 
(90) days from the date of the request for review on the 
record. All final decisions by representatives will be in 
writing and will contain findings of fact and conclusions of 
law.
    Judicial Review of Final Decisions--Claimants may appeal 
final decisions of the Administrator with the U.S. Court of 
Appeals located in the state where they currently reside. 
Appeals must be filed within ninety (90) days of the issuance 
of a final decision. The Court shall review the administrative 
record as a whole and determine whether the final decision is 
not supported by substantial evidence, is contrary to law, or 
is not in accordance with procedures required by law.

2. Prompt payment of claims

    Unlike the current system, in which results can be 
inequitable and unpredictable, S. 852 ensures rapid, fair, and 
predictable payments, while still maintaining the stability of 
the Fund. Once a final decision is rendered, payments are to be 
made by the Fund over a period of 3 years but in no case longer 
than 4 years. If no proposed decision is issued within 180 days 
of submitting a completed claim, that claim is deemed accepted 
and claimants are also entitled to begin receiving payments.
    An expedited payment schedule is available for exigent 
health claims. Living mesothelioma claimants are entitled to 
begin receiving accelerated payments within thirty (30) days, 
and other exigent claimants are entitled to receive their full 
recovery in less than a year. In addition, during Fund start-up 
there are special procedures in place to ensure that if the 
Fund or claims facility is unable to pay in these specified 
time periods the terminal individual may return to court. This 
is outlined in greater detail below.


3. Disease levels

    A claimant filing with the Fund must satisfy the 
eligibility requirements for one of the following nine (9) 
disease levels:
    Level I (Asbestosis/Pleural Disease A)--These individuals 
clearly have asbestos-related pleural disease or asbestosis, 
but their pulmonary function tests are within the normal range. 
Asbestos-related pleural conditions include discrete plaques on 
the pleura (the lining of the chest wall) or pleural 
thickening. Asbestosis involves scarring of the interstitial 
tissue within the lungs.
    Level II (Mixed Disease With Impairment)--Individuals in 
this group have significant respiratory impairment, as defined 
by the American Medical Association. They are impaired due to a 
combination of asbestosis and other causes, typically chronic 
obstructive pulmonary disease. The requirement for a 1/1 ILO 
reading on a chest x-ray helps ensure that asbestos exposure is 
a substantial contributing factor to the lung diseases and 
impairment.
    Level III (Asbestosis/Pleural Disease B)--These individuals 
have impairment that is primarily due to asbestosis. They 
develop asbestos-related respiratory disease with increasing 
losses of pulmonary function, with lung function decreasing to 
as low as 60 percent of predicted average.
    Level IV (Severe Asbestosis)--These individuals have 
impairment that is primarily due to asbestosis. They experience 
significant loss of pulmonary function, with lung function 
between 50 percent and 60 percent of predicted average. Victims 
with this level of impairment are often disabled and cannot 
perform some activities of daily living.
    Level V (Disabling Asbestosis)--These individuals have 
impairment that is primarily due to asbestosis. They experience 
severe loss of pulmonary function, experiencing loss of more 
than 50 percent of predicted average lung capacity. Victims 
with this level of impairment will not be able to perform most 
activities of daily living. Impairment at this level can be 
fatal.
    Level VI (Other Cancers)--Individuals in this group have 
cancers of the colon, larynx, pharynx, or stomach, the risk of 
which may be increased by asbestos exposure. The bill 
commissions the Institute of Medicine to conduct a study on 
whether these cancers are caused by exposure to asbestos.
    Level VII (Lung Cancer With Pleural Disease)--Individuals 
in this category suffer from lung cancer. Asbestos-relatedness 
is demonstrated by substantial exposure requirements and the 
existence of asbestos-related pleural disease.
    Level VIII (Lung Cancer With Asbestosis)--These individuals 
suffer from lung cancer with asbestosis. Asbestos-relatedness 
is shown by the existence of substantial exposure and 
asbestosis (scarring within the lung).
    Level IX (Mesothelioma)--These individuals suffer from a 
rare and fatal cancer of the chest lining (the pleura) and 
abdomen lining. This cancer is usually fatal within 18 months 
of diagnosis although some victims can survive for years. 
Mesothelioma is a particularly debilitating disease whose 
victims typically endure great suffering.

4. Diagnostic and latency criteria

    Asbestos claimants must meet diagnostic and latency 
criteria to be compensated by the Fund. The diagnostic criteria 
should reflect the typical components of a true medical 
diagnosis by a claimant's doctor, including an in-person 
physical examination (or pathology in the case where the 
injured person is deceased) and a review of the claimant's 
medical, smoking and exposure history by the doctor diagnosing 
an asbestos-related disease. These requirements ensure that the 
claimant will be given a meaningful diagnosis related to the 
claimant's condition. The diagnosis must also include 
consideration of other more likely causes of the condition to 
ensure that asbestos exposure was the cause of any claimed 
nonmalignant disease (as opposed to other industrial dust 
exposure) or a substantial contributing factor in causing a 
malignant disease.
    Because asbestos-related diseases have a long latency 
period before symptoms begin to manifest, S. 852 requires that 
the claimant demonstrate that his or her first exposure to 
asbestos occurred at least ten years prior to the diagnosis.

5. Medical criteria

    Claimants must meet medical criteria to ensure that 
resources are protected for those who are currently suffering 
from asbestos-related disease. The medical criteria establishes 
requirements for 9 disease levels, 5 of which relate to 
nonmalignant asbestos-related diseases, such as asbestosis, and 
4 of which relate to malignant diseases, such as lung cancer 
and mesothelioma. The medical criteria for three of the 
nonmalignant categories are based on increasing severity of the 
claimant's impairment. Because these impairments may have other 
causes, such as other airborne contaminants including cotton 
dust, medical evidence is required to establish that asbestos 
exposure is the cause of the claimant's impairment. The medical 
criteria for the malignant categories similarly reflect the 
need to have medical evidence to support a finding that the 
claimant's exposure to asbestos is a substantial contributing 
factor in causing the claimant's asbestos-related disease.

6. Exposure criteria

    Claimants must meet exposure criteria to be compensated. 
Because the risk of developing an asbestos-related disease 
increases with the amount and intensity of exposure to 
asbestos, the Committee has set exposure requirements for each 
disease level to ensure that S. 852 compensates only asbestos-
related diseases. The number of years of occupational exposure 
is weighted based on industry and occupations and by the dates 
of exposure, so as to serve as a proxy for approximating the 
dose of exposure associated with various types of occupational 
exposures typically associated with asbestos-related diseases. 
The intensity and regularity of asbestos exposures associated 
with certain industries and occupations were significantly 
greater prior to the 1970's, at which time federal regulations 
limiting its use and for the protection of workers were first 
implemented. Such exposures often occurred in the manufacture 
of asbestos. The criteria were drafted to ensure that only 
diseases caused by asbestos exposures are compensated by the 
Fund.

7. Exceptional cases

    S. 852 provides exceptions to the above standards for 
compensation. Exceptional cases where the medical criteria 
under the Act cannot be met but the claimant has comparable and 
reliable medical evidence are eligible for review by a 
Physicians Panel, made up of objective, experienced physicians, 
to determine whether the claimant is eligible.
    Special provisions are established for review by a 
Physicians Panel in other unique circumstances, including those 
related to ``take home'' exposures where asbestos was brought 
into the home by an occupationally exposed person, exposures 
due to naturally-occurring asbestos, and those related to the 
high levels of environmental exposures of residents and workers 
in Libby, Montana.

8. Claim values

    S. 852 provides for carefully constructed, rational, and 
fair claims values. Many of the illnesses that are compensated 
under the Act could be caused or contributed to by factors 
other than asbestos exposure, such as smoking and other 
airborne contaminants. Therefore, claims values have been 
carefully constructed to provide increased compensation in 
those cases where there is greater confidence that the asbestos 
exposure was the cause of the claimant's injury. To those ends, 
mesothelioma and lung cancer claims where the claimant has been 
diagnosed with underlying asbestosis and is a nonsmoker have 
been given the highest values. Claims values for claimants with 
severe asbestosis and other lung cancer claims where the causal 
connection between the asbestos exposure and the injury is more 
substantiated similarly reflect the purpose of the Act to 
direct monies to the most serious injuries caused by exposure 
to asbestos.
    The FAIR Act recognizes that claimants with significant 
occupational exposure to asbestos may be at risk of developing 
a serious asbestos-related illness. As such, claimants meeting 
the minimum exposure criteria will be reimbursed reasonable 
costs for medical monitoring. In the event these claimants 
develop into a compensable illness, they may then seek 
compensation from the Fund.

           C. THE FUND START-UP AND PAYMENT OF EXIGENT CLAIMS

    S. 852 creates a streamlined process to ensure that exigent 
health claims are resolved and paid upon enactment of the Act. 
The Committee strongly believes that individuals with 
mesothelioma or a diagnosis of less than 1 year to live should 
have their claims addressed as quickly as possible. Therefore 
provisions were put in place so that exigent health claims can 
immediately be filed after enactment with the Fund or the 
claims facility and then be paid in a timely manner.
    S. 852 allows exigent health claims that arise before or 
after the date of enactment to be resolved through the 
following process:

1. File

    Each exigent individual will file a claim or a notice of 
intent to seek a settlement with the Administrator (or claims 
facility). Notice shall be provided to all named or potential 
defendants.

2. Submit information

    Once the notice of intent has been submitted, each exigent 
individual has 60 days to provide all necessary information to 
support her claim, including who the relevant possible 
defendants would be if the claim arose after enactment. If the 
individual fails to provide all the information required, she 
will have 30 days to perfect her claim.

3. Certification of claim

    Upon receiving all of the required information, the 
Administrator has 60 days to certify the claim--to certify the 
Administrator must evaluate if claim is exigent, and what 
disease level they qualify for. Upon certification, the 
Administrator must immediately notify defendants of approval of 
claim

4. Payment

    Mesothelioma victims receive 50 percent of their award in 
30 days, and 50 percent in 6 months. Other terminal victims 
receive 50 percent of their award in 6 months, and 50 percent 
in 11 months. The Administrator has discretion to extend 
payment if time schedule would severely harm the solvency of 
the Fund. Once a claim has been paid in full the claimant shall 
release any outstanding asbestos claims.

5. Failure to certify

    If Administrator fails to act on the claim for any reason, 
the Administrator must notify the claimant and the defendants 
within 10 days. If the Administrator fails to make such 
notification the claimant may notify the defendants. Defendants 
then have 30 days to make a settlement offer for 100 percent of 
what the claimant would receive under the fund.

6. Failure to pay

    If the Administrator certifies the claim, but fails to make 
the full payment within the payment schedule defendants have 30 
days to make a settlement offer for 100 percent of what the 
claimant would receive under the fund.

7. Appeal

    The claimant may appeal any decision of the Administrator 
in accordance with the appeals procedures provided for in the 
Act.

8. Acceptance or rejection

    The claimant must accept a settlement offer if it equals 
100 percent of what they are entitled to under the fund. If it 
is not, they may reject it. This decision must be made in 20 
days in writing.

9. Opportunity to cure

    If the claim was not certified by the Administrator or the 
defendant settlement offer was rejected; defendants have 10 
business days to amend the offer. If it is still is not 
accepted, the individual would be entitled to a settlement of 
150 percent of what they would receive under the fund.

10. Failure to make offer

    If the defendants fail to make a settlement offer then the 
individual is entitled to a settlement of 150 percent of what 
they would receive under the Fund.

11. Failure to pay

    If the defendants or Administrator fails to make the 
payments within the required payment schedule then the 
individual is entitled to a settlement of 150 percent of what 
they would receive under the Fund.

12. Return to court

    If 9 months after the claim is filed, the Administrator has 
not certified or paid the claim, or if the defendants have not 
paid the claim, and the Fund has not been certified as 
operational then the individual may pursue their claim in court 
where the case was pending or in the appropriate state or 
federal court if the claim arose after enactment.

13. Recovery of costs

    Defendants, who pay the claim either through the settlement 
procedure or in a court action, would receive a credit with the 
fund up to 100 percent of what the fund would have paid the 
claimant, unless the Administrator finds that the defendant's 
settlement offer was not in good faith.
    This streamlined process is fair to both victims and 
defendants. It ensures that claims for terminal individuals are 
handled in an expedited manner, and it provides businesses with 
the opportunity to resolve claims that the Administrator or 
claims facility cannot.

             VI. Section-by-Section Analysis and Discussion


Sec. 1. Short title; table of contents.

Sec. 2. Findings and purpose.

Sec. 3. Definitions.

                  TITLE I.--ASBESTOS CLAIMS RESOLUTION


          Subtitle A.--Office of Asbestos Disease Compensation


Sec. 101. Establishment of Office of Asbestos Disease Compensation

    The FAIR Act establishes the Office of Asbestos Disease 
Compensation (the Office) within the Department of Labor for 
the purpose of providing timely and fair compensation to 
individuals with asbestos-related injuries in a no-fault, non-
adversarial manner. If the Office does not sunset early (see 
sunset provisions in Title IV), then it shall terminate 
automatically no later than twelve (12) months after the 
Administrator certifies that the Asbestos Injury Claims 
Resolution Fund (the Fund) has not paid out claims in twelve 
(12) months and does not have any debt obligations to pay.
    An Administrator, appointed by the President with the 
advice and consent of the Senate, will head the Office for a 
term of five (5) years and report directly to the Assistant 
Secretary of Labor for the Employment Standards Administration. 
The Administrator is charged with the following 
responsibilities: (1) paying all administrative expenses out of 
the Fund; (2) promulgating rules, regulations, and procedures 
necessary to implement the Act, including rules expediting the 
consideration and payment of claims for exigent claims as soon 
as possible after date of enactment; (3) contracting and 
appointing of services and personnel; (4) selecting Deputy 
Administrators, one to handle the claims administration and 
resolution process and one to handle the fiscal management of 
the Fund; and (5) managing the assets to ensure the financial 
integrity of the Fund.
    The Freedom of Information Act (FOIA) shall apply to the 
Office and Asbestos Insurers Commission. The Act provides a 
process by which a participant or claimant may seek an 
exemption from disclosing their confidential records under 
FOIA. The Act charges the Administrator and Chairman of the 
Asbestos Insurers Commission with establishing: (1) procedures 
for handling the commercial and financial records of 
participants marked confidential; (2) a pre-submission process 
determine the confidential nature of information pertaining to 
insurer reserves and asbestos-related liabilities of 
participants; and (3) procedures for determining the 
confidential nature of personnel and medical files of 
claimants.

Sec. 102. Advisory Committee on Asbestos Disease Compensation

    The Administrator shall establish an Advisory Committee on 
Asbestos Disease Compensation (the Advisory Committee) no later 
than one hundred twenty (120) days after the date of enactment 
to advise the Administrator on all matters related to the 
functioning, maintenance, and administration of the Fund. The 
Advisory Committee shall be composed of twenty (20) members 
appointed for three (3) year terms, except that of the first 
members appointed, an equal number shall be appointed for one 
(1), two (2), and three (3) year terms. Of the members 
appointed, the Administrator shall designate a Chairperson and 
a Vice Chairperson.
    The Majority and Minority Leaders of the Senate, the 
Speaker of the House, and Minority Leader of the House shall 
each appoint four (4) members. Of the four, two (2) shall 
represent the interests of the claimants, at least one of whom 
having been recommended by national labor federations. The 
other two (2) shall represent the interests of the 
participants, one of whom shall represent the interests of the 
insurer participants and the other the interests of the 
defendant participants. The Administrator shall appoint four 
(4) members with qualifications and expertise in fields 
relevant to the administration of the Fund. None of the members 
may have earned more than fifteen (15 percent) of their income 
by serving in matters related to asbestos litigation as 
consultants or expert witnesses for each of the five (5) years 
before their appointments.
    The Advisory Committee shall meet at the call of the 
Chairperson, or the majority of its members, at least four (4) 
times per year during the first five (5) years of the asbestos 
compensation program and at least two (2) times per year 
thereafter. The Administrator shall provide such information 
and administrative support to the Advisory Committee as 
reasonably necessary to enable it to carry out its 
responsibilities.

Sec. 103. Medical Advisory Committee

    The Administrator shall establish a Medical Advisory 
Committee to provide expert advice regarding medical issues. 
None of the members may have earned more than fifteen (15 
percent) of their income by serving in matters related to 
asbestos litigation as consultants or expert witnesses for each 
of the five (5) years before their appointments.

Sec. 104. Claimant Assistance

    The Administrator shall establish a comprehensive claimant 
assistance program no later than one hundred eighty (180) days 
after the date of enactment to aid claimants in the claims 
process. The program shall provide for the establishment of 
resource centers. To the extent possible, the program shall 
locate the centers in areas within the Department of Labor, or 
other Federal agencies, in areas with large concentrations of 
potential claimants. The Administrator may enter into contracts 
with outside organizations that do not have a financial 
interest in the outcome of claims for the purpose of providing 
services to potential claimants.
    Legal Assistance: The Administrator shall establish a legal 
assistance program to aid claimants in legal representation 
issues. As part of the program, the Administrator will maintain 
a list of attorneys who are willing to provide their services 
on a pro bono basis. The Administrator shall provide claimants 
notice of and information relating to available pro bono legal 
services and any limitations on attorneys fees. Further, an 
attorney shall provide an individual notice of pro bono 
services for legal services available before the individual 
becomes a client with regard to an asbestos claim.
    An attorney may not receive in attorney's fee awards any 
more than five (5 percent) of a final award made under the 
Fund. If a representative violates these provisions, that 
attorney will be fined the greater of five thousand ($5000.00) 
dollars or twice the amount received by the representative for 
services rendered in connection with the violation.

Sec. 105. Physicians Panels

    The Administrator shall establish Physicians Panels for the 
purpose of making medical determinations and performing other 
such functions that are necessary to carry out the Act. The 
Administrator shall establish enough Panels to ensure the 
efficient conduct of the medical review and exceptional medical 
claims process. The Administrator may periodically adjust the 
number of Physicians Panels on the basis of a mandatory 
periodic review.
    To serve on a Physicians Panel, a person shall be a 
licensed physician in any State, board-certified in pulmonary 
medicine, occupational medicine, internal medicine, oncology, 
or pathology, and has earned no more than fifteen (15 percent) 
of their income as an employee of a participating defendant or 
insurer or law firm representing any party in asbestos 
litigation or as a consultant or expert witness for each of the 
five (5) years before appointment. Each panel shall be composed 
of three (3) physicians. The Administrator shall designate two 
(2) of the physicians on each panel to participate in each 
claim submitted to the Panel. The third physician shall only 
participate in the event of a disagreement.

Sec. 106. Program Startup

    Interim Regulations: The Administrator shall promulgate 
interim regulations and procedures for the processing of claims 
and the operation of the Fund no later than ninety (90) days 
after the date of enactment.
    Interim Personnel: This subsection grants the Secretary of 
Labor, the Assistant Secretary of Labor for the Employment 
Standards Administration, and the Administrator permissive 
authority to engage in certain activities that will ensure the 
swift start up of the Act. Specifically, the Secretary of Labor 
and the Assistant Secretary of Labor for the Employment 
Standards Administration may make such personnel and resources 
available to the Administrator. Further, the Administrator is 
authorized to contract with individuals and entities with 
experience handling financial matters and reviewing workers' 
compensation, occupational disease, or similar claims.
    Exigent Health Claims: The Administrator shall develop 
procedures for the expedited categorization, review, and 
payment of exigent health claims. To qualify for treatment as 
an exigent health claim: (1) a claimant must provide a 
diagnosis of mesothelioma meeting the requirements of the 
Act\39\ or documentation of diagnosis in the form of a 
declaration or affidavit by an examining physician of a 
terminal asbestos-related disease with the life expectancy of 
less than one year\40\; or (2) if the spouse or child of a 
exigent claimant who was living when the claim was filed (or 
who was living on the date of enactment if the claim is filed 
before the implementation of interim regulations) but has since 
died of an asbestos-related disease, the spouse or child must 
provide information establishing that the claimant was eligible 
to receive compensation and has not already received 
compensation from the Fund. The Administrator may designate 
additional categories of claims that qualify as exigent health 
claims in final regulations.
---------------------------------------------------------------------------
    \39\Pursuant to 121(d)(9), the claimant must submit a diagnosis of 
mesothelioma completed by a board certified pathologist and evidence 
that the claimant was exposed to asbestos while working, brought home 
by an individual exposed to asbestos at work, living in the vicinity of 
a operation that regularly released asbestos fibers in the air, or in 
some other manner.
    \40\The physician must have examined the claimant within one 
hundred twenty (120) days of the date of completing the diagnosing 
document.
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    The Act authorizes the Administrator to contract with a 
claims facility to enter into settlements with claimants. The 
processing and payment of such claims shall be subject to the 
rules and regulations enacted under the Act.
    Extreme Financial Hardship Claims: The Act grants the 
Administrator permissive authority to give expedited treatment 
to additional categories of claim on the basis of extreme 
financial hardship.
    Interim Administrator: The Assistant Secretary of Labor for 
the Employment Standards Administration shall serve as the 
Interim Administrator until the Administrator is appointed and 
confirmed. The Interim Administrator shall perform the 
responsibilities and have the authority conferred on the 
Administrator by the Act. Prior to the promulgation of final 
regulations relating to claims processing, the Interim 
Administrator shall issue interim regulations and may 
prioritize claims processing based on the severity of illness 
and likelihood that exposure to asbestos was a substantial 
contributing factor to causing the illness.
    Stay of Claims; Return to the Tort System: As of the date 
of enactment, any asbestos claim pending in State or Federal 
court shall be subject to a stay unless: (1) the presentation 
of evidence has begun before an impaneled jury or judge, as 
trier of fact, or (2) a verdict, final order, or final judgment 
has been entered by a trial court.\41\
---------------------------------------------------------------------------
    \41\See Section 403(d)(2).
---------------------------------------------------------------------------
    Exigent Health Claims.--This section provides for the 
settling of exigent health claims filed before and after the 
date of enactment.
    Procedures for Settlement of Exigent Health Claims.--A 
claimant with an exigent health claim wishing to settle the 
claim may file a claim or a notice of intent to seek a 
settlement with the Administrator at any time prior to 
certification of an operational Fund or claims facility. If the 
individual files a notice of intent, the claimant then has 
sixty (60) days to provide the Administrator with the 
information necessary to file a claim. Filing a claim shall 
require submission of the following information: (1) the amount 
received or entitled to be received as a result of collateral 
source settlements and copies of all such settlements; (2) any 
information that the claimant would be required to submit in 
support of a claim against the Fund; (3) certification by the 
claimant that the information provided is true and complete; 
and (4) for exigent claims arising after the date of enactment, 
a good faith identification of every defendant that the 
claimant could have appropriately brought an action against in 
a civil action for the asbestos injury.
    If the claimant submits all of the required information on 
time, the Administrator then has sixty (60) days to determine 
whether the claim is an approved exigent claim. If so, then the 
Administrator shall issue a certification to all parties that 
the claim is an approved exigent health claim valued at a set 
amount (based on the award value under the Act subtracted by 
the amount of collateral source compensation) and pay the 
claimant in that amount.
    If the claimant fails to submit all of the required 
information on time or there is a deficiency in the 
application, then the claimant shall have thirty (30) days to 
perfect the claim.
    If the claimant fails to perfect the claim or is determined 
not to be eligible as an exigent health claim, then the 
claimant will not be allowed to proceed.
    The Administrator or claims facility must provide notice to 
the claimant within ten (10) days of failure to act if unable 
to process and certify the claim and must immediately refer the 
claim to affected defendants. If the Administrator or claims 
facility fails to provide such notice, then the claimant may 
provide notice to defendants to prompt a settlement.
    Within thirty (30) days of receiving such a notice from the 
plaintiff of failure to process or from the Administrator of 
failure to process or to pay, the defendant may serve a good 
faith offer. This amount--or the aggregate, if multiple offers 
are made--may not exceed the amount that the claimant would be 
entitled to under the Fund.
    The claimant must accept or reject the offer within twenty 
(20) days of receiving an offer. If the claimant accepts the 
offer, the settlement is subject to court approval, which must 
be given within twenty (20) days of the acceptance. The court 
may only reject an offer upon a finding of bad faith or fraud.
    If the offer is rejected, then the defendant has ten (10) 
days to amend the offer. If the offer is the same of the amount 
that the claimant would receive under the Fund, then the 
claimant must accept the offer. If the claimant rejects the 
offer again (for example, because the offer was less than what 
the claimant is entitled to receive under the fund) or the 
defendant fails to amend the offer, then the amount the 
claimant is entitled to receive through the settlement is 
increased to one hundred fifty (150 percent) percent of the 
Fund award. If the claimant fails to make an offer at all, then 
the amount the claimant is entitled to receive through the 
settlement is increased to one hundred fifty (150 percent) 
percent of the Fund award.
    Payment Schedule.--The Administrator has the discretion to 
extend these time periods if paying out the claims on the 
protracted time table would severely harm the solvency of the 
Fund. The amount the claimant is entitled to receive through 
the settlement is increased to one hundred fifty (150 percent) 
percent of the Fund award if there is a failure to pay 
according to this section.
    Mesothelioma Claimants.--Initial payment of fifty (50 
percent) percent of the award in thirty (30) days of acceptance 
and payment of the remaining fifty (50 percent) percent in six 
(6) months of acceptance. Administrator's discretion allows for 
payments to be extended to 50 percent in six (6) months and 50 
percent eleven (11) months after acceptance;
    Other Terminal Claims.--Initial payment of fifty (50 
percent) percent of the award in six (6) months of acceptance 
and payment of the remaining fifty (50 percent) percent in 
eleven (11) months of acceptance. Administrator's discretion 
allows for payments to be extended to 50 percent in first year 
and 50 percent second year after acceptance;
    Recovery of Costs.--A defendant who pays out a claim in 
accordance with this section may recover the cost of settling 
by deducting it from future payments to the Fund.
    Continuation of Health Claims.--After 9 months an exigent 
claimant may pursue their claim in the court where the case was 
stayed or in the appropriate state or federal court for claims 
arising post enactment so long as the Fund is not operational, 
and if the claim has not been settled or if the claim has not 
been paid in full.
    The continuation of an exigent claim in the tort system 
shall not be subject to capped damages or attorney's fees caps, 
and shall not be cut off by a certification that the fund has 
become operational.
    Asbestos Claims.--Pursual of Asbestos Claims in Federal or 
State Court--If the Administrator cannot certify to Congress 
that the Fund is fully operational and handling all asbestos 
claims within twenty-four (24) months of the date of enactment, 
then persons with asbestos claims, except for those with Level 
I claims, may pursue their claims in the State or Federal court 
located within the State where the claimant resides or where 
the asbestos exposure arose. If the defendant cannot be found 
in one of these forums, then the claimant may pursue the claim 
in the Federal or State court in the State where the defendant 
may be found. If the plaintiff alleges that asbestos exposure 
occurred in more than one county or Federal district, the trial 
court will determine the most appropriate forum for the claim. 
If the court determines that another forum is most appropriate, 
then the court shall dismiss the claim. Any relevant statute of 
limitations shall be tolled during this time.
    This section does not preempt or supersede State venue 
requirements that are more restrictive.
    Credit of Claim and Effect of Operational or NonOperational 
Fund.--If the claimant receives any compensation as a result of 
pursuing a claim in the court system, then such recovery shall 
count as collateral source compensation for purposes of 
handling the claim under the Fund. Any participant who pays a 
claimant through a court proceeding may recover the cost of the 
payment by deducting an amount from subsequent payments into 
the Fund up to the amount that the claimant would have received 
from the Fund.
    Operational Preconditions and Certification.--The 
Administrator may not certify that the Fund is operational and 
paying out claims at a reasonable rate until sixty (60) days 
after the Administrator has published in the Federal Register 
information pertaining to the funding allocation of defendant 
participants and the funding methodology of insurer 
participants (to be done within thirty (30) days of the date of 
enactment). Upon certification, the Administrator shall publish 
a notice in the Federal Register that the Fund is operational 
and paying out claims at a reasonable rate.
    Effect of Certification on Claims.--Any non-exigent claim 
in Federal or State court that has not begun the presentation 
of evidence before a judge or impaneled jury or is the subject 
of a verdict, final order, or final judgment by a trial court 
shall be null and void and reinstated as a claim against the 
Fund upon the Administrator's certification that the Fund is 
operational. Claimants may pursue all asbestos-related claims 
in court upon the Administrator's certification that the Fund 
cannot become operational.
    Non-Operational Certification.--Claimants may pursue all 
asbestos-related claims in court upon the Administrator's 
certification that the Fund cannot become operational.

Sec. 107. Authority of the administrator

    This section grants the Administrator the authority to 
issue subpoenas for and compel the attendance of witnesses 
within a 200 mile radius, administer oaths, examine witnesses, 
require the production of books, papers, documents and other 
evidence, and request the assistance from other Federal 
agencies with the performance of the duties of the 
Administrator.

         Subtitle B.--Asbestos Disease Compensation Procedures


Sec. 111. Essential elements of eligible claim

    Claimants must timely file a claim with the Fund and prove 
by a preponderance of the evidence that they have an eligible 
disease or condition as demonstrated by evidence that meets the 
requirements established in the claims procedures.

Sec. 112. General rule concerning no-fault compensation

    It is the intent of the FAIR Act to provide a process to 
compensate victims in a faster and more certain manner than 
provided by the current system. The FAIR Act, therefore, 
removes the burden that a claimant would ordinarily bear to 
establish that the injury was the fault of a particular party. 
Further, under the FAIR Act, claimants do not have to prove 
that an injury resulted from the negligence or other fault of 
any other person.

Sec. 113. Filing of claims

    A claimant, or the personal representative of a deceased or 
incompetent claimant, must file claims with the Office within 
five (5) years from the time the claimant received a medical 
diagnosis and medical test results sufficient to satisfy the 
criteria for the disease level for which the claimant is 
seeking compensation. If the Act preempts a timely filed 
pending asbestos claim, then the asbestos claimant has five (5) 
years from the date of enactment to file with the Fund. Failure 
to file with the Office within the prescribed time period has 
the effect of extinguishing the claim and prohibiting recovery. 
This section specifically provides that the Act shall not treat 
a claim against a bankruptcy trust that has received initial 
payments and due to receive future payment from such a trust as 
a pending claim for purposes of filing against the Fund.
    The Act does not bar a claimant who receives an award for 
an eligible disease level from receiving additional awards for 
higher disease levels. Further, the Act does not impose a 
statute of limitations on the claimant for filing claims for 
additional awards relating to the progression of a non-
malignant disease. However, any malignant disease level claim 
must be filed with the Fund within five (5) years of receiving 
a medical diagnosis and medical test results sufficient to 
satisfy the disease level.
    The Act contains provisions addressing the effect of 
multiple injuries for Libby, Montana claimants. Pursuant to 
this section, if the nonmalignant condition of a Libby, Montana 
claimant progresses and can prove that the condition has 
progressed by providing pulmonary function tests, the claimant 
will qualify for an additional award from the Fund. The 
Administrator shall offset any previous awards from the Fund 
against an award granted to a Libby, Montana claimant for the 
progression of a nonmalignant claim. A Libby, Montana claimant 
shall qualify for treatment as a Level IV claim if the 
claimant: (1) provides a diagnosis of a bilateral asbestos-
related disease; (2) evidence of TLC or FVC less than eighty 
(80%) percent; and (3) medical documentation establishing 
exposure to asbestos as a substantial contributing factor to 
causing the condition in question to the exclusion of other 
more likely causes. A Libby, Montana claimant shall qualify for 
treatment as a Level V claim if the claimant: (1) provides a 
diagnosis of a bilateral asbestos-related disease; (2) evidence 
of TLC or FVC less than sixty (60%) percent; and (3) medical 
documentation establishing exposure to asbestos as a 
substantial contributing factor to causing the condition in 
question to the exclusion of other more likely causes. The 
provisions outlined above regarding the effect of multiple 
injuries on asbestos claims shall apply if a Libby, Montana 
claimant develops a malignant level disease.
    A claimant must include at a minimum the following 
information with the claim: (1) name and information pertaining 
to the identity of the claimant; (2) information pertaining to 
the identity of any dependants and beneficiaries; (3) relevant 
employment history, (4) the asbestos exposure of the claimant, 
(5) the tobacco use of the claimant; (6) medical records 
identifying the asbestos-related disease; (7) any prior 
asbestos-related claims, including information pertaining to 
any collateral sources of compensation, and (8) evidence of 
non-smoker or ex-smoker status if the claimant asserts such 
status and seeks compensation under a malignant level.
    If the claimant files an incomplete claim, the 
Administrator shall notify the claimant that the incomplete 
status of the claim and shall indicate information missing from 
the claim. Further, the Administrator shall also notify the 
claimant of assistance services available through the Claimant 
Assistance Program. The claimant then has a year to supply the 
missing information. However, failure to provide the 
information within this timeline will result in the dismissal 
of the claim.

Sec. 114. Eligibility determinations and claim awards

    This section lays out the time period for considering and 
paying a claim.
    When evaluating and determining the eligibility of a claim 
against the Fund, the Administrator shall consider: (1) the 
factual and medical evidence presented by the claimant; (2) the 
medical determinations of the Physicians Panel; and (3) the 
results of any investigation conducted determining whether the 
claim satisfies the eligibility criteria.
    The Administrator has ninety (90) days after the filing of 
the claim to provide the claimant with a proposed decision on 
the claim. If the Administrator fails to provide the claimant 
with a proposed decision within one hundred eighty (180) days 
after filing the claim, then the claim shall be deemed accepted 
and the claimant entitled to payment. However, if the 
Administrator subsequently rejects the claim in whole, then the 
claimant shall receive no further payments. Alternatively, if 
the Administrator subsequently rejects the claim in part, then 
future payments shall be adjusted accordingly.
    A claimant has ninety (90) days from the date of issuance 
of a proposed decision: (1) to submit a written request for a 
hearing on the decision; or (2) to make a written request for a 
review of the written record. A representative of the 
Administrator shall conduct the hearing in a manner as to best 
ascertain the rights of the claimant. It is within the 
discretion of the Administrator's representative to grant a 
subpoena requested by the claimant. The Administrator shall 
issue a final decision no later than: (1) one hundred eighty 
(180) days after receiving the request for a hearing on the 
decision; or (2) ninety (90) days after receiving the request 
for review on the written record. If the claimant does not make 
a request for obtaining a review either on the written record 
or in a hearing, then the Administrator shall issue a final 
decision. If the final decision materially differs from the 
proposed decision, then the claimant is entitled to review of 
the final decision.
    A claimant may authorize an attorney or other individual to 
represent the claimant in any proceeding under this Act.

Sec. 115. Medical evidence and auditing procedures

    This section authorizes the Administrator to establish 
procedures to ensure that accuracy of medical evidence 
submitted in support of a claim against the Fund.
    The Administrator will establish procedures: (1) to audit 
medical evidence submitted as part of claims ensuring the 
accuracy of x-ray readings and pulmonary function tests; (2) to 
consider the appeal by a provider of a finding of non-
compliance with medical standards; (3) to evaluate x-rays 
submitted in support of a claim; (4) to maintain a list of at 
least fifty (50) certified B readers that may participate in 
independent reviews of x-rays; and (5) to audit pulmonary 
function test results submitted as part of claim. The Office 
shall pay for the cost of all additional evaluations and tests 
required under this section.
    The Administrator has the authority to find the x-ray 
readings of certain providers inadmissible if the Administrator 
determines that the provider fails to comply with prevailing 
medical practices. A non-compliant provider may appeal the 
Administrator's determination pursuant to procedures 
established by the Administrator.
    Pursuant to procedures established by the Administrator, 
independent certified B readers shall evaluate x-rays submitted 
in support of a claim on a random basis. If the independent B 
reader disagrees with the grading of the submitted x-ray, then 
a second independent certified B reader shall review the x-ray. 
The Administrator shall take into account the findings of the 
two independent B readers when considering the submitted claim.
    When assessing the smoking status of Malignant Level VI-IX 
claimants, the Administrator shall have the authority to obtain 
records of past medical treatment and evaluation, affidavits of 
appropriate individuals, applications for insurance and 
supporting materials, and employer records of medical 
examinations. Further, the Administrator may require the 
performance of blood tests--including the performance of a 
required serum cotinine screening--or other appropriate medical 
tests on Malignant Level VI-VIII claimants who assert that they 
are non-smokers or ex-smokers.
    Any false information submitted under this section shall be 
subject to criminal or civil penalties.

                     Subtitle C.--Medical Criteria


Sec. 121. Medical criteria requirements

    This section establishes the latency, diagnostic, exposure 
and medical criteria required of an asbestos claim for each of 
the nine (9) disease levels. Levels I through V include 
nonmalignant asbestos-related disease or conditions and levels 
VI through IX include malignant diseases.
    Latency: Claimants must provide a statement from a doctor 
or a history of exposure stating that at least ten (10) years 
elapsed from the date of the initial exposure to the date of 
the initial diagnosis of any asbestos-related injury.
    Diagnostic Criteria: This section sets forth diagnostic 
criteria that track the typical elements of a medical 
diagnosis, such as an in-person physical examination by the 
claimant's doctor, a thorough review of the claimant's medical, 
smoking and exposure history by the claimant's doctor, and a 
review of other potential causes of the claimant's illness.
    For levels I through V, the claimant must provide a 
diagnosis based on an in-person physical examination by the 
claimant's doctor providing the diagnosis, an evaluation of 
smoking history and exposure history before making a diagnosis, 
an x-ray reading by a certified B-reader. Level III through V 
claims must also include a pulmonary function test. For 
deceased Level I through V claimants, the claim must include a 
physician's report based on pathological evidence or an x-ray 
reading by a certified B-reader. For levels VI through IX, the 
claimant must provide a diagnosis based on a physical 
examination or on findings by a board-certified pathologist. 
For deceased Level VI through IX claimants, the claim must 
include a diagnosis of the disease by a board-certified 
pathologist and a physician's report based upon a review of the 
claimant's medical records.
    Exposure Criteria: A claimant must demonstrate meaningful 
and credible evidence of exposure to asbestos in the United 
States, its territories or possessions, or while a United 
States citizen, while an employee of an entity organized under 
any Federal or State law regardless of location, or while a 
United States citizen while serving on any United States 
flagged or owned ship, provided the exposure results from such 
employment or service.
    Proof of Exposure--The claimant may demonstrate exposure to 
asbestos by affidavit of the claimant (or, if deceased, a co-
worker or family member of the claimant) or by alternative 
documentation, such as invoices, construction or similar 
records, or other reliable evidence.
    ``Take-Home'' Exposure--Alternatively, the claimant may 
satisfy the exposure criteria by demonstrating that the 
claimant was exposed to asbestos brought home by an 
occupationally exposed person. A claimant establishing ``take 
home'' exposure must demonstrate that: (1) the claimant lived 
and used the residence of an occupationally exposed person 
during the required exposure time; and (2) the occupationally 
exposed person can satisfy the exposure requirements for the 
level claimed. It is understood that household members may 
travel to a certain extent for work or vacation and still be 
considered as ``living with'' another member of the household. 
Except for Level IX claims, a Physicians Panel will review all 
``take home'' exposure claims determine whether the causal 
relationship between the take home exposure to asbestos is 
comparable to the occupationally exposed person.
    Libby, Montana--The Administrator shall waive the 
occupational exposure requirements for workers in the mining 
and milling operations in Libby, Montana, and persons who lived 
or worked within a 20-mile radius of Libby, Montana for at 
least 12 consecutive months prior to December 31, 2004.
    Exposure Presumptions--The Administrator shall set exposure 
presumptions prescribing time periods in which workers employed 
in specific industries or occupations were substantially 
exposed to asbestos. A claimant must demonstrate that the 
claimant worked in the industry for the relevant time period to 
be entitled to the presumption. However, these presumptions are 
not conclusive of substantial exposure to asbestos and may be 
rebutted by information to the contrary. Further, even if the 
claimant can demonstrate entitlement to a presumption of 
exposure, the claimant must still satisfy the exposure and 
medical criteria requirements.
    For the first five (5) years of the operational Fund, the 
presumptions will at a minimum include those identified in the 
2002 Trust Distribution Process of the Manville Personal Injury 
Settlement Trust as of January 1, 2005. Thereafter, the 
Administrator may modify the presumptions on the basis of 
supporting evidence. These presumptions are not conclusive of 
substantial exposure to asbestos.
            Asbestos disease levels
    Non-malignant Conditions--For non-malignant conditions 
(Levels I to V), the medical criteria generally require a 
diagnosis of bilateral pleural plaques or thickening, bilateral 
pleural calcification, diffuse pleural thickening, bilateral 
pleural disease of grade B2, or asbestosis based on x-ray 
readings or pathology. Level II includes claimants with mixed 
obstructive and restrictive disease based on pulmonary function 
testing and supporting medical documentation, such as a written 
opinion by the examining or diagnosing physician according to 
diagnostic guidelines establishing that asbestos exposure was a 
contributing factor to the disease. Mild, moderate and severe 
impairment is required for Levels III, IV, and V, respectively, 
based on pulmonary function test results and supporting medical 
documentation, such as a written opinion by the examining or 
diagnosing physician according to diagnostic guidelines 
establishing that the claimant's asbestos exposure is a 
substantial contributing factor in causing the pulmonary 
condition in question. Level I requires five (5) years 
cumulative occupational exposure, while levels II through V 
require five (5) years substantial occupational exposure 
weighted based on time and industry (``weighted years'').
    Malignant Conditions--For malignant conditions (Levels VI 
to IX), the medical criteria require a diagnosis of 
mesothelioma, primary lung cancer, or other cancer.
    Level VI (other cancers) claims include (i) a diagnosis of 
primary colorectal, laryngeal, esophageal, pharyngeal, or 
stomach cancer; (ii) evidence of a bilateral asbestos-related 
nonmalignant disease; (iii) fifteen (15) weighted years of 
exposure to asbestos; and (iv) supporting medical documentation 
, such as a written opinion by the examining or diagnosing 
physician according to diagnostic guidelines establishing that 
the claimant's exposure to asbestos was a substantial 
contributing factor in causing the claimant's other cancer. 
Level VII claims must include: (i) a diagnosis of primary lung 
cancer; (ii) evidence of bilateral pleural plaques, thickening, 
or calcification as established by chest x-ray or any such 
diagnostic methodology supported by the findings of the 
Institute of Medicine; (iii) evidence of twelve (12) or more 
weighted years of substantial occupational exposure; and (iv) 
medical documentation, such as a written opinion by the 
examining or diagnosing physician according to diagnostic 
guidelines, establishing asbestos exposure as a substantial 
contributing factor in causing the cancer. Level VIII claims 
must include: (i) a diagnosis of a primary lung cancer disease; 
(ii) evidence of asbestosis based on a chest x-ray showing 
irregular opacities and the relevant weighted years of 
exposure; and (iii) supporting medical documentation, such as a 
written opinion by the examining or diagnosing physician 
according to diagnostic guidelines establishing that the 
claimants exposure to asbestos for ten (10) or more weighted 
years was a substantial contributing factor in causing the 
claimant's cancer. Level IX claims shall include: (i) a 
diagnosis of malignant mesothelioma; and (ii) credible evidence 
resulting from occupational, take home, or other identifiable 
exposure to asbestos. Diagnosis of all of the malignant disease 
levels must be made by a board certified pathologist.
    Study of ``other cancers'' and causation: This subsection 
calls for the Institute of Medicine (IOM) to complete a study 
no later than April 1, 2006 of causal link between asbestos 
exposure and the other cancers: colorectal, laryngeal, 
esophageal, pharyngeal and stomach cancers. Congress, the 
Administrator, the Advisory Committee on Asbestos Disease 
Compensation or the Medical Advisory Committee, and the 
Physicians Panels shall receive a copy of the study. The 
findings of the study shall have a binding effect on the 
Administrator and the Physicians Panels when determining 
whether asbestos exposure is a substantial contributing factor 
to causing Level VI cancers. If the study finds that asbestos 
is not a substantial contributing factor to causing any one of 
the Level VI cancers, then claims may not be filed or 
compensated for the relevant Level VI diseases.
    Study of CT Scans: This subsection calls for the IOM in 
conjunction with the National Institutes of Health (NIH) to 
complete a study no later than April 1, 2006 of using CT scans 
as a diagnostic tool of asbestos indicators. Specifically, the 
study will determine whether the medical profession accepts the 
use of CT scans as a tool to detect asbestos indicators and 
whether professional standards of practice exist for the 
Administrator to rely on CT scan evidence. Congress, the 
Administrator, the Advisory Committee or Medical Advisory 
Committee, and the Physicians Panels shall receive a copy of 
the study. The findings of this report shall have a binding 
effect on the Administrator and Physicians Panels in 
determining what constitutes reliable and acceptable evidence 
for Level VII claims.
    Exceptional Medical Claims: This provision allows a 
claimant to have a claim designated an exceptional medical 
claim if the claim does not meet the medical criteria 
requirements of the bill or has been found ineligible for 
compensation based on the failure to meet the medical criteria 
only. The claimant must provide a report from a physician 
meeting the requirements of this section which includes (i) a 
complete review of the claimant's medical history and current 
condition, (ii) additional material as required by the 
Administrator, and (iii) a detailed explanation as to why the 
claim meets the standard for designating exceptional medical 
claims.
    A Physicians Panel shall review all applications for 
designation as an exceptional medical claim. For the claim to 
receive treatment as an exceptional medical claim, a Physicians 
Panel must find that the claimant cannot meet the requirements 
for reasons beyond the individual's control, but can through 
comparably reliable evidence establish a condition similar to 
one that would satisfy the requirements. In reaching its 
determination, a Physicians Panel may request additional 
reasonable testing. Further, the claimant may submit CT scans 
in addition to an x-ray.
    If a Physicians Panel certifies a claim as an exceptional 
medical claim, it must designate the disease category for which 
the claimant may seek compensation and refer the claim to the 
Administrator for a determination on eligibility on the 
remaining diagnostic, latency and exposure requirements. In 
making this determination, the Administrator shall give due 
consideration to the recommendation of the Physicians Panel. If 
a Physicians Panel denies claimant's application for 
designation as an exceptional medical claim, then the claimant 
may resubmit application based on new evidence, specifying the 
new evidence that serves as the basis of the resubmission.
    Libby, Montana--Due to ongoing studies regarding the 
medical conditions of the residents of Libby, Montana, such 
claimants have the option to have their claims designated as 
exceptional medical claims. A Physicians Panel shall review all 
such applications made by Libby, Montana claimants.
    Nonmalignant Levels II-IV Libby, Montana claimants that 
receive a certificate of medical eligibility from the 
Administrator or a Physicians Panel shall receive an award no 
less than the amount awarded to Level IV asbestosis claimants 
($400,000). Malignant level Libby, Montana claimants shall 
receive an award corresponding to the malignant disease 
category designated by the Administrator or Physicians Panel. 
To qualify for Level IV compensation, a Libby, Montana claimant 
must provide a diagnosis and evidence of an asbestos-related 
disease as well as supporting medical documentation 
establishing that asbestos exposure as a substantial 
contributing factor to causing the condition to the exclusion 
of other causes.
    Study of Vermiculite Processing Facilities--This subsection 
calls for the Agency for Toxic Substances and Disease Registry 
(ATSDR) to conduct a study in conjunction with the ongoing 
National Asbestos Exposure Review (NAER) of all Phase 1 sites 
that: (1) received vermiculite ore from Libby, Montana; (2) the 
Environmental Protection Agency (EPA) has mandated further 
action on the basis of contamination; and (3) was an 
exfoliation facility that processed at least one hundred 
thousand (100,000) tons of vermiculite from the Libby, Montana 
mine. The study shall determine whether the overall nature of 
these sites is substantially equivalent to that of Libby, 
Montana. The findings of this study shall have a binding effect 
on the Administrator in determining whether the claims of 
residents at these sites deserve the same rights as Libby, 
Montana claimants.
    Naturally Occurring Asbestos--Claimants exposed to 
naturally occurring asbestos may file and seek designation as 
an exceptional medical claim.
    Guidelines for CT Scans: This subsection calls for the 
American College of Radiology to develop guidelines and 
methodology for the use of CT scans as a diagnostic tool. The 
American College of Radiology shall develop these guidelines 
after consulting with the American Thoracic Society, American 
College of Chest Physicians, and IOM.

                          Subtitle D.--Awards


Sec. 131. Amount

    Eligible claims will be paid as follows:

----------------------------------------------------------------------------------------------------------------
                                             Disease/condition                 Amount of award
----------------------------------------------------------------------------------------------------------------
Level I..............................  Asbestosis/Pleural Disease A  Medical Monitoring
Level II.............................  ``Mixed'' Disease...........  $25,000
Level III............................  Asbestosis/Pleural Disease B  100,000
Level IV.............................  Severe Asbestosis...........  400,000
Level V..............................  Disabling Asbestosis........  850,000
Level VI.............................  Other Cancers...............  200,000
Level VII............................  Lung Cancer with Pleural
                                        Disease.
                                       Smokers.....................  300,000
                                       Ex-Smokers..................  725,000
                                       Nonsmokers..................  800,000
Level VIII...........................  Lung Cancer with Asbestosis.
                                       Smokers.....................  600,000
                                       Former Smokers..............  975,000
                                       Nonsmokers..................  1,100,000
Level IX.............................  Mesothelioma................  1,100,000
----------------------------------------------------------------------------------------------------------------
Scheduled awards will be indexed for future inflation based on a cost of living adjustment.

    Level IX Adjustments: This subsection grants the 
Administrator discretionary authority to adjust Level IX 
awards. The Administrator may adjust Level IX awards upon a 
determination that such an adjustment would have a neutral 
effect on the revenue. Specifically, the Administrator may 
choose to increase the awards for Level IX claimants under 51 
and decrease the awards of Level IX claimants who are 65 or 
older. However, before making such adjustments, the 
Administrator must publish notice of and plan for such 
adjustments in the Federal Register.
    FELA Adjustments: This subsection provides for the 
development of special FELA adjustments. Representatives of 
railroad management and labor have forty-five (45) days after 
the date of enactment to submit to the Administrator a joint 
proposal on the eligibility requirements for special FELA 
adjustments, which the Administrator shall promulgate into 
regulations no later than ninety (90) days after the date of 
enactment.
    If railroad management and labor are unable to agree on a 
joint proposal, then the Administrator shall appoint an 
arbitrator acceptable to both railroad management and labor to 
determine the benefits available under the special adjustment. 
After meeting with the representatives of management and labor, 
the arbitrator shall submit the benefits levels to the 
Administrator no later than thirty (30) days after appointment, 
which the Administrator will then promulgate into regulations. 
The parties to the arbitration may file with the U.S. District 
Court for the District of Columbia to review the 
Administrator's order. The court may affirm, set aside (in 
whole or in part), or remand the order of the Administrator for 
further action.
    To qualify for a special FELA adjustment, a claimant filing 
an asbestos-related FELA claim, or otherwise eligible to bring 
such a claim, must demonstrate: (i) employment in the railroad 
industry; (ii) exposure to asbestos as part of employment; 
(iii) the nature and severity of the asbestos-related injury; 
and (iv) evidence establishing eligibility for a disease level 
of Level II or greater. The amount of the special adjustment 
shall reflect the type and severity of the disease and shall be 
one hundred and ten (110%) percent of the average amount a 
person with the disease would have received in the five (5) 
year period prior to enactment.

Sec. 132. Medical monitoring

    This section provides that Level I claimants will receive 
reimbursements for all reasonable costs (not covered by 
insurance) for x-rays, physical examinations, and pulmonary 
function tests every three years, which will provide the 
claimant with information as to whether he or she has a 
compensable illness. Although the claimant may choose which 
physician conducts such tests, the Administrator will provide 
eligible claimants with a list of providers in the claimant's 
area that can provide such services. Filing a claim for 
reimbursement of medical monitoring costs does not start the 
clock on the five (5) year statute of limitations for filing a 
claim for compensation for an eligible condition or disease.

Sec. 133. Payment

    This section provides for the payment of asbestos awards. A 
claimant shall receive payment of their award over a period of 
three (3) years and in no event more than four (4) years, if 
necessary to ensure the overall solvency of the Fund, from the 
date of final adjudication of the claim. The Act establishes a 
presumption that the claimant shall receive forty (40%) percent 
of the payment in year 1, thirty (30%) percent in year 2, and 
thirty (30%) percent of the total amount in year 3. However, 
the claimant shall in no event receive less than fifty (50%) 
percent of the award in the first 2 years of the payment 
period. Claimants may also elect to receive their benefits in 
the form of an annuity. All benefits are non-taxable and not 
deemed to be a Medicare benefit. Payment of the asbestos claim 
shall have the effect of completely satisfying the claim. As 
such, any claimant receiving payment of an award under the Fund 
may not later pursue a claim for the same injury in the tort 
system.
    Lump Sum Payments--If a mesothelioma claimant is alive on 
the date that the Administrator receives notice of eligibility, 
then the claimant shall receive the full payment of the award 
in the form of one lump sum no later than thirty (30) days from 
the date the Administrator approves the claim. If this 
shortened timeline would threaten the timeline of the Fund, 
then the Administrator may adjust the time period for paying 
the claim. However, the Administrator shall ensure that the 
claimant receives payment no later than the shorter of: (1) six 
(6) months from the date that the Administrator approves the 
claim; or (2) eleven (11) months from the date the claimant 
filed the claim.
    Expedited Payments--Exigent health claimants with a 
terminal diagnosis of less than a year and the spouses or 
children of exigent health claimants who were living when the 
claim was filed with the Fund and has since died from an 
asbestos-related disease shall receive full payment of their 
claims no later than the shorter of: (1) six (6) months from 
the date the Administrator approves the claim; or, (2) one (1) 
year from the date that claimant filed the claim. If this 
shortened timeline would severely harm the solvency of the 
Fund, then the Administrator may adjust the time period for 
paying the claim. However, the Administrator shall ensure that 
the claimant receives payment no later than the shorter of: (1) 
one (1) year from the date Administrator approves the claim; or 
(2) two (2) years from the date the claimant filed the claim.

Sec. 134. Setoffs for collateral source compensation and prior awards

    This section provides for the reduction of claimant awards 
by an amount equal to any collateral source or prior award that 
the claimant has received or may receive. This includes any 
amounts that the claimant has received as a result of judgment 
or settlement for an asbestos related injury serving as the 
basis for the underlying claim from a defendant, its insurer, 
or compensation trust.
    Collateral sources do not include worker's compensation and 
veteran's benefits. Further, prior awards from the Fund for 
non-malignant disease shall not set off subsequent awards for 
malignant diseases unless the claimant received a diagnosis of 
the malignant disease before receiving compensation for the 
non-malignant disease.

Sec. 135. Certain claims not affected by payment of awards

    This section provides that payment of an award shall not 
affect a claimant's claim against a party relating to insurance 
payments or workers' compensation. As such, the payment of an 
award shall not be considered a form of compensation or 
reimbursement for a loss for the purpose of imposing liability 
on any such party. The section is intended to preserve asbestos 
claimants' ability to obtain payments such as life or health 
insurance or workers compensation for asbestos-related injuries 
and to make clear that claimants will not be required to 
provide reimbursement of such payments if they receive an award 
under the Fund. The section is not intended to permit asbestos 
claimants to pursue direct actions or other litigation in the 
tort system against insurance companies, based on insurance 
provided to defendants that is preempted under the Act. No 
subrogation is allowed as a result of a claimant receiving an 
award from the Fund.

           TITLE II.--ASBESTOS INJURY CLAIMS RESOLUTION FUND


          Subtitle A.--Asbestos Defendants Funding Allocation


Sec. 201. Definitions

Sec. 202. Authority and tiers

    The Act required defendant participants, in accordance with 
their assigned tiers and subtiers, to pay over the life of the 
Fund no more than $90 billion, less any bankruptcy trust 
credits. Defendant participants will generally be placed in 
tiers based on historical expenditures on asbestos claims, 
including costs related to defense and indemnity, and further 
subdivided based on revenues.\42\ The Administrator shall 
assign each defendant to a tier and determine the amount that 
each defendant participant shall be required to pay into the 
Fund according to the guidelines below. Any appeal of the 
Administrator's determination shall receive an expedited 
review.
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    \42\It is the intent of the Committee that the amounts contributed 
by defendants and insurers be tax deductible and that claim awards and 
the growth of the Asbestos Claims Resolution Fund be tax-free, 
consistent with the good public policy. The Judiciary Committee and 
Finance Committee will work together to insert the appropriate language 
for Senate floor consideration of this bill.
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    Bankruptcies Not Caused by Asbestos Liability: This section 
allows a company to proceed with its bankruptcy if it was not 
caused by asbestos liabilities. Specifically, the debtor 
company is permitted to proceed with the filing and approval of 
the bankruptcy reorganization plan. And any asbestos 
compensation trust established pursuant to such plan, will be 
pursuant to other provisions in this Act, be incorporated in 
the Asbestos Injury Claims Resolution Fund. Therefore, any 
company that filed for chapter 11 protection prior to January 
1, 2003 and has not substantially consummated a plan of 
reorganization as of the date of enactment of this Act, may 
petition to proceed with its bankruptcy filing if asbestos 
liability was not the sole or precipitating cause of its 
bankruptcy. The presiding bankruptcy court shall make this 
determination after notice and a hearing upon motion filed by 
the entity within 30 days of the date of enactment of this Act, 
which motion shall be supported by an affidavit or declaration 
of the Chief Executive Officer, Chief Financial Officer, or 
Chief Legal Officer of that company, and copies of the entity's 
public statements and filing for chapter 11 protection that 
asbestos liability was not the sole or precipitating cause of 
the entity's chapter 11 filing. The bankruptcy court shall hold 
a hearing and make its determination within 60 days of when the 
motion is filed. Any judicial review of this determination must 
be an expedited appeal and limited to whether the decision was 
against the weight of the evidence presented.
    If the bankruptcy court's determination is in favor of the 
company's motion, that company may proceed with the filing, 
solicitation, confirmation, and consummation of a plan of 
reorganization, including a trust and channeling injunction 
pursuant to section 524(g) of the bankruptcy code, 
notwithstanding any other provisions of this Act, provided 
that: (1) the bankruptcy court determines that such 
confirmation is required to avoid the liquidation or the need 
for further financial reorganization of that company; (2) an 
order confirming the plan of reorganization is entered by the 
bankruptcy court within nine months after the date of enactment 
of the Act, or such longer period approved by the bankruptcy 
court for good cause shown. To the extent such company or a 
debtor successfully confirms a plan of reorganization including 
a 524(g) trust and channeling injunction that involves payments 
by insurers who are otherwise subject to this Act, such 
insurers shall obtain a corresponding reduction in the amount 
otherwise payable by that insurer under this Act.
    Tier I: Includes all debtors that, together with all of 
their direct or indirect majority-owned subsidiaries, have 
prior asbestos expenditures greater than $1 million. The 
definition of ``debtor'' in Sec. 201 includes persons that have 
a case pending under a chapter of title 11 of the United States 
Code on the date of enactment of the FAIR Act or at any time 
during the 1-year period immediately preceding that date, 
irrespective of whether the debtor's case under that title has 
been dismissed. Any appeal of determination shall receive an 
expedited review in the U.S. Circuit Court of Appeals for the 
circuit in which the bankruptcy is filed.
    Other Tiers: Except as otherwise provided, persons or 
affiliated groups are included in Tier II, III, IV, V, VI or 
VII according to their prior asbestos expenditures as follows:
          Tier II: $75 million or greater.
          Tier III: $50 million or greater, but less than $75 
        million.
          Tier IV: $10 million or greater, but less than $50 
        million.
          Tier V: $5 million or greater, but less than $10 
        million.
          Tier VI: $1 million or greater, but less than $5 
        million.
          Tier VII: $5 million or more in FELA liability. 
        (Note: Tier VII is discussed in Sec. 203.)

A defendant participant shall remain in the tier and the 
subtier that they are assigned to for the life of the Fund, 
regardless of subsequent events, unless the Administrator finds 
sufficient evidence to conclude that inclusion within a tier 
was inaccurate.
    Superseding Provisions: The FAIR Act shall supersede all of 
the following: (i) The treatment of any asbestos claim in a 
plan of reorganization with respect to a debtor included in 
Tier I; (ii) any asbestos claim against a debtor in Tier I; and 
(iii) any agreement, understanding, or undertaking by a debtor 
or third party with respect to the treatment of any asbestos 
claim filed in a debtor's bankruptcy case. Further, any plan of 
reorganization, agreement, understanding, or undertaking by any 
debtor (including any pre-petition agreement, understanding, or 
undertaking that requires future performance) or any third 
party relating to an asbestos claim shall be of no force or 
effect and no person shall have any right or claim with respect 
to such agreements.
    Specifically, Section 202(f)(2) provides that agreements by 
debtors relating to asbestos claims are of no force and effect 
under this Act, regardless of whether such agreements were 
entered into pre-petition or as part of the reorganization 
process. Section 202(f)(2) also expressly provides that Section 
403(c)(3), which preserves pre-enactment settlement agreements 
that meet certain criteria, does not apply to agreements 
relating to the asbestos claims of debtors, even if such 
agreements were entered into prior to the bankruptcy filing. 
The differential treatment of settlement agreements entered 
into by solvent entities and debtors is both logical and 
entirely consistent with the current expectations of parties to 
those agreements under existing law. Asbestos claimants who 
have fulfilled all of the conditions to payment under 
settlement agreements with solvent entities have a defined 
right to payment on certain terms; if the Act were to abrogate 
such agreements, it would be effecting a substantial change in 
the parties' rights and expectations. By contrast, asbestos 
claimants with claims against debtors under pre-petition 
settlement agreements have no such settled expectations. By 
operation of the Bankruptcy Code, the rights and obligations of 
the parties to such agreements were subject to substantial 
modification once the debtor filed for bankruptcy, and 
claimants were faced with uncertainty as to how much and when, 
if at all, they would be paid under any Plan of Reorganization 
and/or Trust Distribution Plan. One of the benefits of the Act 
is that it resolves that uncertainty by providing such 
claimants, if they meet medical and eligibility criteria, with 
a certain and timely remedy that is not dependent on the 
complex byways of the bankruptcy process.

Sec. 203. Subtiers

    Defendant participants in Tiers II through VI shall be 
assigned a subtier on the basis of their revenues. Except as 
otherwise provided, persons or affiliated groups included 
within Tiers I through VII shall pay the following amounts to 
the Fund:
    Tier I: Tier I debtors shall pay the following amounts 
according to subtier assignment:
    Subtier 1--Operational companies--In general, 1.67024 
percent of the debtor's 2002 revenues. However, a debtor 
otherwise in Subtier 1 shall annually pay $500,000 if it falls 
within a limited engineering and construction exception. The 
Administrator may allow a Subtier 1 debtor to meet its payment 
obligation with other assets if the Administrator determines 
that an all cash payment would render the debtor's 
reorganization infeasible. If a debtor with a case pending 
under chapter of title 11, United States Code, fails to pay its 
payment obligation on time, the Administrator may seek payment 
of all or any portion of the amount due from any direct or 
indirect majority-owned subsidiaries.
    Right of Contribution--The liquidation, cancellation, or 
termination of a debtor participant's interest in a direct or 
indirect majority-owned foreign subsidiary resulting from 
foreign liquidation proceedings shall not affect a 
participant's obligation to the Fund. However, the debtor 
participant shall have a claim against the foreign subsidiary, 
as determined by a court of competent jurisdiction, in an 
amount greater of: (i) the estimated amount of the subsidiary's 
asbestos liabilities; or (ii) the subsidiary's allocable share 
of the participant's obligations to the Fund.
    Maximum Annual Payment Obligation--Subject to the 
assessment provisions of the Act and the contributions of 
debtors in Tier I, Subtiers 2, 3 and the Class Action Trusts, 
the annual payment obligation of a Tier I, Subtier 1 debtor 
shall not exceed $80,000,000.
    Subtier 2--Non-operational company debtors other than class 
action trusts must assign all of the unencumbered assets 
earmarked for the settlement of asbestos claims to the Fund no 
later than ninety (90) days after the date of enactment.
    Subtier 3--Non-operational companies with no assets 
earmarked for the settlement of asbestos claims shall 
contribute fifty (50%) percent of all unencumbered assets to 
the Fund no later than ninety (90) days after the date of 
enactment.
    Calculation of Unencumbered Assets--Unencumbered assets 
shall be calculated as the total assets, excluding insurance 
related assets, jointly held, in trust or otherwise, with a 
defendant participant less all allowable administrative 
expenses, allowable priority claims under section 507 of title 
11, United States Code, and allowable secured claims.
    Class Action Trust--The assets of any class action trust 
established by a court before the date of enactment for the 
settlement of asbestos claims of any Tier I debtor shall be 
transferred to the Fund no later than sixty (60) days after 
that date of enactment.
    Tier II: A person or affiliated group in Tier II shall pay 
the following amounts into the Fund on an annual basis:
          Subtier 1--$27.5 million (highest revenues).
          Subtier 2--$24.75 million (next highest revenues).
          Subtier 3--$22 million (remaining).
          Subtier 4--$19.25 million (next to the lowest 
        revenues).
          Subtier 5--$16.5 million (lowest revenues).

Each subtier shall contain as close to an equal number of the 
total defendant participants as possible.
    Tier III: A person or affiliated group in Tier III shall 
pay the following amounts into the Fund on an annual basis:
          Subtier 1--$16.5 million (highest revenues).
          Subtier 2--$13.75 million (next highest revenues).
          Subtier 3--$11 million (remaining).
          Subtier 4--$8.25 million (next to the lowest 
        revenues).
          Subtier 5--$5.5 million (lowest revenues).

Each subtier shall contain as close to an equal number of the 
total defendant participants as possible.
    Tier IV: A person or affiliated group in Tier IV shall pay 
the following amounts into the Fund on an annual basis:
          Subtier 1--$3.85 million (highest revenues).
          Subtier 2--$2.475 million (next highest revenues).
          Subtier 3--$1.65 million (remaining).
          Subtier 4--$550,000 (lowest revenues).

Each subtier shall contain as close to an equal number of the 
total defendant participants as possible.
    Tier V: A person or affiliated group in Tier V shall pay 
the following amounts into the Fund on an annual basis:
          Subtier 1--$1 million (highest revenues).
          Subtier 2--$500,000 (remaining).
          Subtier 3--$200,000 (lowest revenues).

Each subtier shall contain as close to an equal number of the 
total defendant participants as possible.
    Tier VI: A person or affiliated group in Tier VI shall pay 
the following amounts into the Fund on an annual basis:
          Subtier 1--$500,000 (highest revenues).
          Subtier 2--$250,000 (remaining).
          Subtier 3--$100,000 (lowest revenues).

Each subtier shall contain as close to an equal number of the 
total defendant participants as possible.
    If a participant's required subtier payment under Tier VI 
would exceed the amount the participant paid in asbestos 
expenditures during the eight (8) years prior to the enactment 
of the Act for settlements and judgments, then the participant 
shall make the payment of the immediately lower subtier. 
Alternatively, if the participant paid less than $100,000 in 
annual asbestos expenditures for the eight (8) years prior to 
the enactment of the Act for settlements and judgments, then 
the participant shall not have to make payments into the Fund.
    If a participant receives an adjustment under this 
subsection, then the participant may not also receive a 
hardship and inequity adjustment.
    Tier VII--In addition to an assignment in Tiers II through 
VI, a person or affiliated group shall also be included in Tier 
VII if it is, or has at any time been subject to, asbestos 
claims under FELA and has paid not less than $5 million in 
costs relating to such claims. Such persons or affiliated 
groups shall pay, in addition to their other tiered payment 
obligations and on an annual basis:
          Subtier 1: $11 million (Railroad or common carriers 
        with revenues of $6 billion or more).
          Subtier 2: $5.5 million (Railroad or common carriers 
        with revenues of less than $6 billion, but more than $4 
        billion).
          Subtier 3: $550,000 (Railroad or common carriers with 
        revenues of less than $4 billion, but more than $500 
        million).
    Revenues: Revenues shall be determined by reported earnings 
for the year ending December 31, 2002, or if applicable, the 
earlier fiscal year that ends during 2002. Any portion of 
revenues of a defendant participant derived from insurance 
premiums shall not be used to calculate the payment obligation.

Sec. 204. Assessment administration

    This section requires each defendant participant to pay the 
amount required of its tier, subtier assignment on an annual 
basis until the defendant participant has either satisfied its 
obligations during the 30 annual payment cycles of the Fund or 
the Fund receives $90 billion from the defendant participants, 
excluding any amount rebated.
    Small Business Exception: This subsection exempts from 
payment requirements and subtier allocations all persons or 
affiliated groups meeting the definition of ``small business'' 
as defined by the Small Business Administration pursuant to the 
Small Business Act, 15 U.S.C. Sec. 632, on December 31, 2002.
    Adjustments: Under expedited procedures established by the 
Administrator, a defendant participant may seek an adjustment 
of the amount of its payment obligations, either in the form of 
forgiveness of a portion of the payment or a rebate, based on 
severe financial hardship or demonstrated inequity. The 
decision of the Administrator whether to grant the adjustment 
and the size of such an adjustment is subject to judicial 
review pursuant to section 303.
    The Administrator shall appoint a Financial Hardship 
Adjustment Panel and an Inequity Adjustment Panel to advise the 
Administrator in granting adjustments.
    Hardship Adjustments--A defendant participant may apply for 
such an adjustment during any period in which a payment 
obligation to the Fund remains outstanding. To qualify for the 
adjustment, the defendant participant must demonstrate that the 
amount of the payment obligation would constitute a severe 
financial hardship.
    Inequity Adjustments--To qualify for an inequity 
adjustment, a defendant participant must demonstrate that the 
amount of its payment obligation is exceptionally inequitable: 
(1) when measured against the amount of the likely cost of its 
future liability in the tort system in the absence of the Fund, 
(2) when compared to the payment rate for all defendant 
participant in the same tier, or (3) when measured against the 
percentage of prior asbestos expenditures that were incurred 
with respect to claims that neither resulted in an adverse 
judgment nor the subject of a settlement that required a 
payment to a plaintiff. Additionally, a defendant participant 
shall qualify for a two-tier main tier and a two-tier sub-tier 
adjustment reducing the payment obligation by demonstrating 
that not less than ninety-five (95%) percent of such person's 
prior asbestos expenditures arose from claims related to the 
manufacture and sale of railroad related products, so long as 
the sale of such products is temporally and casually remote. 
The phrase `shall qualify for' in Sec. 204(d)(3)(A)(ii) shall 
have the same meaning as `shall be granted' in the following 
paragraph.
    Term and Renewal--Hardship and inequity adjustments granted 
shall have a term of three (3) years. A defendant participant 
may seek renewal of the adjustment by demonstrating continued 
qualification.
    Reinstatement Authority--Following the expiration of the 
hardship or inequity adjustment period granted under this 
section, the Administrator shall annually determine whether 
there has been a material change in the financial condition of 
the defendant participant such that the Administrator may 
reinstate part or all of the defendant participant's payment 
obligation that was not paid during the adjustment term.
    Limitation of Adjustments--The aggregate total of financial 
hardship and inequity adjustments in any given year shall not 
exceed $300 million, except to the extent (1) additional monies 
are available for adjustments as a result of carryover of prior 
years' funds or made available under the Defendant Guaranteed 
Payment Account; or (2) the Administrator determines that 
additional adjustments are needed in excess of the cap to 
address situations that would otherwise render defendant 
participants insolvent by its payment obligations.
    Bankruptcy Relief--This subsection provides a special 
adjustment for defendant participants that would be rendered 
insolvent upon paying the amount due to the Fund. A defendant 
participant may apply for this adjustment at any time during 
which such a payment is due to the Fund. To qualify for such an 
adjustment the defendant participant must provide the 
Administrator with information sufficient to establish that the 
payment would render the defendant participant insolvent as 
required by the Bankruptcy Code.
    The Administrator may grant a defendant participant an 
adjustment of its payment into the Fund sufficient to prevent 
the defendant participant from becoming insolvent and unable to 
pay its debts. The defendant participant shall have the 
adjustment for a term of a year but may seek renewal of the 
adjustment on an annual basis by demonstrating that the 
adjustment or modification of its payment remains justified. 
The Administrator shall review such adjustments on an annual 
basis for a material changes in the condition of a defendant 
participant warranting the reinstatement of a defendant 
participant's payment obligation.
    Several Liability: Each defendant participant's payment 
obligation to the Fund is several. There is no joint liability 
and the future solvency of any defendant participant shall not 
affect the assessment assigned to any other defendant 
participant.
    Consolidation of Payments: This subsection provides for the 
consolidated reporting of defendant participants and such 
affiliated groups as elect to report in such a manner for the 
purpose of determining payment obligations to the Fund. If such 
groups choose to report on a consolidated basis, then the 
Administrator shall treat the group as a single defendant 
participant. In such a case, sole liability for annual payments 
to the Fund shall rest with the ultimate parent of the group. 
However, notwithstanding the subsection immediately preceding 
this section, members of the group may pursue actions against 
affiliated members for joint payment into the Fund.
    Determination of Prior Asbestos Expenditures: Payments by 
indemnitors prior to December 31, 2002, shall count as part of 
the indemnitor's prior asbestos expenditures. However, prior 
asbestos expenditures shall not be for the account of either 
the indemnitor or indemnitee if the indemnitor entered into a 
stock purchase agreements in 1988 that involved the sale of 
stock of businesses that produced friction and other products 
where the agreement provided that the indemnitor indemnify the 
indemnitee and affiliates for losses arising from matters, 
including asbestos claims, asserted before the date of the 
agreement and filed after the date of the agreement and prior 
to the ten (10) year anniversary of the sale.
    Minimum Annual Payments: As an aggregate, defendant 
participants shall pay at least $3 billion annually into the 
Fund for thirty (30) years. To the extent such annual payments 
fail to meet this minimum after taking into account hardship 
and inequity adjustments for defendant participants and 
applicable adjustments for distributors, then monies from the 
defendant guaranteed payment account shall pay the balance. To 
the extent that there are insufficient monies in the guaranteed 
payment account to meet the minimum net, the Administrator 
shall assess a guaranteed payment surcharge to pay the balance 
of the minimum requirement unless the Administrator has 
implemented a funding holiday.
    Procedures for Making Payments: This section outlines the 
materials defendant participants must submit to the 
Administrator for the purpose of determining the amount that 
such defendant participant must pay into the Fund.
    Initial Year: Tier I--Each debtor shall file with the 
Administrator no later than ninety (90) days after the date of 
enactment: (1) a statement identifying the bankruptcy cases 
associated with the debtor, a statement of whether its prior 
asbestos expenditures exceed $1 million; and (2) a statement of 
whether the debtor is operational and holds any assets. 
Additionally, debtors falling within the subtiers shall file as 
follows: (1) those within subtier 1 shall file with their 
payment, a statement of the 2002 revenues or a statement of 
prior asbestos expenditures and the nature of business 
operations if the defendant participant qualifies for the 
payment exception, (2) those within subtier 2 shall assign its 
assets to the Fund, (3) those within subtier 3 shall include 
with their payment a statement of how such a payment was 
calculated, and a signature page personally verifying the truth 
of the statements and estimates as required by section 404 of 
the Sarbanes-Oxley Act.
    Initial Year: Tiers II-VI--Each participant included within 
Tiers II through VI shall file with the Administrator no later 
than one hundred eighty (180) days after the date of enactment: 
(1) a statement of whether it elects to report on a 
consolidated basis; (2) a good faith estimate of prior asbestos 
expenditures; (3) a statement of 2002 revenues; (4) payment in 
the amount specified for the lowest subtier of the tier within 
which the defendant participant falls; and (5) a signature page 
personally verifying the truth of the statements and estimates 
as required by section 404 of the Sarbanes-Oxley Act.
    Relief--The Administrator shall establish procedures to 
grant defendant participants relief from its initial payment 
obligation where the participant shows that it is likely to 
qualify for a financial hardship adjustment and failure to 
provide relief would cause severe irrevocable harm.
    Initial Year: Tier VII--Each defendant participant shall 
file with the Administrator no later than ninety (90) days 
after the date of enactment: (1) a good faith estimate of all 
asbestos-related FELA payments; (2) a statement of revenues; 
and (3) payment in the amount specified by the subtier.
    Notice: The Administrator shall directly notify all 
reasonably identifiable defendant participants no later than 
two hundred and forty (240) days after the date of enactment 
that the defendant participant must submit certain information 
necessary to calculate the amount that the participant must pay 
into the Fund. Further, the Administrator must publish a notice 
in the Federal Register that any possible defendant participant 
must submit such information necessary to calculate the amount 
that such a participant would be required to pay into the Fund. 
Such a notice shall include a list of all defendant 
participants that the Administrator has directly notified of 
this requirement. Upon receiving notice of this requirement, 
the defendant participant has thirty (30) days to submit such 
information to the Administrator.
    Initial Determination--Once the Administrator has received 
this information from the defendant participant, the 
Administrator has sixty (60) days to send such a participant a 
notice of initial determination identifying the tier and 
subtier into which the participant falls and the annual payment 
obligation. The Administrator then has seven (7) days to 
publish a notice in the Federal Register listing all of the 
defendant participants that the Administrator has sent such an 
initial determination.
    Payments--The defendant participant must then pay the 
Administrator the amount required under this initial 
determination no later than thirty (30) days after receiving 
the initial determination.
    Rehearing--A defendant participant seeking a rehearing of 
the Administrator's inclusion of the participant within a given 
tier and/or subtier must file such a request within thirty (30) 
days of receipt of notice of the Administrator's determination. 
The Administrator shall publish a notice of any change of a 
defendant participant's tier or subtier assignment or payment 
obligation in the Federal Register.
    New Information: The Administrator shall adopt procedures 
for requiring the payment of additional amounts, or refunding 
amounts already paid, based on new information received. 
Additionally, if the Administrator receives information that an 
additional person may qualify as a defendant participant, the 
Administrator shall require such person to submit information 
necessary to determine whether the person is required to make 
payments.
    Defendant Hardship and Inequity Adjustment Account: This 
subsection provides for the creation of a defendant hardship 
and inequity account. The Administrator shall deposit any 
excess monies (not to exceed $300 million) received in a given 
year that exceed the minimum aggregate payment of $3 billion.
    Use of Funds--The money in this account may only be used to 
balance any hardship and inequity adjustments, distributor tier 
adjustments, or to reimburse defendant participants granted 
relief after payment.
    Carryover of Unused Funds--Any unused funds in a given year 
in the account shall be carried over for adjustments in 
subsequent years.
    Defendant Guaranteed Payment Account: The Administrator 
shall place any monies paid in excess of the minimum annual 
amount of $3 billion into a defendant guaranteed payment 
account. The Administrator may then use this money to grant 
additional adjustments, not to exceed $50 million in any given 
year.
    Guaranteed Payment Surcharge: Unless the Administrator 
grants a funding holiday, if there are insufficient funds in 
the defendant guaranteed payment account to meet the minimum 
aggregate payment into the fund of $3 billion, then the 
Administrator shall impose a guaranteed payment surcharge on 
defendant participants sufficient to attain the minimum 
aggregate annual payment.
    Limitation--The Administrator shall not impose a surcharge 
on defendant participants in Tier V, Subtier 3 or Tier VI, 
Subtier 3. This amount shall be reallocated on defendant 
participants.
    The Administrator shall impose any such a surcharge on a 
pro rata basis against a defendant participant's relative 
liability, taking into account any adjustments granted by the 
Administrator. Further, the subsection requires the 
Administrator to certify that all reasonable efforts have been 
extended to collect the minimum annual payment of $3 billion 
from the defendant participants before imposing such a 
surcharge. The Administrator shall not issue a final 
certification until after publishing a proposed certification 
in the Federal Register and providing for a public comment and 
notice period.
    Adjustments for Distributors: This section provides a 
definition of ``distributor'' and procedures for distributor 
tier reassignments. Specifically, after a final determination 
by the Administrator of tier assignment, a distributor may 
submit an application, prepared in accordance to promulgated 
rules, for a tier adjustment. A distributor submitting an 
application for tier adjustment shall pay amounts into the Fund 
according to its assignment until the Administrator makes a 
final decision on the adjustment application. The 
Administrator's decision and designation on the application 
shall be final. However, if the defendant participant has a 
right to a rehearing of the Administrator's decision pursuant 
to the procedures in the Act. If the Administrator's adjustment 
decision results in a lower payment obligation, then the 
Administrator shall grant a refund or credit of excess 
payments.
    But that for this provision of the bill, a distributor 
that: (1) would be assigned to Tier IV, shall be assigned to 
Tier V; (2) would be assigned to Tier V, shall be assigned to 
Tier VI; and (3) would be assigned to Tier VI, shall be 
assigned to no tier at all and shall have no payment obligation 
to the Fund. However, a distributor shall not be eligible for 
an inequity adjustment.
    The total number of adjustments available under this 
provision shall not exceed $50 million. If the total number of 
adjustments will exceed this limit, then each distributor's 
adjustment shall be reduced pro rata until the aggregate does 
not exceed $50 million.

Sec. 205. Stepdowns and funding holidays

    Stepdowns: The Administrator will reduce the minimum 
aggregate funding obligations of the defendant participants by 
ten (10%) percent of the initial minimum aggregate at the end 
of the tenth, fifteenth, twentieth, and twenty-fifth years of 
the life of the Fund. The Administrator will apply these 
reductions on a pro rata basis to all of the defendant 
participants, except with regard to tier 1, sub-tiers 2-3 
defendant participants and class action trusts. However, the 
Administrator may suspend, cancel, reduce, or delay any 
reductions if he/she finds that such is necessary to ensure 
that sufficient assets in the Fund are present to pay future 
obligations.
    Funding Holidays: This section grants the Administrator the 
authority to reduce or waive all or part of the payment 
obligations. However, such a funding holiday may not be granted 
in the first ten (10) years of the life of the Fund. Further, 
such a funding holiday may only be granted after the tenth year 
of the Fund if there are sufficient assets in the Fund to 
fulfill its obligations.
    Each year after the tenth year of the Fund, the 
Administrator shall conduct an annual review of the Fund to 
determine whether the Fund contains sufficient assets to 
satisfy all of its payment obligations and grant a funding 
holiday. Upon such a finding, the Administrator shall award a 
funding holiday on a pro rata basis on the relative payment 
obligations the defendant participants, except with regard to 
the tier 1, sub-tiers 2-3 participants and class action trusts. 
However, should the Administrator receive new information that 
leads him/her to believe that the funding holiday will cause 
the Fund to be depleted to the point that there will not be 
sufficient assets to satisfy future obligations, then the 
Administrator may revoke all or part of the funding holiday on 
a pro rata basis.
    Certification: The Administrator must certify through a 
written notice in the Federal Register, including a thirty (30) 
day comment period, that any stepdown or funding holiday 
satisfies the requirements of the section. After consideration 
of the submitted public comments, the Administrator must make a 
final certification of the stepdown or funding holiday and 
notify each defendant participant of such within thirty (30) 
days of the final certification.

Sec. 206. Accounting treatment

    Payment obligations shall be subject to accounting 
discounting for each defendant participant. However, this 
discounting shall not reduce the amount of monetary payments to 
the Fund.

               Subtitle B.--Asbestos Insurers Commission


Sec. 210. Definition

Sec. 211. Establishment of Asbestos Insurers Commission

    The President, with the advice and consent of the Senate, 
shall appoint 5 members to serve on the Asbestos Insurers 
Commission (the Commission) and shall select a Chairman from 
among its members. No member may be an employee, immediate 
family member of an employee, or shareholder of an insurer 
participant and may not be an officer of the Federal 
Government, except by reason of membership on the Commission. 
Further, a former officer, director, employee, or shareholder 
of an insurer participant within the two years prior to 
appointment may not sit on the Commission unless such 
information is fully disclosed. Any vacancy shall be filled by 
Presidential appointment.
    Not later than 30 days after the date on which all members 
of the Commission have been appointed, the Commission shall 
hold its first meeting and shall thereafter meet at the call of 
the Chairman as necessary. No business may be conducted without 
a majority of the member participating.

Sec. 212. Duties of Asbestos Insurers Commission

    Determination of Insurer Payment Obligations: Insurer 
participants shall be responsible for a total aggregate 
contribution of $46.025 billion, less any bankruptcy trust 
credits. The Commission shall determine the amount required of 
each insurer to pay into the Fund. The Commission's first 
rulemaking shall promulgate the methodology for allocating 
payments among the participants. This rule shall also include a 
methodology for adjusting payments by insurer participants to 
make up in the first five (5) years, and any other years as 
provided for, any failure to meet the minimum aggregate annual 
payment to the fund resulting from: (1) financial hardship and 
inequity reductions; (2) the failure or refusal of an insurer 
participant to make the required payment; or (3) any other 
reason causing the payments to fall below the required amounts. 
Within the time constraints of this provision, the Commission 
shall conduct a thorough study to determine the reserve 
allocation of each insurer participant, including requesting 
information from the Securities and Exchange Commission (SEC) 
if necessary.
    Not later than one hundred twenty (120) days after the 
initial meeting, the Commission shall commence a rulemaking 
procedure to propose and adopt a rule providing for the 
allocation of contributions among the insurers. The Commission 
may provide for one or more allocation formulas to be applied 
to all insurer participants or groups of similarly situated 
participants. After adopting such a rule, the Commission shall 
then apply that formula to determine the amount that each 
insurer participant shall be required to pay into the Fund.
    This section also grants the Commission and Administrator 
authority over every insurer, reinsurer and run-off entity to 
enforce the provisions of the Act and ensure the payment of 
such an insurer participant's full contribution obligation 
without regard to whether it is licensed in the United States. 
Insurer participants are severally liable for payments to the 
Fund, unless otherwise provided. There is no joint liability 
and the future insolvency of any insurer participant shall not 
affect the assessment assigned to any other insurer 
participant.
    Reinsurers who issued retrospective policies to an insurer 
participant after 1990 that provides for a risk or loss 
transfer to insure for asbestos and other losses shall make 
payments into the Fund on behalf of the insurer participant. 
The insurer participant holding the policy shall direct the 
reinsurer to pay all or a portion of the payment directly into 
the Fund within ninety (90) days after the scheduled date to 
make an annual payment into the Fund, subject to the 
enforcement procedures of the Fund.
    Payment Criteria--Insurers that have paid or assessed at 
least $1 million in defense or indemnity costs by a legal 
judgment or settlement for asbestos-related personal injury 
claims shall be considered insurer participants only. It is not 
the intent of the Act to submit insurer participants to double 
liability and so no insurer participant shall be liable for 
payment obligations as defendant participants as well.
    The Commission shall consider and weigh the following when 
establishing the allocation formula: (1) historic premium for 
lines of insurance associated with asbestos exposure; (2) 
recent loss experience for asbestos liability: (3) reserves for 
asbestos liability; (4) the likely cost of future liabilities; 
and (5) any other relevant factors. The Commission may 
establish procedures and standards for determination of 
asbestos reserves of insurer participants.
    Payment Schedule--The aggregate annual amounts shall be as 
follows:
          Years 1 and 2: $2.7 billion
          Years 3 through 5: $5.075 billion
          Years 6 through 27: $1.147 billion
          Year 28: $166 million
    Certain Runoff Entities--A runoff entity shall include any 
direct insurer or reinsurer whose asbestos liability reserves 
have been transferred, directly or indirectly, to the runoff 
entity and on whose behalf the run off entity handles, adjusts, 
and/or pays asbestos claims.
    Financial Hardship and Exceptional Circumstances 
Adjustments--Insurer participants may seek adjustments by 
demonstrating that the set contribution poses an exceptional 
circumstance or severe financial hardship to the insurer 
participant. The Commission may determine whether to grant and 
the size of any such adjustment. However, such adjustments 
shall not affect the aggregate payment obligations of insurer 
participants, except as provided in the allocation methodology 
rule by the Commission, shortfall assessment credits, or the 
shortfall analysis.
    Funding Holidays--At any time after the first ten (10) 
years of the Fund, the Administrator shall reduce or waive part 
or all of the payments required by the insurer participants if 
the Administrator determines that the assets of the Fund at 
that point in time and expected future payments satisfy the 
anticipated obligations of the Fund. However, such a funding 
holiday shall only be made: (1) to the extent that the 
Administrator determines that the Fund will be able to satisfy 
the Fund's obligations; and (2) will be applied on an equal pro 
rata basis to the insurer participants. The Administrator shall 
conduct an annual review to determine whether to reduce or 
waive insurer participant payments. If the Administrator 
receives information at any time that indicates that the 
reduction or waiver may cause the assets of the Fund and the 
expected future payments to decrease, then the Administrator 
shall revoke all or part of the reductions or waivers on a pro 
rata basis to ensure the Fund's obligations.
    Procedure for Notifying Insurer Participants of Individual 
Contribution Obligations: This section provides the timeline 
and process for determining the amount that each insurer 
participant is obligated to pay into the Fund.
    Within thirty (30) days after its initial meeting, the 
Commission must directly notify all reasonably identifiable 
insurer participants of the requirement to submit information 
necessary to calculate the amount of any required contribution 
to the Fund. The Commission shall also publish a notice in the 
Federal Register requiring any person who may be an Insurer 
Participant to submit such information along with a list of all 
notified insurer participants. Upon publication of this notice, 
there will be thirty (30) days public comment period regarding 
the completeness and accuracy of the list of identified insurer 
participants. Insurers meeting the criteria of insurer 
participants shall respond to such notice. The response shall 
be signed by a responsible corporate officer, general partner, 
proprietor, or individual of similar authority, who shall 
certify under penalty of law the completeness and accuracy of 
the information submitted.
    Not later than one hundred and twenty (120) days after the 
initial meeting of the Commission, the Commission shall send 
each participant a notice of the initial determination 
assessing a contribution to the Fund. The Commission then has 
seven (7) days to publish a notice of initial listing of 
insurer participants, along with their initial determination. 
If no response is received from the participant, or if the 
response is incomplete, the initial determination assessing a 
contribution from the participant shall be based on the best 
information available to the Commission. Not later than thirty 
(30) days after receiving notice of the initial determination 
from the Commission, an insurer participant may provide the 
Commission with additional information to support limited 
adjustments to the assessment received to reflect exceptional 
circumstances.
    The Commission has the authority to conduct examinations of 
the books and records of insurer participants to determine the 
completeness and accuracy of the information submitted for the 
purpose of determining required contributions. The Commission 
may request the Attorney General to subpoena persons to compel 
relevant information. Additionally, any escrow account 
established in connection with an asbestos trust fund that has 
not been judicially confirmed by the date of enactment shall be 
the property of and returned to the insurer participant.
    Not later than sixty (60) days after the notice of initial 
determination is first sent out, the Commission shall send a 
notice of final determination.
    Insurer Participants Voluntary Allocation Agreement: Direct 
insurers and reinsurers have thirty (30) days from the day of 
the Commissions proposed rulemaking on the allocation formula 
to submit their own allocation agreement, approved by all the 
participants in the applicable group, to the Commission. Upon 
receipt of this agreement, the Commission must determine 
whether the allocation agreement meets the requirements of the 
Act and certify the agreement. Once the Commission certifies 
the agreement, the Commission no longer has authority over 
insurer participant. At this point, the Administrator shall 
assume the responsibility of calculating individual 
contribution obligations.
    Commission Report: Until the Commission is terminated, 
though, the Commission shall submit an annual report stating 
the amount that each insurer participant is required to 
contribute to the Fund, including the payment schedule, to the 
Administrator and the Committees on the Judiciary of the Senate 
and the House of Representatives.
    Interim Payments: Insurer participants must submit a 
certified statement to the Administrator of its net reserves 
for asbestos liabilities within thirty (30) days of the date of 
enactment. The Administrator must allocate this interim 
payment--which must be made within ninety (90) days of the date 
of enactment and in an amount not to exceed fifty (50%) percent 
of the insurer participants' first year payment obligation--
according to the amount that the participants hold in reserves. 
The Administrator must publish this allocation in the Federal 
Register within sixty (60) days of enactment. The 
Administrator's final allocation is appealable under Section 
303. Insurer participants must then make a payment into the 
Fund within the first ninety (90) days of the date of enactment 
of an amount not to exceed fifty (50%) percent of the first 
year's total payment obligation.
    Transfer of Authority from the Commission to the 
Administrator: Upon termination of the Commission, the 
Administrator shall assume the responsibilities and authority 
of the Commission, except that the Administrator shall not have 
the power to modify the established allocation formula.
    Financial Hardship and Exceptional Circumstances 
Adjustments--The Administrator shall have the authority to make 
adjustments for financial hardships and exceptional 
circumstances as provided for in the Act for a term not to 
exceed three (3) years. Upon the grant of any adjustment, the 
Administrator shall increase the payments of all other insurer 
participants in accordance with the allocation methodology 
established by the Commission.
    Credits for Shortfall Assessments--The Administrator shall 
grant any insurer participant required to make up for a 
shortfall pursuant to the allocation methodology within the 
first five (5) years of the Fund a credit against its annual 
payments in year 6 and thereafter. The credit will equal amount 
in the amount the insurer participant made in shortfall 
assessments and granted on a pro rated bases over the same 
number of years that the participant paid such assessments. 
However, the Administrator shall not grant a credit for short 
fall assessments imposed by the Administrator as a result of 
the shortfall analysis.
    Accounting Treatment: Insurer participant payment 
obligations to the Fund shall be subject to discounting under 
applicable accounting guidelines but shall in no way reduce the 
required payments into the Fund.
    Judicial Review: The Commission's established allocation 
formula, its final determinations of contribution obligations 
and other final actions shall be judicially reviewable.

Sec. 213. Powers of the Asbestos Insurers Commission

    This section authorizes the Commission to conduct 
rulemakings for the purpose of implementing its authority under 
the Act. The Commission may hold hearings, sit and act at such 
times, take testimony and receive evidence as it considers 
advisable. The Commission may secure directly from any Federal 
or State department or agency such information as the 
Commission considers necessary to carry out this act, and may 
use the United States mails in the same manner and under the 
same conditions as other departments and agencies of the 
Federal government. The Commission may not accept, use, or 
dispose of gifts or donations of services or property. The 
Commission may also enter into contracts as it deems necessary 
to obtain expert advice and analysis.

Sec. 214. Personnel matters

    This section provides for certain personnel matters 
relating to the performance of the duties of the Commission, 
such as: (1) the pay of members of the Commission; (2) the 
appointment of additional personnel necessary to perform its 
duties; (3) the compensation rate for such additional staff; 
and (4) the detailing of individuals serving in other branches 
of the Federal government.

Sec. 215. Termination of Asbestos Insurers Commission

    The Commission shall terminate sixty (60) days after the 
date on which the Commission submits its report.

Sec. 216. Expenses and costs of commission

    All expenses and costs of the Commission shall be paid by 
the Asbestos Injury Claims Resolution Fund.

        Subtitle C.--Office of Asbestos Injury Claims Resolution


Sec. 221. Establishment of the office of asbestos injury claims 
        resolution

    This section provides for the establishment of the Office 
of Asbestos Disease Compensation within the Asbestos Injury 
Claims Resolution Fund.
    Borrowing Authority: This subsection gives the 
Administrator borrowing authority. However, in any calendar 
year, the Administrator may not borrow an amount in excess of 
all amounts expected to be paid by participants during the 
subsequent ten (10) years, taking into account previous payment 
obligations of the Fund for amounts already borrowed and other 
payment obligations of the Fund. The purpose of this provision 
is to ensure that the Fund does not sunset early as a result of 
unforeseen circumstances, such as an unexpected surge in claims 
filed in a single year. This subsection also gives the 
Administrator the authority in the first five (5) years of the 
Fund to borrow amounts necessary for the performance of the 
Administrator's duties from the Federal Financing Bank in 
accordance with section 6 of the Federal Financing Bank Act of 
1973. Again, the purpose of this provision is to ensure that 
the Fund does not sunset in the early years that it becomes 
operational and assist in the smooth start up of the Fund.
    Repayment of monies borrowed by the Administrator shall be 
made in full by Fund contributors to the extent there is either 
current or prospective amounts available in the Fund.
    Lockbox for Severe Asbestos-Related Injury Claimants: This 
section authorizes the Administrator to establish four separate 
lockbox accounts to protect the funds needed to compensate the 
victims with the most severe asbestos-related injuries: 
mesothelioma (Level IX), lung cancer (Level VIII), severe 
asbestosis (Level V), and moderate asbestosis (Level IV). The 
Administrator shall allocate to each of these accounts a 
portion of payments to the Fund to compensate anticipated 
claimants for each account. Funds will be allocated to these 
accounts based on the best epidemiological and statistical 
studies. Within sixty (60) days after the date of enactment and 
periodically during the life of the Fund, the Administrator 
shall determine an appropriate amount to allocate to each 
account.
    Audit Authority: This section grants the Administrator 
audit authority to examine data, summon persons and materials, 
and take testimony for the purpose of ascertaining the veracity 
of information provided, determining outstanding liabilities, 
or inquiring into any offense connected with the administration 
or enforcement of payment obligations.
    False, Fraudulent, or Fictitious Statements or Practices: 
If the Administrator determines that materially false, 
fraudulent, or fictitious statements or practices have been 
submitted or engaged in by persons submitting information to 
the Administrator or Commission, then the Administrator may 
impose a civil penalty not to exceed $10,000.
    Identity of Certain Defendant Participants; Transparency: A 
person, as defined by the Act, having knowledge that either 
they are an affiliated group has prior asbestos expenditures of 
$1 million dollars or more shall submit to the Administrator 
within sixty (60) days of the date of enactment the name, or 
ultimate parent, of the person with such liability and the 
likely tier to which the group may be assigned. The 
Administrator, or Interim Administrator, shall publish in the 
Federal Register no later than twenty (20) days after this 
sixty (60) day period a list of submissions received. After 
this list is published, a person may submit information to the 
Administrator relating to the identity of others with prior 
asbestos liability of $1 million dollars or more.
    No Private Right of Action: There shall be no private right 
of action under any State or Federal law against any 
participant based on a claim of compliance or noncompliance 
with the FAIR Act or the involvement of any participant in the 
enactment of the FAIR Act.

Sec. 222. Management of the Fund

    The Administrator shall hold monies in the Fund for the 
exclusive purpose of providing benefits to asbestos claimants 
and their beneficiaries and to otherwise defray the reasonable 
expenses of administering the Fund. The Administrator shall 
invest amounts in the Fund in a manner that enables the Fund to 
make current and future distributions to or for the benefit of 
asbestos claimants, taking into account the nature of the Fund 
and relevant outside factors.
    Bankruptcy Trust Guarantee: To ensure the liquidity of the 
Fund, the Administrator shall have the authority to impose a 
pro rata surcharge on all participants if the assets of a 
bankruptcy trust established before July 31, 2004, are not 
available to be transferred because a non-appealable final 
judgment has enjoined the transfer of funds from the trust or 
the borrowing authority is insufficient because it would likely 
increase the possibility that the Fund will sunset on the basis 
of reasonable claims projections. Such a surcharge may not 
exceed the total aggregate amount of the enjoined assets of the 
relevant bankruptcy trusts of four ($4,000,000,000) billion 
dollars. Any surcharge shall be applied over a period of five 
(5) years on a pro rata basis on the relative aggregate funding 
obligations of all participants, taking into account any 
hardship, inequity, or exceptional circumstances adjustments 
granted by the Administrator. Before the Administrator may 
apply such a surcharge, he/she must publish notice in the 
Federal Register that includes information relating to the 
reasons why a surcharge is necessary, the amount of the assets 
enjoined from a bankruptcy trust, the total aggregate amount of 
the surcharge, and the amount of the surcharge for each tier 
and subtier of participant. After the thirty (30) day comment 
period, the Administrator shall publish a final certification 
in the Federal Register.
    Bankruptcy Trust Credits: If the Fund receives assets from 
a bankruptcy trust established after July 31, 2004, then the 
Administrator shall credit the aggregate payment obligations of 
all participants. The Administrator shall allocate the credits 
in amongst the defendant and insurer participants.

Sec. 223. Enforcement of payment obligations

    If any participant fails to meet its payment obligations to 
the Fund, then the Administrator must make a demand of payment 
and provide the participant with thirty (30) days to cure the 
default. If the participant fails to cure the default, then the 
United States shall have a lien for an amount equal to the 
participant's payment obligation. In the case of a bankruptcy 
or insolvency proceeding, the lien shall be treated in the same 
manner as a lien for taxes due and owing to the United States.
    In any case where there has been a refusal or neglect to 
pay an assessment, the Administrator may bring a civil action 
in any appropriate United States District Court, or other 
appropriate lawsuit or proceeding outside of the United States. 
In any action involving a willful refusal to pay, the 
Administrator may seek punitive damages, including costs and 
attorneys fees, and may collect a fine equal to the total 
amount of the liability not collected.
    Enforcement Authority as to Insurer Participants: In 
addition to other enforcement provisions, the Administrator may 
seek to recover amounts in satisfaction of a contribution not 
timely paid by an insurer in the following manners:
    Subrogation--The Administrator shall be subrogated to the 
contractual rights of participants to recover payment 
obligations from non-paying foreign insurer payments. The 
Administrator may then bring an action or arbitration against 
the nonpaying participant pursuant to those rights.
    Recoverability of Contribution--In any action brought under 
this section, the nonpaying insurer participant shall not be 
entitled to a credit or offset for amounts collectable from any 
participant or a right to collect any sums payable from a 
participant.
    Intervention/Cooperation--An insured party of a nonpaying 
insurance party shall cooperate with the Administrator in 
enforcement proceedings against the nonpaying participant. The 
Administrator shall have the power to settle or compromise any 
claims against an insurer participant.
    Bar on U.S. Business--Unless the participant complies, if 
any insurance participant refuses to pay a contribution 
obligation, then in addition to other penalties, the 
Administrator shall issue an order barring such entity and its 
affiliates from conducting business within the United States. 
Further, if any insurer participant does not supply requested 
information, then the Administrator shall bar the participant 
from doing business in the United States or from obtaining a 
license from any State to write insurance until payment of all 
contributions.
    Credit for Reinsurance--If a reinsurer insurer participant 
defaults on its payment obligation to the Fund or otherwise 
fails to comply with the Act, then the Administrator may issue 
an order barring any direct insurer participant from receiving 
credit for reinsurance purchased from the defaulting reinsurer 
after the date of the Administrator's determination of default.
    Defense Limitations: A participant must raise any 
challenges available to the participant regarding the 
constitutionality of the FAIR Act or determinations of payment 
obligations made by the Administrator or Commission during 
administrative or judicial review proceedings provided under 
the Act. If the participant fails to raise these challenges at 
that point, then the Act bars the participant from later 
raising such a challenge during enforcement proceedings.
    Deposit of Funds: The Administrator shall deposit in the 
Fund any monies collected as a fine equal to the total amount 
of the participant liability.
    Proposed Transactions: The FAIR Act incorporates language 
from an amendment by Senator Leahy last Congress designed to 
ensure future accountability of corporate participants in the 
Fund that are sold, or otherwise change hands. The Leahy 
amendment defined participants in the trust fund to include so-
called ``successors in interest'' based on the ``substantial 
continuity test'' to determine whether it is fair and 
appropriate to require a company to take on the obligations of 
its predecessor. This amendment adopts the precedent of number 
courts that have generally looked to a number of factors in 
determining ``substantial continuity'': whether the new company 
retains the same assets and facilities, the same employees and 
supervisors, the same jobs and working conditions, the same 
products and services, and the same customers and 
investors.\43\
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    \43\This ``substantial continuity'' rule has been routinely applied 
in cases involving tort plaintiffs and the beneficiaries of federal 
statutes, such as the NLRA (labor relations), the Family Leave Medical 
Act (FMLA), CERCLA (environmental crimes), Title VII (EEOC) and the 
Veterans' Readjustment Assistance Act.
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    The FAIR Act includes a comprehensive and specific 
provision designed precisely to ensure that successors-in-
interest to the participants in the Fund are held just as 
responsible as the participants were, so that the Fund will not 
suffer any financial harm as the result of merger-and-
acquisition activity. This provision of the FAIR Act also 
requires reporting on all such activity to the Administrator, 
and just as importantly creates the opportunity for the 
Administrator--or another interested party--to bring a lawsuit 
to force compliance with the successor-in-interest provision 
and the obligations of such successors.
    Notice and Contents of Notice--A participant must provide 
the Administrator notice of a proposed transaction(s) that 
would result in the transfer of a significant portion of the 
participant's assets. The Administrator shall protect 
information contained in the notice as confidential commercial 
information if: (1) the participant requests such treatment; 
(2) the participant does not publicly disclose the 
transaction(s); and (3) the Administrator does not believe that 
the true nature of the transaction merits action against the 
participant.
    The Administrator shall prescribe by rulemaking the 
information necessary for the participant to include such 
notice. The Administrator will use this information to 
determine whether: (1) the party acquiring the assets of the 
participants should be considered a successor in interest of 
the participant; or (2) the transfer would allow a trustee in 
Chapter 11 proceedings to avoid the payment obligations of the 
participant to the Fund.
    The participant must also include a statement in the notice 
regarding whether a person has or will become a successor in 
interest to the participant and whether that person has 
acknowledged such.
    Timing--
          Notice of Transaction--The participant must give the 
        Administrator notice of such a transaction no later 
        than thirty (30) days before the consummation of the 
        proposed transaction. If the process involves a series 
        of transactions, then the participant must give the 
        Administrator notice of the series of transaction no 
        later than thirty (30) days before the consummation of 
        the first transaction in the series. As such, any 
        proposed transaction may not be consummated until at 
        least thirty (30) days after the Administrator receives 
        such notice, unless otherwise provided by the 
        Administrator.
          Certification Statements--The participant shall 
        submit a certification of notice compliance to the 
        Administrator by the date of the participant's payment 
        obligation.
    Right of Action--This subsection provides for the right of 
action against a participant engaging in such a transaction or 
any party to the transaction on the grounds that: (1) the 
participant and person has not stated or acknowledged that the 
person has or will become a successor in interest as a result 
of the transaction; or (2) the transfer would allow a trustee 
in Chapter 11 proceedings to avoid the payment obligations of 
the participant into the Fund. The Administrator or other 
participant may bring such an action in the appropriate United 
States district court or, otherwise, any forum appropriate 
outside of the United States.
    Relief--In such an action, the Administrator or participant 
may seek: (1) declaratory judgment of whether a person is a 
successor in interest of the participant; or (2) a preliminary 
restraining order or any other appropriate relief as determined 
by the court against the transaction if the transaction would 
allow a Chapter 11 trustee to avoid the payment obligations of 
the participant into the Fund.

Sec. 224. Interest on underpayment of nonpayment

    If a participant fails to meet its payment obligation on or 
before the last date prescribed for payment, the liable party 
shall pay interest on that amount at the Federal short-term 
rate determined under section 6621(b) of the Internal Revenue 
Code of 1986, plus 5 percentage points until the date paid.

Sec. 225. Education, consultation, screening, and monitoring

    The Administrator shall establish a program for the 
education, consultation, medical screening, and monitoring of 
persons exposed to asbestos out of the assets of the Fund.
    Outreach and Education: No later than one year after the 
date of enactment, the Administrator shall establish an 
outreach and education program to provide information about 
asbestos-related conditions to members of the population who 
are at-risk of exposure.
    Medical Screening Program: The Administrator shall 
establish a medical screening program for individuals who are 
at high risk of incurring an asbestos-related disability 
between the eighteenth and twenty-fourth months that the Fund 
is fully operational. The Administrator shall adopt regulations 
establishing: (1) criteria for participation in the screening 
program; (2) protocols conducting the medical screening process 
of participants; and (3) the frequency that participants may 
receive medical screening services.
    The program shall receive annually at least $20,000,000 and 
no more than $30,000,000 for the first five (5) years of the 
program. However, the Administrator may suspend funding of the 
program if continued funding would cause the Fund to sunset. 
After the program is fully implemented, the Administrator may 
reduce the annual amount the program receives to less than 
$20,000,000. At the conclusion of the fourth year, the 
Administrator shall conduct a review of the program to 
recommend the amount to be allocated to the program for an 
additional five (5) years, not to exceed six hundred 
$600,000,000 million dollars. All contracts with medical 
screening providers shall provide for the reimbursement of 
those services and the termination of such contracts if the 
Administrator determines that the provider does not meet the 
provider qualifications.
    Medical Monitoring Program: The Administrator shall 
establish a medical monitoring program for persons exposed to 
asbestos and approved for level I compensation. Procedures for 
the administration of the program shall include: medical tests, 
such as the distribution of a health evaluation and work 
history questionnaire, physical examinations, chest x-rays, and 
spirometry; qualifications of medical providers who are to 
provide the tests; and administrative provisions for the 
reimbursement from the Fund for costs of monitoring.

Sec. 226. National mesothelioma research and treatment program

    This section requires the Administrator of the Fund and the 
Director of the National Institutes of Health (NIH) to allot 
respectively $1.5 million from the Fund and $1 million from 
funds available to the Director annually for the years 2006-
2015 to establish ten (10) mesothelioma disease research and 
treatment centers. The Director of the NIH shall, in 
consultation with the Medical Advisory Committee, select sites 
for the centers that are, amongst other requirements: (1) 
distributed in areas of high concentration of mesothelioma 
cases; and (2) closely associated with the Department of 
Veterans Affairs medical centers. The Administrator of the Fund 
and the Director of the NIH shall allot respectively $1 million 
from the Fund and $1 million from amounts available to the 
Director for the years 2006-2015 to establish a National 
Mesothelioma Registry. No less than $500,000 of these amounts 
shall be allocated for the collection and maintenance of tissue 
specimens. Each of the ten (10) mesothelioma centers shall 
participate in the registry. The Administrator of the Fund and 
the Director of the NIH shall allot respectively $1 million 
from the Fund and $1 million from funds available to the 
Director for the years 2006-2015 to establish a Center for 
Mesothelioma Education, with the advice and consent of the 
Medical Advisory Committee. The Director of the NIH shall 
publish and provide Congress a report and recommendations on 
the results gained through the Program no later than September 
30, 2015, which shall contain such information as the Act 
requires.

                      TITLE III.--JUDICIAL REVIEW


Sec. 301. Judicial review of rules and regulations

    The United States Court of Appeals for the District of 
Columbia Circuit shall have exclusive jurisdiction over any 
action to review rules or regulations promulgated by the 
Administrator. A petition for review shall be filed not later 
than sixty (60) days after the date notice of such promulgation 
appears in the Federal Register. The United States Court of 
Appeals for the District of Columbia shall provide procedures 
for expedited review.

Sec. 302. Judicial review of award decisions

    Any claimant adversely affected or aggrieved by a final 
decision of the Administrator regarding compensation may 
petition for judicial review of the decision by filing a 
petition of review in the United States Court of Appeals for 
the circuit in which the claimant resides within ninety (90) 
days of the issuance of a final decision of the Administrator. 
The court shall uphold the decision of the Administrator unless 
the court determines, upon review of the record as a whole, 
that the decision is not supported by substantial evidence, 
contrary to law, or is not in accordance with procedure 
required by law. This review will be subject to expedited 
procedures.

Sec. 303. Judicial review of participants' assessments

    The United States Court of Appeals for the District of 
Columbia Circuit shall have exclusive jurisdiction over any 
action to review a final determination regarding the liability 
of any person to make a payment to the Fund, including a notice 
of applicable subtier assignment, notice of insurer participant 
obligation, a notice of financial hardship or inequity 
determination, and notice of a distributors tier adjustment. A 
petition for review shall be filed not later than sixty (60) 
days after a final determination giving rise to the action and 
will be subject to an expedited review. Any defendant 
participant who receive notices of its applicable subtier 
assignment and any insurer participant who receives notice of a 
payment obligation must commence any action within thirty (30) 
days of receiving such notice.

Sec. 304. Other judicial challenges

    The United States District Court for the District of 
Columbia shall have exclusive jurisdiction over any action for 
declaratory or injunctive relief challenging any provision of 
the FAIR Act. Such action shall be filed not later than sixty 
(60) days after the date of enactment or sixty (60) days after 
the final action by the Administrator giving rise to the 
action, whichever is later.
    A final decision in the action shall be reviewable on 
appeal directly to the Supreme Court of the United States and 
shall be taken by filing a notice of appeal within thirty (30) 
days, and the filing of a jurisdictional statement within sixty 
(60) days, of the entry of a final decision.
    Such actions shall be advanced on the dockets and subject 
to an expedited review process.

Sec. 305. Stays, exclusivity, and constitutional review

    The courts may not issue a stay of a payment obligation 
pending its final judgment. Further, the courts may not issue a 
stay or injunction on the basis of a challenge to the whole or 
any portion of the FAIR Act until the all judicial avenues have 
been exhausted. An action for which review is otherwise 
provided for by the FAIR Act shall not be subject to judicial 
review in any other proceeding.
    Constitutional Review: The original action shall be filed 
in the United States District Court for the District of 
Columbia and shall be heard by a three (3) judge court. A final 
decision on the action shall be reviewable only by an appeal 
directly to the Supreme Court of the United States, which shall 
be taken by filing a notice of appeal within ten (10) days and 
a jurisdictional statement within thirty (30) days after entry 
of the final decision. The United States District Court for the 
District of Columbia and the Supreme Court of the United States 
to expedite the disposition of such an action.
    If the transfer of any asbestos trust of a debtor or class 
action trust, or the Act as a whole, is held to be 
unconstitutional, then the Fund shall transfer the remaining 
balance of such assets back to the appropriate trust within 
ninety (90) days after the final decision is ordered.

                  TITLE IV.--MISCELLANEOUS PROVISIONS


Sec. 401. False information

    This section amends Title 18, Chapter 63 of the U.S. Code 
by adding a new section 1348 to impose criminal penalties for 
fraud against the Office of Asbestos Compensation, and false 
statements made against the Asbestos Injury Claims Resolution 
Fund by any party.

Sec. 402. Effect on bankruptcy laws

    Contribution obligations are not dischargeable and may not 
be stayed when a participant files for bankruptcy. Claims by 
the Administrator against a participant are allowed even in 
bankruptcy. Participants' payment pending bankruptcy or in 
bankruptcy are not avoidable as preferences or executory 
contract.
    Transfer of Existing Asbestos Trusts: Existing asbestos 
trusts, including 524(g) trusts, will be incorporated into the 
Asbestos Injury Resolution Fund. The assets of such trusts 
shall be transferred to the Fund no later than six (6) months 
after the date of enactment. The Administrator shall have 
discretion when transferring assets of these trusts and may 
refuse to accept any asset that may create liability for the 
Fund in excess of the value of the asset. For trusts with 
beneficiaries that are not asbestos claims, the assets 
transferred to the Fund shall not include assets allocable to 
non-asbestos-related beneficiaries. Incorporation of trust 
assets is estimated to provide an additional $4-6 billion in 
contributions to the fund.
    Effect on Insurance Receivership Proceedings: In any 
insurance receivership proceeding involving an insurer 
participant, there shall be a lien in favor of the Fund for the 
amount of any assessment and any such lien shall be given 
priority over all other claims against the participant in 
receivership, except for the expenses of the receivership. 
Payment of any assessment shall not be subject to any stay in 
any insurance receivership proceeding.
    Standing in Bankruptcy Proceedings: The Administrator shall 
have standing in any bankruptcy involving a debtor participant. 
Further, no bankruptcy court may require the return of property 
seized by the Administrator to satisfy participant obligations 
to the Fund.

Sec. 403. Effect on other laws and existing claims

    This section provides that there will be no other forum for 
recovery of an asbestos injury claim other than under the Act 
and addresses the effect that the Act has on particular areas 
of the law as it relates to the asbestos problem.
            Effect on silica claims
    In General--An individual seeking to recover on the basis 
of suffering a silica-related injury must plead with 
particularity and establish by a preponderance of the evidence 
that: (i) the individual has not asserted or filed a claim for 
an asbestos-related injury and that the individual is not 
eligible for a monetary award under the Fund; (ii) the injury 
was caused by exposure to silica; and (iii) asbestos was not a 
significant contributing factor. To establish that the 
individual is suffering a ``functional impairment'' due to 
silica and not because of exposure to asbestos, the plaintiff 
must establish that they would not meet the exposure 
requirements set in Section 121 of this Act. If an individual 
is not able to meet these requirements, then the claim is 
preempted by the Act.
    Required Evidence--The initial pleading must be accompanied 
by: (1) admissible evidence relating to an individual's 
condition and exposure to asbestos; (2) notice of a previous 
lawsuit or claim asserting an asbestos-related injury; and (3) 
copies of all medical and lab reports pertaining to the 
individual's exposure to asbestos.
    Statute of Limitations--State law shall apply regarding the 
statute of limitations for filing a silica claim. However, the 
clock will begin to run on the statute of limitations for any 
claim filed under this subsection when the plaintiff becomes 
impaired.
    Superseding Provisions: Except as provided below and in 
provisions relating to the settlement of claims during the 
start up of the Fund, the Act shall supersede obligations 
imposed by any agreement, understanding, or undertaking 
relating to an asbestos claim that requires future performance. 
Such ``future performance'' is not intended to include 
obligations to defend, indemnify or hold harmless parties 
making payments under insurance coverage settlement agreements, 
or to maintain the confidentiality of such agreements, where 
the other financial terms and conditions have been satisfied.
    Exception--This Act shall not abrogate a binding and 
legally enforceable written settlement between a participant 
and a named plaintiff if before the date of enactment the 
settlement was executed directly by: (1) the settling defendant 
or insurer and the specific individual plaintiff, the immediate 
relatives of the plaintiff, or an authorized legal 
representative on behalf of the plaintiff if the plaintiff is 
incapacitated; (2) the settlement contains an express 
obligation by the participant to make future definite payments; 
and (3) all of the conditions to payment have been fulfilled, 
including court approval, within thirty (30) days of the date 
of enactment. However, if a settlement agreement is prepared in 
anticipation of this Act, then the exception of this provision 
shall not apply.
    The exception shall not apply to bankruptcy-related 
agreements.
    Any settlement payment under this provision shall be 
considered a collateral source. This subsection shall not 
abrogate a settlement agreement reached in anticipation of the 
Act and anticipates the effects of the Act. Further, this 
subsection shall not abrogate an otherwise enforceable 
settlement agreement executed before the date of enactment 
between a settling defendant or insurer and a named plaintiff 
for the payment or the health care insurance or expenses of the 
plaintiff.
    Exclusive Remedy: The remedies provided under the Act shall 
be the exclusive remedy for an asbestos claim. However, the Act 
shall not apply to any individual civil action in State or 
Federal court that on the date of enactment: (i) has commenced 
the presentation of evidence to an impaneled jury or a judge, 
sitting as a trier of fact; or (ii) a verdict, final order, or 
final judgment has been entered by a trial court. This 
exception to the preemption provisions of the Act is intended 
to permit the completion of civil trials involving plaintiffs 
in which the presentation of evidence has already begun on the 
date of enactment, as well as to preserve jury verdicts or 
judgments on all issues following the completion of such a 
trial. The exception is not intended to apply to mass trials 
such as class actions, consolidations, or other trials 
involving multiple plaintiffs not related by marriage or other 
family relationship, or to proceedings related to a bankruptcy.
    Bar on Asbestos Claims: As of the date of enactment, no new 
or pending claims may be pursued in State or Federal court, 
except those that meeting a limited exception preserving 
certain insurance claims or those filed during the start up to 
the Fund before it is fully operational. An exception to the 
preservation of insurance claims under Section 403(e)(2) 
concerns insurance coverage obligations relating to claims that 
are preempted, barred, or superseded by Section 403. Insurance 
coverage obligations relating to such claims are commuted under 
the Act so that insurers are permitted to take down reserves 
relating to these claims in order to be able to make their 
contributions to the Fund.
    The only judgment that a trial court may enter for a 
pending claim after the date of enactment is that of a judgment 
of dismissal. If a State court does not dismiss a claim, it may 
be removed to Federal court, which will determine whether 
removal was proper and whether the claim presented is a pending 
asbestos claim as defined by the Act.
    Notwithstanding the express preemption of pending cases, if 
a court determines that an asbestos claim for which there has 
been no order or judgment duly entered before the date of 
enactment is not subject to the preemption provisions and 
requires a participant to satisfy a judgment with respect to 
the claim, then the participant will receive a credit against 
any assessment owed to the Fund equal to the amount of the 
payment made with respect to the judgment. The Administrator 
shall require participants seeking credit to demonstrate that 
the participant pursued timely remedies, including dismissal of 
the claim. The participant must have also notified the 
Administrator of the denial of a motion to dismiss within 
twenty (20) days of the expiration of the period to seek 
appeal. The Administrator may require as much further 
information as is necessary and appropriate to establish 
eligibility for and the amount of such a credit.

Sec. 404. Effect on insurance and reinsurance contracts

    Because most insurance policies cover multiple liabilities, 
it was necessary to account for ``erosion'' of a policy that 
covers not only asbestos liabilities, but potentially other 
liabilities such as property or other environmental liabilities 
when assessing contribution obligations to the Fund in order to 
avoid depriving an insured of coverage for other non-asbestos 
related claims. This section establishes how contributions to 
the Fund by insurers and reinsurers reduce the limits of 
existing insurance policies held by the defendant participants. 
The quantum of erosion is based on the collective payment 
obligations to the Fund by the insurer and reinsurer 
participants. The payment obligations are deemed as of the date 
of enactment to erode remaining aggregate product limits 
available to a defendant participant in an amount of 38.1% of 
each defendant participant's scheduled assessment amount. The 
erosion principles apply to the mandatory payment obligations 
to the Fund. However, any contingent payment required by the 
Administrator of any defendant participant shall not be deemed 
to erode remaining aggregate product limits.
    Restoration of Aggregate Product Limits Upon Early Sunset: 
In the event of an early sunset of the Fund, any unearned 
erosion amount will be deemed restored as aggregate product 
limits available to the defendant participant as of the date of 
enactment. Such amounts will be deemed restored to each policy 
in such a manner that the last limits deemed eroded at 
enactment of the Act are to be the first limits restored at the 
early sunset. The applicable statute of limitations and 
contractual provisions for filing claims under any insurance 
policy with restored aggregate product limits shall be deemed 
tolled from the date of enactment through six (6) months after 
the date of the early sunset.
    Finite Risk Policies Not Affected: Notwithstanding any 
other provision of this Act, except subject to Sec. 
212(a)(1)(D), the Act shall not affect or impair any rights or 
obligations of any party to an insurance contract that 
expressly provides coverage for governmental assessments 
imposed to replace insurance or reinsurance liabilities in 
effect on the date of enactment.
    Notwithstanding any other provision of this Act, except 
subject to Sec. 212(a)(1)(D) and Sec. 404(d)(2), the Act shall 
not affect or impair any rights or obligations of any person 
with respect to any insurance purchased by a participant after 
December 31, 1990 that expressly provides coverage for asbestos 
liabilities, including finite risk policies. Subject to Sec. 
212(a)(1)(D), which governs the obligations of certain 
reinsurers to their reinsureds under reinsurance policies 
commonly referred to as finite risk policies, aggregate stop 
loss, aggregate excess of loss, or loss portfolio transfer 
policies, Sec. 404(d)(1)(B) addresses the insurance obligations 
under so-called ``finite risk'' insurance contracts purchased 
by a participant after 1990 and that expressly provide coverage 
for asbestos liabilities. These two sections have distinct 
purposes.
    Effect on Certain Insurance and Reinsurance Claims: Subject 
to Section 212(a)(1)(D), a participant may not pursue an 
insurance or reinsurance claim against another participant for 
payments to the Fund. However, Section 404(e) provides a 
limited exception to this bar. A participant may pursue a claim 
against an insurer or reinsurer on the basis of a written 
agreement specifically providing insurance, reinsurance or 
other reimbursement for required payments to (i) a Federal 
trust fund established by Federal statute to resolve asbestos 
injury claims or (ii) where applicable under 404(d).
    Any assignment of any rights to coverage for asbestos 
claims to any person who has asserted an asbestos claim prior 
to the effective date, or to any trust, person, or entity 
established to pay asbestos claims, shall be null and void.
    The Act does not affect or impair any rights or obligations 
of any person for amount that is obligated to pay with respect 
to asbestos or other claims except as otherwise provided by the 
FAIR Act.

Sec. 405. Annual report of the administrator and sunset of the act

    This section requires the Administrator to submit an annual 
report to the Senate Committee on the Judiciary and House 
Committee on the Judiciary concerning the operation of the 
Asbestos Injury Claims Resolution Fund. The section specifies 
the contents of the report which includes summaries, estimates, 
recommendations, and an analysis of the financial condition of 
the fund, including the ability of the Fund to pay claims for 
the subsequent five (5) years in full and as required.
    Contents of Report: The annual report shall include an 
analysis of the claims experience of the Fund during the fiscal 
year, including among other factors a statement of the 
percentage of asbestos claimants who filed, determined to be 
eligible, and received compensation to which they were 
eligible. The report shall also include a statement as to the 
administrative performance, financial condition, and financial 
prospects of the Fund.
    Claims Analysis and Verification of Unanticipated Claims: 
On the basis of the annual report, the Administrator will 
conduct a review based on the best available medical evidence: 
(1) of qualifying claims under a disease level to determine 
whether all or a significant number of qualified claimants 
under the class level suffer from an asbestos exposure related 
disease if the number of qualifying claims under a disease 
level exceeds the Congressional Budget Office (CBO) projected 
claims by one hundred twenty-five (125%) percent, or; (2) of 
ineligible claims under a disease level to determine if a 
significant number of claimants that were denied compensation 
but should have qualified on the basis of an asbestos exposure 
related disease if the number of qualifying claims under a 
disease level falls below the CBO projected claims by seventy-
five (75%) percent.
    Determination--The Administrator shall examine the best 
available medical evidence and any recommendation made by the 
Advisory Committee and Medical Advisory Committee regarding the 
improvement of diagnostic, exposure, and medical criteria to 
determine the nature of the claims submitted and awarded 
compensation under a disease level. Specifically, the 
Administrator shall determine whether claimants suffering from 
injuries that were not substantially contributed to exposure to 
asbestos received compensation under a claim level or whether 
claimants suffering from injuries that were substantially 
contributed to exposure to asbestos were denied compensation 
under a claim level. Further, the Administrator shall determine 
the accuracy of CBO projections of the number of expected 
claimants.
    Recommendations Concerning Claims Criteria--On the basis of 
these findings, the Administrator shall issue a recommendation 
to Congress of changes to compensation criteria to ensure that 
the Fund compensates the claims of claimants suffering from 
injuries that are substantially contributed to exposure to 
asbestos.
    Recommendations of Administrator and Advisory Committee: 
Any recommendations of the Administrator to Congress shall be 
referred to the Advisory Committee, which shall hold expedited 
public hearings on such recommendations and any alternatives to 
come to its own recommendations to be submitted to the Senate 
and House Committees on the Judiciary no later than ninety (90) 
days after receiving the Administrator's recommendations.
    Shortfall Analysis: If the Administrator concludes after 
conducting the annual report that the Fund may not be unable to 
pay claims at any time within the next five (5) years, then the 
Administrator shall include an analysis explaining why and when 
the Fund will no longer be able to pay out claims. The 
Administrator must also include recommendations as to 
alternatives for responding to the situation and a statement as 
to which of the alternatives he/she believes would be the best.
    Beginning in year 6 of the life of the Fund, if the 
Administrator determines that a shortfall in payments by 
insurer participants would cause the termination of the Fund, 
then the Administrator may impose shortfall assessments on 
insurer participants in addition to the amounts required under 
the allocation methodology. However, the Administrator shall 
not impose shortfall assessments if they would be insufficient 
to avoid a recommendation of termination of the Fund. These 
shortfall assessments may not exceed the amount necessary to 
account for any shortfall in meeting the required aggregate 
amount to be paid into the Fund by insurer participants.
    In formulating recommendations, the Administrator shall 
consider the reasons for the short fall, including: (1) 
financial factors such as the returns on investments, borrowing 
capacity, interest rates, and ability to collect contributions; 
(2) the operation of the Fund, such as the administration of 
claims process, collection of obligations, programs, and 
potential areas of fraud; (3) the appropriateness of the 
diagnostic exposure and medical criteria; the actual incidence 
of asbestos-related injuries based on data; and (4) the 
compensation of injuries with alternative causes. If the 
Administrator recommends the termination of the Fund, such a 
recommendation must be accompanied by a plan for winding up the 
Fund.
    Sunset of Act: The Fund shall terminate after the 
Administrator has: (i) begun processing claims; and (ii) 
conducted an operational review of the Fund in preparation for 
the annual report and found that there are insufficient monies 
in the Fund to consider additional claims and still satisfy all 
of the Fund's outstanding obligations, such as satisfying 
resolved claims and paying incurred debt. The Fund shall 
terminate one hundred eighty (180) days after the 
Administrator's determination of termination.
    Extinguished Claims--A claim that is extinguished for 
failure to file with the Fund within the prescribed statute of 
limitations or otherwise preempted shall not be revived after 
the sunset of the Act.
    Continued Funding--The Act requires participants to 
continue making payments to the Fund. However, if the full 
payment obligation of the participants is not required to pay 
off the obligations of the Fund, then the Administrator may 
reduce the payment levels. Any such reduction shall be 
allocated among the participants in the same manner as required 
by the Act above.
    Sunset Claims--This provision relates to remaining 
unsatisfied claims upon termination of the Fund and persons 
asserting those claims. Upon determination of termination of 
the Fund, the applicable statute of limitations shall be tolled 
for the filing of sunset claims. For those who chose to pursue 
their claims in court, the relevant statute of limitations 
shall continue to run, except those who filed a claim with the 
Fund before termination of the Fund shall have two (2) years 
after the date of termination to file a claim in court.
    Asbestos Trusts and Class Action Trusts--After termination, 
the trust distribution program of an asbestos trust and class 
action trust will be replaced by the medical criteria 
requirements of Section 121.
    Payment to Asbestos Trusts and Class Action Trusts--The 
amounts determined to be paid to asbestos trusts and class 
action trusts must be transferred to the respective trusts of 
the debtor within ninety (90) days.
    Nature of Claim After Sunset: After termination of the 
Fund, any individual, who has not had an asbestos-related claim 
satisfied by the Fund, may bring a claim in Federal district 
court, State court in where the claimant resides, or any State 
court where the asbestos exposure occurred. If a defendant 
cannot be found in the State where the plaintiff resides or 
where the asbestos exposure occurred, then the claim may only 
be brought in the Federal or State court where the defendant 
may be found. In suits where asbestos exposure occurred in more 
than one county or Federal district, the trial court will 
determine the most appropriate forum for the claim. If the 
court determines that another forum is most appropriate, then 
the court shall dismiss the claim. Any relevant statute of 
limitations shall be tolled during this time.
    An individual whose claim was resolved by the Fund may not 
bring a claim after the sunset of a Fund. However, if the 
individual recovered for a non-malignant asbestos-related 
disease from the Fund that has progressed, then the individual 
may bring a claim for the subsequent progressive disease unless 
the claimant knew or should have known about the disease at the 
time of filing with the Fund. Further, an individual, who 
recovered for a non-malignant or malignant asbestos-related 
disease from the Fund that has progressed to mesothelioma, may 
bring a suit on the basis of his/her mesothelioma unless the 
individual knew or should have known of the disease when he/she 
filed with the Fund.
    Exclusive Remedy--After the Fund sunsets, a suit brought in 
this manner shall be the exclusive remedy for any asbestos 
claim, regardless of whether the claim arose before or after 
the date of enactment or termination of the Act.
    Class Action Trusts--An asbestos-related claim may not be 
maintained against an established asbestos liability class 
action trust after the assets of the class action trust have 
been transferred into the Fund. If the Act sunsets, then the 
only remedy for claims against that class action trust will be 
to bring a claim against the class action trust established by 
the Administrator for the purpose of paying asbestos claims.
    Expert Witnesses--This provision allows for the 
introduction of qualified expert testimony meeting certain 
requirements if the testimony will assist the trier of fact in 
reaching a determination on a claim.

Sec. 406. Rules of construction relating to liability of the United 
        States government

    Except as otherwise specifically provided in this Act, 
nothing in this Act may be construed as creating a cause of 
action against the United States government, any entity 
established under this Act, or any officer or employee of the 
United States government or such entity. In addition it should 
not be construed in any way to create an obligation of funding 
from the United States government, including any authorized 
borrowing.

Sec. 407. Rules of construction

    Nothing in this Act shall preclude the formation of a fund 
for the payment of eligible medical expenses related to 
treating asbestos-related disease for current and former 
residents of Libby, Montana. Any such payment shall not be 
considered a collateral source.
    Nothing in this Act shall be construed to preclude any 
eligible claimant from receiving health care from the provider 
of their choice.

Sec. 408. Violations of environmental and occupational health and 
        safety requirements

    This section requires the Administrator to refer any 
information relating to violation of the Toxic Substances 
Control Act, the Clean Air Act, or the Occupational Safety and 
Health Act to the Secretary of Labor, to the Administrator of 
the EPA or the United States Attorney for possible civil or 
criminal prosecution and penalties. The Act also amends the 
Occupational Safety and Health Act of 1970 to provide enhanced 
criminal penalties for willful violations of occupational 
standards for asbestos.
    This section also directs the United States Sentencing 
Commission to review and amend, as appropriate, the United 
States Sentencing Guidelines regarding environmental crimes 
relating to asbestos to ensure that the penalties are 
sufficient to deter and punish future activity and for other 
reasons.

Sec. 409. Nondiscrimination of health insurance

    A health insurer may not deny, terminate, or alter the 
terms of coverage of the health plan of a claimant or 
beneficiary of a claimant because of participation in a medical 
monitoring program or as a result of information discovered as 
a result of medical monitoring. This section amends Section 
702(a)(1) of the Employee Retirement Income Security Act of 
1974, Section 2702(a)(1) of the Public Health Service Act, and 
Section 9802(a)(1) of the Internal Revenue Code of 1986 to 
conform with this provision.

                         TITLE V.--ASBESTOS BAN


Sec. 501. Prohibition on asbestos containing products

    This section amends chapter 39 of Title 18 to prohibit the 
manufacture, distribution and importation of consumer products 
to which harmful asbestos is deliberately or knowingly added. 
This section provides a specific exception for the manufacture, 
processing, or distribution of asbestos-containing products by 
or for the Department of Defense if the Secretary of Defense 
certifies and provides a copy of the certification to Congress 
that: (1) the use of the product is necessary to the critical 
functions of government (as defined); (2) there are no other 
reasonably available and equivalent alternatives to the 
product; and (3) the use of the product will not result in a 
known unreasonable risk to health or the environment. Further, 
the provision provides an exemption without a review or limit 
on duration for any asbestos containing product requested by 
the Administration of the National Aeronautics and Space 
Administration if the Administrator certifies and provides a 
copy of the certification to Congress of the necessity of the 
product.
    The provision also contains specific exemptions and 
authorizes the Administrator to hear and grant exemptions on a 
case by case basis. The Committee found precedence and 
structured this section in large part on an asbestos ban 
implemented by the Environmental Protection Agency in 1989. 
Although this regulatory ban was invalidated by the Fifth 
Circuit on mainly procedural grounds, this section implements 
it legislatively and it is the Committee's intent that the 
Administrator use the 1989 Environmental Protection Agency 
regulations as a guide towards implementing the ban and 
relevant exceptions under this section. The Committee 
recommends that the EPA consider, consistent with its prior 
regulations, among other issues: 1) whether to create a two-
stage ban with a manufacturing ban first and a distribution in 
commerce ban phased in after a proper time delay; 2) whether to 
provide a labeling mechanism to identify an asbestos containing 
product as soon as practicable after date of enactment; and 3) 
whether to provide an enforcement standard that requires a 
violation under the ban to be knowing and willful.

Sec. 502. Naturally occurring asbestos

    This section calls for the Administrator of the 
Environmental Protection Agency (EPA) to conduct a study and 
submit a report within twelve (12) months of the date of 
enactment to assess the risks of exposure to naturally 
occurring. Given the uncertainties concerning naturally 
occurring asbestos, including the potential multiple sources of 
asbestos in communities and the uncertainties associated with 
the durations of activity-based exposure, the EPA shall 
evaluate the appropriateness of the existing risk assessment 
values for asbestos and methods of assessing exposure.
    Within eighteen (18) months of the date of enactment, the 
Administrator of the EPA shall establish dust management 
guidelines, and model regulations that States or localities can 
choose to adopt, after consulting with appropriate Federal and 
State agencies and other interested parties after appropriate 
notice. These guidelines and model regulations shall include 
site management practices to minimize the disturbance of 
naturally occurring asbestos, air and soil monitoring programs 
to assess exposure levels as development sites, and appropriate 
disposal options. Further, not later than eighteen months after 
the date of enactment, the Administrator of the EPA shall 
establish comprehensive protocols for testing the presence of 
naturally occurring asbestos after consulting with appropriate 
State agencies. For existing buildings and areas, the 
Administrator of the EPA shall issue public education 
materials, recommended best management practices and 
recommended remedial measures for areas containing naturally 
occurring asbestos no later than one (1) year after the date of 
enactment.
    This section also calls for the following:
    (1) the Secretary of the Interior to collaborate with the 
California Geological Survey and any other appropriate State 
agencies to produce final, publicly available maps of asbestos 
zones, prioritizing relevant portions of California counties 
with significant amounts of naturally occurring asbestos that 
are experiencing rapid population growth, and also identifying 
and mapping other areas of significant concern in other States;
    (2) the Director of the National Institutes of Health to 
administer one or more research grants to qualified entities 
for studies that focus on better understanding the health risks 
of exposure to naturally occurring asbestos, where grants are 
awarded through a competitive peer-reviewed, merit-based 
process;
    (3) the participation of representatives of the EPA and 
Health and Human Services in any task force convened by the 
State of California to evaluate policies and adopt guidelines 
for the mitigation of risks associated with naturally occurring 
asbestos;
    (4) the Administrator of the EPA to award fifty (50%) 
percent Federal matching grants for the remediation of 
naturally occurring asbestos in schools, parks, other public 
areas, and public or private serpentine roads that generate 
significant public exposure to naturally occurring asbestos; 
and to establish criteria to award such grants within four (4) 
months of the date of enactment; and
    (5) an allotment of $40 million from the Fund for the 
purpose of carrying out the requirements of the section.

                VII. Critics' Contentions and Rebuttals

    Critics' Contention No. 1: Critics contend that the funding 
provided for in S. 852 is inadequate to pay all asbestos 
victims.
    Response: S. 852 as amended obligates defendant and insurer 
participants to contribute an aggregate of $136 billion to the 
Asbestos Injury Claims Resolution Fund (hereinafter ``Fund''). 
In addition, at least another $4 billion would be contributed 
to the Fund from confirmed bankruptcy and other asbestos 
compensation trusts, bringing the total level of mandatory 
contributions to the Fund to at least $140 billion. The size of 
the Fund is based on sound statistical data and economic 
models, and is more than adequate to compensate all victims of 
asbestos-related disease. Indeed, a leading actuary with 
Tillinghast-Towers Perrin, testified convincingly before the 
Committee on June 4, 2003 that ``$108 billion appears to be 
more than adequate * * *'' \44\
---------------------------------------------------------------------------
    \44\Statement of Jennifer L. Biggs, FCAS, MAAA, Tillinghast-Towers 
Perrin, Hearing Before the Senate Committee on the Judiciary, ``Solving 
the Asbestos Litigation Crisis: S. 1125, the Fairness in Asbestos 
Injury Resolution Act of 2003,'' 108th Cong., June 4, 2003, at 7.
---------------------------------------------------------------------------
    The total estimated cost of ultimate asbestos loss and 
expense, which includes both past payments and projected future 
payments, is $200 billion.\45\ The RAND Institute for Civil 
Justice estimated that $70 billion has already been paid 
through year-end 2002.\46\ By reducing the total estimated cost 
of asbestos-related loss and expense by the $70 billion already 
paid out through 2002, the remaining future cost of asbestos-
related loss and expense is an estimated $130 billion.
---------------------------------------------------------------------------
    \45\Id. at 1.
    \46\Steve Caroll, RAND Institute for Civil Justice, ``The 
Dimensions of Asbestos Litigation'' presentation at the Spring Meeting 
of the Casualty Actuarial Society, May 19, 2003.
---------------------------------------------------------------------------
    One of the most beneficial features of the FAIR Act is that 
it will significantly reduce the substantial transaction costs 
of the current tort system--amounts which most experts agree 
currently consume more than half of the total costs.\47\ By 
substituting the tort system for an administrative no-fault 
system for compensation, the FAIR Act will wring out these 
transaction costs and further reduce the future projected 
costs. Of the $130 billion of asbestos-related spending 
remaining outstanding, Tillinghast-Towers Perrin estimates that 
approximately $28 billion (or 21.5%) is attributable to defense 
costs. Of the remaining $102 billion, Tillinghast estimates 
that approximately $41 billion (or 40%) will go to plaintiffs' 
attorneys. In the current system, as a result of these 
transaction costs, only $61 billion of the $130 billion 
estimate of future asbestos-related loss and expense, or less 
than half, is expected to be paid to asbestos victims.\48\ 
Moreover, the FAIR Act will correct the current misallocation 
of payments being made to unimpaired claimants who are flooding 
the court system today. Therefore, the $140 billion to be 
contributed to the Fund by defendant and insurer participants 
will be more than double the $61 billion, thus giving victims 
the certainty that they will receive compensation under the new 
system.
---------------------------------------------------------------------------
    \47\See id; see also Biggs, supra Note 1 at 2-3.
    \48\See Biggs, supra Note 1 at 2.
---------------------------------------------------------------------------
    Finally, as an added protection against the unlikely risk 
of insufficient funding, the FAIR Act gives the Administrator 
authority to borrow from commercial and government lending 
institutions amounts to offset short term losses.
    Critics' Contention No. 2: Critics contend that given the 
significant amount of time that will be involved in 
establishing the Fund and getting it funded and fully 
operational, asbestos victims may have to wait years before 
they receive any compensation.
    Response: Currently, when cases enter the tort system many 
individuals are forced to wait significant periods of time 
before their case is brought before a judge or jury. Some 
states, however, have enacted expedited procedures to address 
cases of terminal individuals in an expedited timeframe. In 
these states, cases are filed and either settled or heard 
within 6 months. In addition, these cases are often paid within 
30 days to 6 months.
    Given the expedited processes available in many states, 
provisions were added during Committee consideration of the 
FAIR Act to establish several safeguards to ensure that 
terminal individuals have their claims paid as quickly as or 
quicker than the current system.
    A process was created whereby exigent claimants, 
individuals who have mesothelioma or have been diagnosed with 
less than one year to live, may have their claims resolved in 
as little as sixty (60) days and receive their first payment in 
thirty (30) days.
    The process created under the bill allows exigent claimants 
to immediately file their claim with the Fund or with the 
claims facility, or they may file a notice of intent to seek a 
settlement. In either case the exigent claimant must provide 
the necessary information to the Administrator. The 
Administrator then has up to sixty (60) days to make a 
determination if the claim qualifies for payment. Upon approval 
the Administrator must pay the claim on an expedited basis.
    In addition, there are several additional provisions to 
ensure exigent claimants are paid quickly. If for whatever 
reason the Administrator or claims facility is unable to 
process or pay the claim, the defendants and the claimant must 
be notified within ten (10) days. Upon notification, the 
defendants may make a settlement offer. If the offer is 
rejected defendants have twenty (20) days to perfect the offer. 
If the offer is again rejected, or if no offer is made, the 
claimant's settlement must then be bumped up to 150% of the 
award value under the trust. If after nine (9) months the 
exigent claimant has not had their claim processed or fully 
paid, then they may return to court where their case was 
originally filed, or if their claim arose after enactment they 
may file their case in the appropriate state or federal court.
    This process ensures that terminal individuals receive fair 
and timely payment as quickly as possible, and in many cases in 
a timelier manner than if they proceeded in the courts.
    Critics' Contention No. 3: Critics contend that if the Fund 
runs out of money, asbestos victims will have no place to turn 
for compensation.
    Response: As explained in detail in response to Critics' 
Contention No. 1, based on all reasonable estimates, the Fund 
will not run out of funds or be unable to meet all of its 
obligations to all claimants. But in the event the FAIR Act 
does not ultimately provide adequate funding to compensate all 
asbestos victims deemed entitled to compensation, S. 852 
provides victims the right to pursue their claims in the tort 
system.
    Critics' Contention No. 4: Critics contend that victims 
will be paid less under the FAIR Act than they could get in the 
tort system.
    Response: The Committee has approved S. 852 in recognition 
that the tort system is broken and the status quo cannot be 
sustained for either victims or defendants. Under the bill, 
claimants will receive fair, consistent and equitable 
compensation without the delays inherent in litigation. 
Moreover, most appropriately, those that are most seriously ill 
and whose diseases have the most direct causal link to asbestos 
will receive the most compensation under the legislation, 
including up to $1.1 million for Level IX, Mesothelioma. Those 
individuals who have been exposed to asbestos but are not 
impaired will be eligible for medical monitoring, and their 
claims will be preserved should they later develop impairment.
    In sharp contrast to the bill, the current tort system is 
unfair to asbestos victims and plagued with uncertainty. 
Whether asbestos victims receive compensation at all, and, if 
so, how much they might receive, depends on where and when they 
file claims, who the defendants happen to be, whether those 
defendants are solvent, and the leverage and skill of their 
trial lawyers. The amount of compensation victims receive 
diverges widely, with some victims receiving very large 
amounts, and others receiving little or nothing. And sadly, 
some victims die before their cases can be heard in court. 
These distortions in the current tort system are further 
exacerbated by jurisdictional idiosyncrasies. Only five states 
had two-thirds of all asbestos case filings between 1998 and 
2000. The concentration of an overwhelming number of filings in 
a small number of jurisdictions only increases the delays and 
inequities inherent in the current system.
    While the tort system bestows large awards for some 
victims, it all too often leaves the unfortunate without fair 
compensation, and the system is only getting worse with time. 
In order for victims to be compensated, they need to be able to 
look to solvent companies for resources. However, to date, at 
least 73 companies have declared bankruptcy because of asbestos 
claims. While bankruptcy trust funds can be an efficient way of 
compensating victims, a study of a number of major asbestos 
defendant bankruptcies showed that the average time from 
petition to confirmation of a reorganization plan was six 
years. During these proceedings, claimants are not paid. Even 
worse, after a company declares bankruptcy, it has very limited 
resources with which to compensate victims. The Manville Trust, 
for example, can only pay victims 5 percent of the value of 
their claims. Moreover, not one single existing asbestos trust 
or any of the 20 or more trusts currently pending in bankruptcy 
court can or will be able to pay any more than a fraction of 
the value of the claims that will be presented.\49\
---------------------------------------------------------------------------
    \49\See Statement of David Austern, General Counsel for the 
Manville Personal Inquiry Settlement, Trust, Hearing before the Senate 
Committee on the Judiciary, The Asbestos Litigation Crisis Continues--
It is Time for Congress to Act, 108th Cong., March 5, 2003.
---------------------------------------------------------------------------
    As noted in the response to Critic's Contention No. 1, by 
reducing the substantial transaction costs of the current 
system and directing resources to those who are injured from 
asbestos related diseases, S. 852 will deliver more 
compensation to victims in a timely and certain manner.
    The scheduled values of S. 852 are some of the highest of 
any federal or state compensation program in existence. The 
values compare very favorably to the statutory, maximum 
disability and death benefits of all other federal compensation 
programs and are higher than the benefits offered under state 
workers' compensation programs. In January of 2002, of the 23 
states reporting a calculated, maximum death benefit, the 
lowest reported amount was $46,900 in Maryland; the highest 
reported amount was $390,000 in Minnesota. By contrast, under 
the bill, the benefit for Level IX, Mesothelioma, is $1.1 
million.
    The values in S. 852 also compare favorably to the other 
bankruptcy trusts. By example, the Manville Trust provides for 
a scheduled value of $350,000 for mesothelioma claimants, and 
is only able to pay 5 cents on the dollar on all claims. A 
mesothelioma claimant would, therefore, only receive a payment 
of $17,500 from the Manville Trust, but under S. 852 would 
receive $1.1 million. While claimants typically sue a number of 
trusts, the results are likely to be similar.
    Finally, the S. 852 prohibits the subrogation of a claim as 
a result of a claimant receiving an award from the Fund.
    Critics' Contention No. 5: Critics contend that S. 852 is 
supposed to embody a ``no fault'' system, but the medical 
criteria are overly stringent.
    Response: S. 852 establishes a non-adversarial, no-fault 
system in which claimants, in sharp contrast to the tort 
system, will not have to prove fault on the part of defendants 
or have to provide specific product identification in order to 
receive compensation. In addition, those individuals that have 
been exposed to asbestos but are not ill will be eligible for 
medical monitoring and will remain eligible to receive 
compensation at a later time should they become ill in the 
future.
    The bill's medical criteria are fair and reasonable and 
appropriately designed to provide certainty to claimants. 
Indeed, the starting point for the medical criteria provided 
for under S. 852 were those from the Manville Trust, which were 
adopted with the overwhelming support of the claimants and 
their counsel and which have been substantially followed by 
other bankruptcy trusts because of their credibility.
    In exchange for establishing a no-fault, non-adversarial 
system, however, the criteria in the Act require a medical 
diagnosis by the claimant's doctor and sufficient evidence to 
establish that the claimed illness is asbestos related. Such 
criteria are also necessary to keep the problems associated 
with mass screenings and the current abuses found in the tort 
system from being transferred to the Fund. To ensure the 
integrity of the Fund and to promote the purpose of the bill to 
direct funds to those claimants who are truly ill from their 
exposure to asbestos, therefore, the criteria in the bill 
reflects compromises, yet is based on sound, diagnostic, 
medical, latency and exposure criteria.
    Critics' Contention No. 6: Critics contend that small 
businesses that rely on their insurance will be harmed under S. 
852 because they will be forced to contribute to the Fund and 
will not be able to use their insurance in order to do so.
    Response: Under the FAIR Act, small businesses, as defined 
under Section 3 of the Small Business Act, are explicitly 
exempt from having to contribute to the Fund, but will receive 
the very protections provided to all of the other defendant 
participants under the legislation. Also, small companies that 
have not incurred asbestos liability-related payments of $1 
million or more before December 31, 2002 are exempt from having 
to contribute to the Fund. For those companies that are not 
exempt from having to contribute to the Fund, S. 852 tiers 
companies by size and liability, such that no company would 
have to contribute to the Fund an amount out of line with their 
resources. In stark contrast, the current tort system provides 
no protections for small businesses and allows any company of 
any size, no matter how small, to be sued into bankruptcy. 
Furthermore, the bill authorizes the Administrator to adjust 
defendant participants' contributions based on severe financial 
hardship and demonstrated inequity, further protecting the 
interests of all businesses of all sizes.
    Critics' Contention No. 7: Critics contend that S. 852 will 
primarily benefit businesses and insurance companies.
    Response: This contention is unwarranted. The bill benefits 
victims who have been inadequately served by the current tort 
system while providing economic stability to businesses that 
have been overwhelmed by abusive litigation in the current tort 
system, driving many into bankruptcy and impacting the jobs and 
pensions of their employees.
    S. 852 will benefit victims significantly because they will 
receive fair, certain and equitable compensation without the 
delays and uncertainties inherent in the current tort system. 
Moreover, claimants will not have to worry whether their 
defendant is or will become bankrupt, and they will not bear 
the burden to prove liability, causation or to establish 
product identification as in litigation.
    Further, under the funding provisions in S. 852, more 
resources will be available to compensate victims than under 
the current system. As estimated by leading actuaries, because 
of the substantial transaction costs of the current tort 
system, only a total of about $61 billion will go to asbestos 
victims in the future, while an estimated $69 billion will go 
to plaintiff and defense lawyers.\50\ In contrast, under S. 
852, $140 billion will go directly to compensate victims.
---------------------------------------------------------------------------
    \50\See Jennifer L. Biggs, supra at 2.
---------------------------------------------------------------------------
    Victims will be much better protected once S. 852 is 
enacted because the current awards some receive from the tort 
system are not sustainable into the future. To date, over 
seventy (70) companies have gone into bankruptcy as a result of 
asbestos liability, and without reform, more companies will be 
at risk in the future. The Committee's hearing record is 
replete with the devastating impact the current asbestos crisis 
is having on businesses, workers, retirees, shareholders and 
the U.S. economy. S. 852 will ensure that asbestos victims no 
longer face the risk that their only recourse will be trusts 
created out of bankruptcies paying pennies on the dollar.
    In short, S. 852 provides fair compensation to those who 
are injured by asbestos exposure and ensures that scarce 
resources will not be spent on the unimpaired at the expense of 
those with asbestos-related injuries now and into the future. 
Too often those most deserving do not get their fair share out 
of the current system. Victims will benefit substantially from 
the new system. S. 852 is fair and balanced and will produce 
substantial benefits for victims, workers, retirees, 
shareholders and the U.S. economy.
    Critics' Contention No. 8: Critics contend that S. 852 is 
unconstitutional and will lead to years of litigation over its 
constitutionality.
    Response: S. 852 has been very carefully written to avoid 
running afoul of the U.S. Constitution. Indeed, it is important 
to note that more than a decade ago a committee of the United 
States Judicial Conference, appointed by the Chief Justice of 
the U.S. Supreme Court, studied the special features of 
asbestos litigation and concluded that the ``ultimate solution 
should be [federal] legislation recognizing the national 
proportions of the problem and creating a national asbestos 
dispute resolution scheme * * *.''\51\ Since that time, the 
U.S. Supreme Court has called repeatedly for an administrative 
solution as provided for in S. 852.
---------------------------------------------------------------------------
    \51\Report of the Judicial Conference Ad Hoc Committee on Asbestos 
Litigation 3 (March 1991); see also id. at 42 (dissenting statement of 
Hogan, J.) (agreeing that ``a national solution is the only answer'' 
and suggesting ``passage by Congress of an administrative claims 
procedure * * *'')
---------------------------------------------------------------------------
    In 1997, in Amchen Prods., Inc. v. Windsor, 521 U.S. 628-
629 (1997), Justice Ginsburg wrote: ``The argument is sensibly 
made that a nationwide administrative claims processing regime 
would provide the most secure, fair, and efficient means of 
compensating victims of asbestos exposure.''\52\ In March 2003, 
in writing for the Court in Norfolk & Western Ry. v. Ayers, 123 
S.Ct. 1210, 1228 (2003), Justice Ginsburg again stated: ``The 
`elephantine mass of asbestos cases' lodged in the state and 
federal courts, we again recognize, `defies customary judicial 
administration and calls for national legislation.''' The 
Committee has heeded the explicit call of both the U.S. 
Judicial Conference and the U.S. Supreme Court in establishing 
the no-fault, publicly-administered, privately-funded 
administrative claims process provided for in S. 852.
---------------------------------------------------------------------------
    \52\See also Ortiz v. Fibreboard Corp., 527 U.S. 815, 821 (1999).
---------------------------------------------------------------------------
    In reviewing the constitutionality of S. 852, at the 
specific request of the Committee, preeminent Harvard 
constitutional law scholar Professor Laurence H. Tribe, 
testifying before the Committee on June 4, 2003, confirmed the 
constitutionality of the legislation:

          My conclusion, in brief, is that the FAIR Act is well 
        within Congress' authority to enact and does not offend 
        the constitutional guarantees of due process, equal 
        protection, or right to jury trial. Nor does it 
        represent an uncompensated taking of private property, 
        an unconstitutional impairment of contracts, or a 
        violation of the separation of powers.\53\
---------------------------------------------------------------------------
    \53\See Statement of Lawrence H. Tribe, Hearing Before the Senate 
Committee on the Judiciary, Solving the Asbestos Litigation Crisis: S. 
1125 The Fairness in Asbestos Injury Resolution Act of 2003, 108th 
Cong., June 4, 2003, at 2.

    With regard to the concerns of some that the preemption of 
common law tort claims may violate due process or create a 
claim under the Takings Clause of the Constitution, Professor 
Tribe testified further on the ability of Congress to preempt 
---------------------------------------------------------------------------
common law tort claims:

          The legislative precedents illustrate the breath of 
        Congress' power to adjust, restrict, or even abolish 
        common-law and statutory causes of action. Thus, 
        Congress has ample authority to rationalize asbestos 
        claims, by creating an Article I procedure in the 
        asbestos court for the orderly payment of such claims 
        and thereby avoiding a race-to-the-bottom situation in 
        which relatively unimpaired plaintiffs are overpaid, 
        transaction costs are high, and grievously injured 
        plaintiffs risk getting little or no compensation at 
        all * * *. It has long been settled, ever since the 
        states began adopting workers' compensation statutes, 
        that a legislature is free to modify or abolish common-
        law causes of action without violating due process or 
        creating a claim for compensation under the Takings 
        Clause.\54\
---------------------------------------------------------------------------
    \54\Tribe testimony at 6.

In written testimony submitted to the Committee by former 
Solicitor General Seth Waxman supports this analysis, he 
explains that ``[t]here is further no doubt that in pursuing 
proper national goals, Congress may, to the extent it deems 
necessary or desirable, preempt and supersede the operation of 
state law.''\55\
---------------------------------------------------------------------------
    \55\Hearing on Solving the Asbestos Litigation Crisis: S. 1125, the 
Fairness in Asbestos Injury Resolution Act of 2003, Before the Senate 
Comm. on the Judiciary, 108th Cong. 4 (2003) (testimony submitted for 
the record by Seth P. Waxman, Wilmer, Cutler & Pickering).
---------------------------------------------------------------------------
    Nevertheless, should the constitutionality of S. 852 be 
challenged, the legislation explicitly provides for an 
expedited appeal directly to the Supreme Court as a matter of 
right within thirty days of any decision of a federal court 
finding any part of S. 852 to be unconstitutional. This ensures 
that any such litigation will be resolved quickly.
    Critics' Contention No. 9: Critics contend that the FAIR 
Act will become another black lung fund with the government 
having to put money into the Fund to compensate victims.
    Response: The FAIR Act establishes a trust fund for the 
compensation of asbestos claims that is privately funded. 
(Section 221(a)). Although the program is housed in the 
Department of Labor, the Act ensures that all administrative 
expenses, as well as claims, are paid by the Fund. (Section 
101(a)(3)). The FAIR Act expressly provides that nothing in the 
Act shall be construed to create any obligation of funding from 
the United States or to require the United States to satisfy 
any claims if the amounts in the Fund are inadequate. (Section 
406(b)). As such, industry, not the U.S. Treasury, will be 
paying the bills.
    In response to an inquiry from Senator Nickles on S. 1125, 
as reported out of the Senate Judiciary Committee in 2003, the 
GAO recognized that S. 1125 explicitly provides that any 
borrowing by the Fund would not be supported by the U.S. 
Government. The GAO noted, however, that ``[t]o ensure that the 
government incurs no liability for repayment of borrowing under 
the act, Congress may wish to explicitly state that repayment 
of borrowing is limited solely to amounts available in the 
Fund.'' The GAO's recommendation has now been incorporated into 
the FAIR Act. Under the Specter draft, any borrowing is limited 
to monies expected to be paid into the Fund, and section 
221(b)(4) of the FAIR Act expressly provides that ``[r]epayment 
of monies borrowed by the Administrator under this subsection 
is limited solely to amounts available in the [Fund].'' 
(Section 221(b)).
    In addition, the problems of the Black Lung Disability 
Trust Fund being chronically under-funded have been considered, 
and FAIR Act has been carefully crafted so as not suffer from 
the same problems as the Black Lung program. Many of the 
companies obliged to pay for workers' illnesses under the black 
lung fund were, soon after the enactment of the legislation 
creating the fund, acquired by other corporate interests. The 
legislation had not contemplated this scenario, and the 
successors-in-interest were not obligated to continue the 
payments that the original companies had made. The FAIR Act, by 
contrast, includes a comprehensive and specific provision 
designed precisely to ensure that successors-in-interest to the 
participants in the Fund are held just as responsible as the 
participants were, so that the Fund will not suffer any finial 
harm as the result of merger-and-acquisition activity. This 
provision of the FAIR Act also requires reporting on all such 
activity to the Administrator, and just as importantly creates 
the opportunity for the Administrator--or another interested 
party--to bring a lawsuit to force compliance with the 
successor-in-interest provision and the obligations of such 
successors.
    Further, unlike the Black Lung program, which is financed 
by a tax imposed solely on coal mining companies, the asbestos 
compensation fund has a much broader funding base because 
asbestos litigation has affected virtually every sector of 
industry. Moreover, the funding obligations are not dependent 
on a fixed tax on a few companies, but are instead guaranteed 
collectively by all of the defendants and insurers. In 
addition, unlike the Black Lung program the total amount of 
funding is based on a long history of claims filing with 
bankruptcy trusts, which is the best available data upon which 
to estimate funding obligations, and the most reliable claims 
projections by experts in the field.
    The Black Lung program also has been criticized as being 
based on overly broad, ill-considered presumptions, creating 
what has been characterized as a runaway program. The medical 
criteria in the FAIR Act are based on detailed medical 
standards and require credible and reliable medical evidence to 
be filed with all claims. The Act also provides for Physicians 
Panels to review claims that have a more tenuous relationship 
to asbestos exposure. There are also independent reviews of 
certain claims and audit provisions to address any potential 
fraud and abuse. These safeguards were made to ensure that the 
FAIR Act does not establish a runaway program, while still 
providing compensation to the true victims of asbestos 
exposure. Finally, the FAIR Act also now excludes claims 
previously called Level VII claims, the so-called exposure-only 
lung cancers.
    Also unlike the Black Lung program, the FAIR Act provides 
the Administrator with greater flexibility to address short-
term funding problems without incurring undue debt, and, as 
previously noted, any debt incurred must be based on expected 
monies to be paid by defendants and insurers. If the guaranteed 
funds are not sufficient to pay all of the Fund's obligations, 
including administrative expenses and debt repayments, when 
due, the Fund will sunset and asbestos victims will be able to 
pursue their claims in court. (Section 405(f)). The funding 
requirements are to continue even after sunset if necessary to 
pay off any debt. (Section 405(f)(5)). The taxpayers will not 
be left holding the bill.
    The Black Lung Benefits Act only required that a program be 
created for coal miners with pneumoconiosis, and the statute 
merely outlined presumptions of those who should be eligible 
and delegated authority to determine eligibility requirements 
to the Department of Labor. See, e.g., 30 U.S.C. Sec. 921. 
Section 121 of the FAIR Act, on the other hand, prescribes 
detailed medical, diagnostic, latency, and exposure 
requirements to determine eligibility for compensation of 
asbestos claims. Consequently, Congress itself in the FAIR Act 
prescribes the criteria for eligibility for compensation, and 
these criteria are designed to compensate only those truly ill 
from asbestos exposure and not other causes. Unlike the Black 
Lung Benefits Act, the FAIR Act does not authorize the 
Department of Labor to promulgate new eligibility criteria or 
to change the criteria reflected in the statute. Indeed, as 
part of the annual report to Congress required by the FAIR Act, 
the Administrator must review claims filings and eligibility 
determinations to ensure the purposes of the Act are met and 
that the Fund is compensating true victims of asbestos exposure 
and not compensating claims for injuries that are not caused by 
asbestos. (Section 405(c)). Based on experience gained in 
implementing the program, the Administrator can recommend 
changes to the eligibility criteria, but any such recommended 
changes must first go through a special commission and then be 
approved by Congress. (Section 405(e)). The Administrator is 
not authorized to change the eligibility criteria through 
regulations.
    Moreover, the bill expressly mandates Department of Labor 
the authority to contract out with a claims handling facility 
to help alleviate the initial influx of claims. (Section 
106(c)(4)). Currently, there are a number of private sector 
claims handling facilities in existence with experience 
managing asbestos claims. For example, the Claims Resolution 
Management Corporation (``CRMC'') handles the claims processing 
for the Manville Trust and three other bankruptcy trusts. CRMC 
reportedly has been able to handle over 150,000 asbestos claims 
annually from law firms filing with the Manville Trust. In 
addition to CRMC, there are a number of claims management 
facilities that handle a multitude of cases every year on 
behalf of insurance companies and defendants. Existing claims 
handling facilities are very efficient. For example, in 2002, 
CRMC adopted a sophisticated electronic claims submission 
system. These entities (or new entities drawing upon the 
expertise of these entities) would be available to handle 
claims on behalf of the Department of Labor and/or to assist in 
training of claims handling personnel. The costs of retaining 
such entities would be borne entirely by the Fund.
    Critics' Contention No. 10: Critics contend that 
legislation that imposes a set of medical criteria in the tort 
system would be preferable to the trust fund created in S. 852.
    Response: The Committee received significant testimony 
establishing that the current system for compensating asbestos 
victims is broken. Victims are dying while they wait for their 
day in court. When they finally receive their day in court, 
victims often receive only a small percentage of the costs 
involved in our tort system, or if the defendant has been 
forced to file for bankruptcy, then victims receive little or 
no compensation. This dire situation cries out for a solution 
outside of the court system that streamlines the claims process 
for victims; ensures that they receive timely and fair 
compensation relative to the severity of their injuries; and 
protects compensation they receive from subrogation by 
insurance companies.
    According to the most recent RAND study, asbestos victims 
receive an average of only 42 cents for every dollar spent on 
asbestos litigation. Thirty-one cents of every dollar have gone 
to defense costs, and 27 cents have gone to plaintiffs' 
attorneys and other related costs. Enactment of a medical 
criteria bill for asbestos would fail to reduce the high 
transaction costs of the asbestos tort system.
    Medical criteria bills do nothing to protect businesses 
from going bankrupt or victims who were injured by bankrupt 
companies from receiving fair compensation. Many asbestos 
manufacturers are in bankruptcy proceedings and therefore are 
immune from suit. Victims like our nation's veterans are unable 
to recover for asbestos exposure they received while serving 
the country in the current tort system. The Judiciary Committee 
recently received the following testimony from Hershel W. 
Gober, National Legislative Director, Military Order of the 
Purple Heart:

          The avenues open to veterans to seek compensation 
        through the tort system, however, are very limited. The 
        Federal government, as the members of this Committee 
        know, has sovereign immunity, thereby restricting 
        veterans' ability to recover from the government; and 
        most of the companies that supplied asbestos to the 
        Federal government have either disappeared or are 
        bankrupt and, therefore, are only able to provide a 
        fraction of the compensation that should be paid to 
        asbestos victims, if anything at all. Even if there is 
        a solvent defendant company for a veteran or his/her 
        family to pursue, there remains the lengthy, costly, 
        and uncertain ordeal of filing a civil lawsuit and 
        going through discovery and trial, where the plaintiff 
        bears a heavy burden of proof and often has the very 
        difficult to impossible task of establishing which 
        defendant's product caused their injuries.

Criteria bills would do nothing to compensate victims like our 
nation's veterans who were injured by bankrupt companies during 
their service to our country.
    Legislation imposing medical criteria in the tort system is 
inherently unfair to victims. Such measures do not alleviate 
the delays victims face when confronted with overwhelmed court 
dockets. Criteria bills will impose new hurdles for plaintiffs 
and continue to require the identification and proof of the 
manufacturer or entity responsible for exposing them to 
asbestos decades ago. In contrast, the FAIR Act Fund will not 
require victims to identify and prove the manufacturer or 
entity that exposed them to asbestos. Under the FAIR Act Fund, 
victims will not have to hope that the entity responsible for 
their exposure is financially solvent. They will recover 
compensation under the Fund in proportion to their impairment 
or disease.
    The current system for compensating victims of asbestos 
exposure is inefficient and inequitable. A medical criteria 
bill is not a solution because it operates within the same tort 
system. A true alternative will avoid the problems with the 
current asbestos tort system and bankruptcy compensation 
process. The Fund created by S. 852 will provide fair and 
timely compensation to all victims impaired by asbestos 
exposure and would bring financial certainty to defendant 
companies and insurers. Medical criteria proposals that would 
operate within the existing tort system simply would not.

                          VIII. Cost Estimate

    Due to time constraints, the Congressional Budget Office 
estimate was not included in the report. When received by the 
Committee, it will appear in the Congressional Record at a 
later time.
    Language for filing Congressional Budget Office estimate in 
the Record:

                         CBO ESTIMATE ON S. 852

    Mr. SPECTER: Mr. President, on June 30, 2005, I filed a 
committee report to accompany S. 852, a bill to provide for 
education and training, and for other purposes. At the time the 
report was filed, the estimates by the Congressional Budget 
Office were not available. I ask that a complete copy of the 
CBO estimate be printed in the Record.

                    IX. Regulatory Impact Statement

    Pursuant to Rule XXVI, of the Standing Rules of the Senate, 
the Committee, after due consideration anticipates that S. 852 
will have the following regulatory impact:
    A. (i) Businesses regulated--Under S. 852 companies and 
insurers with asbestos liability will be required to submit 
necessary financial documentation to the Asbestos Injury Claims 
Resolution Fund and the Insurers Commission respectively for 
proper assessment of contributions. With respect to the ban on 
certain asbestos containing products in S. 852, it is 
anticipated the regulatory burden will be minimal especially in 
light of regulation promulgated in the late 1970's and early 
1980's that limited occupational exposure to asbestos.
    (ii) Individuals regulated--Individuals seeking 
compensation from the Asbestos Injury Claims Resolution Fund 
will be required to submit necessary documentation to support 
their claim.
    B. Economic Impact--S. 852 will have a positive economic 
impact on businesses by providing greater certainty with regard 
to asbestos liability exposure, which in turn will enable 
businesses to preserve jobs and pension for employees.
    C. Personal Privacy Impact--Claimants must provide written 
consent for claims examiners to obtain information necessary to 
evaluate their claim, including their medical and smoking 
history in order for a determination of eligibility. It is 
anticipated that the impact will be comparable to requirements 
under the current tort system.

                          X. ADDITIONAL VIEWS

                              ----------                              


 ADDITIONAL VIEWS OF SENATORS SESSIONS, CORNYN, GRASSLEY, KYL, GRAHAM, 
                         BROWNBACK, AND COBURN

    The asbestos litigation explosion of recent years has 
caused untold harm to asbestos victims, has cost billions of 
dollars and has bankrupted over 70 businesses. The RAND 
Institute notes that asbestos litigation is ``the longest-
running mass tort litigation in the United States.''\1\ Today, 
it continues to deny many victims timely compensation, serves 
as a significant drain on the national economy, and hinders 
America's competitiveness on the global stage. This albatross 
should not be allowed to continue.
---------------------------------------------------------------------------
    \1\Stephen J. Carroll, Asbestos Litigation, Rand Inst. for Justice, 
xvii (2005).
---------------------------------------------------------------------------
    S. 852 represents a step forward in our efforts to craft 
legislation that would offer a national solution to this 
problem. The bill includes a number of important improvements 
over the legislation we considered in the 108th Congress, S. 
1125 and S. 2290. These improvements combined with the 
considerable efforts of the Chairman to advance the bill 
compelled us to vote it out of Committee.
    However, we continue to hold serious reservations about a 
number of important aspects of the current legislation. These 
concerns generally can be summarized as follows: (1) the 
medical criteria as written do not ensure that the trust fund 
will pay only the claims of individuals who are truly sick from 
asbestos exposure; (2) the trust fund does not create a 
complete and permanent alternative to litigation, particularly 
in that it allows a large number of claims to remain in or 
return to the courts; (3) the trust fund is not adequately 
protected from much of the abuses and fraud that has 
contributed a great deal to the existing situation; (4) it is 
neither clear that the cost of the trust fund can be sustained 
nor that the allocations formula is structured fairly; (5) the 
level of available information for our study and analysis is 
not sufficient to conduct adequate due diligence; and (6) the 
trust fund does not enjoy the level of broad support from the 
victims and the parties who are contributing to it that we 
would prefer.
1. The medical criteria are not sufficient
    Because claimants may suffer from diseases that may or may 
not have been caused by asbestos exposure, and because asbestos 
exposure may leave markers without impairment or illness, it is 
essential that this Fund contains medical criteria and exposure 
requirements that distinguish claimants, based on medical and 
scientific standards, who have disease caused by asbestos 
exposure from those who do not. Unfortunately, S. 852, as 
written, will result in many individuals receiving compensation 
who are not, in fact, sick from asbestos exposure.
    For example, Level VI provides compensation for claimants 
suffering from ``other cancers'', including colorectal, 
laryngeal, esophageal, pharyngeal and stomach cancer. These 
cancers commonly affect the general public, and according to 
the overwhelming weight of the medical evidence, are not caused 
by exposure to asbestos.\2\ In addition, the use of CT Scans 
for diagnoses is fraught with potential abuse and problems. 
These and other problems could bankrupt the fund, leaving 
inadequate funds to compensate those victims who are truly sick 
from asbestos exposure.
---------------------------------------------------------------------------
    \2\See Generally, Goodman, M., Cancer in Asbestos-Exposed 
Occupational Cohorts: A Meta-Analysis, Cancer Causes and Control, 10: 
453-65 (1999).
---------------------------------------------------------------------------
    In order to ensure that true victims of asbestos exposure 
are compensated fairly, we believe that the medical criteria 
should be improved. Doing so would greatly increase the chances 
of the trust fund's success and help bring resolution to 
thousands of asbestos victims.
2. S. 852 does not provide a complete alternative to litigation
    One of the key benefits of a trust fund should be exiting 
the current broken asbestos litigation system--one where 
attorneys' fees and other administrative costs are consuming 
approximately 58% of all asbestos-related litigation costs.\3\ 
Unfortunately, the current version of the trust fund in S. 852 
leaves potentially thousands of claims outside of the trust 
fund and undermines the ability of the fund to operate 
properly.
---------------------------------------------------------------------------
    \3\Carroll, supra note 1, at 105.
---------------------------------------------------------------------------
    At virtually every turn throughout the life of the fund, 
the possibility of a claim remaining in the tort system is an 
option. At start-up, claimants may choose to stay in court if 
the trust fund is not certified as operational by the 
Administrator within a certain time frame. Similarly, rather 
than putting all claims pending at the time of enactment that 
do not have a final judgment or verdict into the trust fund, S. 
852 leaves many current claims in court. Finally, and 
potentially most troubling, the current legislation would allow 
a complete reversion to the tort system in the event the 
Administrator finds the trust fund is insolvent. Below, we 
discuss the likelihood, or at least potential, that the fund's 
viability may be in question, but the prospect of spending 
billions of dollars to create a federal trust fund only to 
return to the current, albeit slightly modified, court system 
is troubling.
    Virtually everyone agrees that the current system is badly 
broken. Accordingly, we would prefer that S. 852, or any trust 
fund legislation, place as many claimants as possible into the 
newly created fund in order to prevent their continuation in 
the current fraudulent, broken asbestos litigation system.
    One of the advantages of a no-fault compensation system, 
such as the asbestos trust fund, is the ease with which claims 
may be filed. Instead of forcing claimants or their attorneys 
to fully litigate their claim against the defendant companies, 
the current trust fund only requires them to submit the 
requisite paperwork and documentation to the Administrator. 
While S. 852 limits attorney's fees to 5% of the award paid to 
the claimant, we believe that an attorney, representing a 
mesothelioma victim who recovers $1.1 million from the trust 
fund, should not be entitled to $55,000 in attorney's fees for 
simply filing paperwork with the Administrator.
3. The trust fund does not sufficiently avoid current fraudulent 
        practices
    The level of fraud underlying the current asbestos 
litigation crisis is well documented and troubling.\4\ One of 
the primary benefits of a trust fund should be eliminating 
these fraudulent practices from continuing. S. 852 goes a long 
way toward eliminating those abuses but does not go far enough.
---------------------------------------------------------------------------
    \4\Senate Comm. on the Judiciary, 180th Cong., The Fairness in 
Asbestos Injury Resolution Act of 2003, (Comm. Report 2003) (additional 
views of Sen. Kyl).
---------------------------------------------------------------------------
    Specifically, we are very concerned about the potential 
abuses with regard to silica litigation and the on-going Multi-
District Litigation (MDL) in Corpus Christi, Texas. What has 
transpired there is more than alarming. The details of the 
fraud and corruption are covered in the additional views 
offered by Senators Kyl, Cornyn and Coburn within this 
document. However, it can be summarized by Judge Janice Jack, 
who is presiding over this litigation, when she referred to 
``great red flags of fraud'' with respect to numerous doctors 
signing off on claimants' medical records as consistent with 
diseases related to silica exposure without performing 
appropriate analysis.\5\
---------------------------------------------------------------------------
    \5\Jonathan D. Glater, Civil Suits Over Silica in Texas Become a 
Criminal Matter in New York, N.Y. Times (May 18, 2005).
---------------------------------------------------------------------------
    The trust fund currently takes some steps to address this 
specific concern--requiring plaintiffs to demonstrate by a 
preponderance of the evidence that, in short, they are not 
trying to ``double-dip'' and obtain a trust fund award while 
also pursuing a silica claim through the court system. Our 
concern is that the current language in the bill is not 
sufficient. It allows a claimant to show that he would only 
receive Level One medical monitoring and, thus, not a monetary 
award, and then be eligible to pursue a silica claim in court. 
This provision opens the door to extension of the existing 
fraudulent system.
    Finally, we remain concerned that one of the key avenues 
for abuses, the ``medical screening'' programs, remains a part 
of S. 852. While improved in many respects--that is, limiting 
compensation to Medicare rates, requiring screeners to be 
approved and to not have excessively profited from screening 
historically--the mere existence of the medical screening 
program is troubling. At a lifetime cost of $600 million, this 
program calls into question the soundness of the trust fund and 
continues a practice that caused much of the problems we are 
attempting to solve in the first place.
4. The financial structure of the trust fund still causes us concern
    The trust fund depends on a comprehensive understanding of 
the cash inflows and cash outflows. Unfortunately, while we 
await the analysis of the CBO, at the present we are satisfied 
neither that the allocations formula (inflows) is fair and 
adequate nor that the cost of the trust fund (outflows) will be 
sustainable.
    The allocations to be assessed upon the insurance companies 
have been left to an insurance commission. While this remains 
disconcerting to us and many insurance companies, the 
allocations against defendant companies under the trust fund is 
particularly troubling. We should never be so careless as to 
place what amounts to a substantial tax burden on companies 
without knowing whether this burden is fair and whether it 
accurately reflects the amount the company would owe under the 
tort system.
    The bill's current funding allocations have the potential 
to create substantial hardship for companies that have 
adequately insured themselves against asbestos litigation 
exposure. Since the fund will strip companies of their 
insurance coverage and it uses past asbestos expenditures, 
including those covered by insurance, to determine tier 
placement, certain companies who have paid no out-of-pocket 
expenses due to adequate insurance coverage stand to pay 
substantial sums. For example, the fund's allocations formula 
will require one company, which has $110 million in total past 
asbestos expenditures but no out-of-pocket expenses and, it 
believes, adequate insurance to cover all projected future 
expenses, to pay $16.5 million per year into the fund equaling 
$495 million over the life of the fund. Many companies predict 
that this inequity in funding allocations will drive them into 
bankruptcy. One of the goals of this legislation is to prevent 
more companies from going into bankruptcy. In addition, if 
companies cannot pay their required allocation under the fund, 
the ultimate viability of the fund may be questionable.
    However, our concerns with the outflows or cost of the 
trust fund center more directly on the effect of medical 
criteria and the likely number of claimants. As previously 
discussed, failure to further improve the medical criteria will 
lead to an increased number of payouts to claimants who are not 
truly sick from asbestos exposure and, potentially, to the 
eventual bankruptcy of the fund. In addition, we are concerned 
that the data we were given regarding claims predictions may be 
insufficient and outdated. At the present, we are relying 
solely on one person's projections, those of Dr. Fran 
Rabinowitz, and the analysis of one company, Goldman Sachs, to 
determine the total cost of the Trust Fund. Should the claims 
predictions data, upon which the entire fund is based, prove 
incorrect; the overall viability of the fund will be 
jeopardized. Finally, the provisions providing Level IV 
compensation to residents of Libby, Montana without requiring 
proof of occupational exposure are problematic and call into 
question the possibility that other sites throughout the 
country where significant quantities of asbestos have been 
mined or processed will qualify, or ask to qualify, for the 
same benefits. The proposition of this alone could add 
significant stress to the Trust Fund and potentially lead to 
its insolvency.
    We are also concerned that potential problems created by 
locating the asbestos trust fund within the Department of Labor 
will place additional and unnecessary financial strain on the 
trust fund. As the Department of Labor's experience with the 
Black Lung Trust Fund shows, housing the asbestos trust fund 
within the Department of Labor will lead to the inefficient 
processing of claims and will create an expectation that the 
federal government guarantees the solvency of the fund.\6\ 
Instead, we believe that a private, non-profit corporation 
would alleviate these concerns by processing claims quickly and 
efficiently and by preventing the expectation of a taxpayer 
bailout should the fund become insolvent.
---------------------------------------------------------------------------
    \6\The history of the Department of Labor's Black Lung Trust Fund 
demonstrates that the risk of a federal government bail-out is very 
real. The fund, which had access to financing from the Treasury to 
cover early claims, owed $2.8 billion to the Treasury by the end of 
1985. What is worse, any default by the fund in ultimately repaying its 
debt--which now exceeds $8 billion--will represent an additional charge 
to taxpayers.
---------------------------------------------------------------------------
5. Available information has been insufficient to perform adequate due 
        diligence
    One particularly concerning problem has been the lack of 
information that is available to the Committee with regard to 
the underlying financial analysis of the trust fund. We have 
repeatedly requested more information on the financial analysis 
upon which this trust fund is based. The proponents of the 
trust fund have provided us with only cursory data. We have 
inadequate information regarding the identity of the companies 
required to pay into the fund and their allocations; the past 
asbestos expenditures of those companies; and whether these 
companies have received notification of their impending 
liability. We, as a Congress, should take great care not to 
enact legislation of this magnitude without performing due 
diligence adequate enough to ensure that it is based on sound 
financial analysis.
6. Trust fund support should be stronger among victims and contributing 
        companies
    While the potential overall economic benefit to ending the 
current abusive litigation environment is readily apparent and 
while the goal to streamline and improve compensation for 
victims is laudable, support for the fund remains tepid. In 
fact, for all its potential benefits, the fund has met 
resistance from both victims and business groups.
    Determining the level of support for the trust fund is a 
difficult task. Among victims' groups, support for the trust 
fund varies. Some groups are supportive to be sure, but we have 
received many letters of concern as well. Some victims do not 
believe it is fair to cap their potential damages--a common 
complaint for a no-fault system. Still, others recognize that a 
no-fault system will increase the likelihood they will receive 
compensation quickly and efficiently.
    Among those paying for the fund, again, opinions are mixed. 
The fund imposes a significant assessment (only semantically 
different from a tax) upon American businesses to pay for it. 
Yet, many companies are so desperate for reform that they would 
support virtually any reform we might enact. Conversely, 
numerous companies are either opposed or, at best, neutral to 
our consideration of S. 852. Among the most important concerns 
are the start-up of the fund and the associated ``leakage'' 
from the fund; concerns about the fairness of the allocations 
formula; concerns about the medical criteria and how the costs 
associated with that criteria will impact the viability of the 
trust fund; and concerns about the lack of subrogation.
    For a trust fund of this magnitude, we would prefer to see 
a much broader spectrum of support among victims and those 
contributing to the Fund. After all, while these groups often 
have competing interests, they are the intended beneficiaries 
of the legislation and we would hope that we could engender as 
much support as possible from them.
    In summary, our support for this legislation out of 
Committee should not be viewed as an indication of its 
readiness for final passage. Instead, it represents a 
commitment to continue working to improve it. There are two 
indispensable characteristics to enacting any type of asbestos 
litigation reform: predictability and finality. The reform must 
provide predictability for victims of asbestos-related injuries 
as well as for the insurers and defendant companies paying for 
it. In addition, it must provide finality to those paying for 
it by ensuring that they will not be forced to pay under dual 
tracks or into the trust fund only to revert back to the same 
broken tort system. Unfortunately, at this time, this bill 
provides neither predictability nor finality to the extent 
needed to ensure the viability of the fund.
    While we support the admirable goal behind this 
legislation--enhancing benefits to victims who are truly sick 
from asbestos exposure by compensating them generously, quickly 
and efficiently and by limiting administrative costs and 
attorney's fees while providing finality for American 
businesses--we believe that a significant number of important 
issues must be addressed for it to be successful.

                                   Jeff Sessions.
                                   John Cornyn.
                                   Charles E. Grassley.
                                   Jon Kyl.
                                   Lindsey O. Graham.
                                   Sam Brownback.
                                   Tom Coburn.

     ADDITIONAL VIEWS OF SENATORS COBURN, GRASSLEY, KYL, AND CORNYN

    The Committee states that the purpose of the Asbestos 
Injury Claims Resolution Fund (``Fund'') is to ``address the 
current asbestos crisis, which has diverted resources from the 
truly sick, clogged our federal and state courts, bankrupted 
companies, and endangered the jobs and pensions of employees.'' 
Our goal is to compensate those individuals who are truly sick 
from diseases caused by asbestos exposure, while also 
establishing a solution to the litigation crisis created by 
asbestos injury claims. Many businesses have gone bankrupt or 
have otherwise suffered great financial difficulties, not just 
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. It is time for that to end.
    However, we must be certain that the solution we reach is 
the right one. We must create a process that provides finality 
to this crisis. First, we must ensure that we have a Fund that 
will get on its feet as quickly as possible. Next, we must be 
certain that the Fund is compensating the correct people. This 
will require good medical criteria and exposure requirements so 
that only those claimants who are sick from asbestos exposure 
are compensated. We also need to know who is paying into the 
Fund and how their participation is going to affect their 
viability. We also must ensure that quality assurance is built 
into the system to prevent it from being gamed--such as limits 
on attorneys' fees and the fees that doctors receive for 
screenings, and good auditing procedures of the claims. 
Finally, the Fund should not sunset before the intended end of 
its life. Claimants should not return to the broken tort 
system. Finally, under no circumstances should there be a dual-
track system where claims are being paid by the Fund at the 
same time that litigation is proceeding.
    There is no reason why this Fund should become insolvent. 
Asbestos use has declined dramatically in the last few decades, 
and is currently heavily regulated. Therefore, very few 
individuals are presently exposed to asbestos that could cause 
illness. In fact, Dr. James D. Crapo stated that ``[m]ost 
pulmonologists rarely or never see a case of new asbestosis 
today.''\1\ Dr. Crapo estimates that the decline of asbestosis 
began in the mid 1980s, following the implementation of 
stricter guidelines for occupational asbestos exposure.\2\
---------------------------------------------------------------------------
    \1\Responses to Questions of Dr. James D. Crapo, Professor of 
Medicine, National Jewish Medical and Research Center, Submitted to the 
Senate Committee on the Judiciary, May 25, 2005, at 4 (Attachment A). 
Dr. Crapo is certified in Internal Medicine and Pulmonary Diseases. He 
is currently Professor of Medicine of the National Jewish Medical and 
Research Center in Denver, Colorado. National Jewish is a specialty 
hospital that is the nation's top ranked hospital in pulmonary disease. 
Dr. Crapo is also a Professor of medicine at the University of Colorado 
Health Sciences Center. He is a Past President of the American Thoracic 
Society. He is currently the President of the Fleischner Society, a 
leading international society of selected specialists in radiology and 
pulmonary medicine. He has more than 25 years of experience with 
asbestos-related issues, including medical research and clinical 
treatment of patients suffering from asbestos-related diseases. He has 
served as expert witness on behalf of defendants involved in asbestos 
litigation, and he has testified before the United States Senate 
Judiciary Committee twice.
    \2\Id.
---------------------------------------------------------------------------
    Improvements were made to S. 852 in Committee to ensure 
that all of these requirements are met. However, more changes 
to the bill must be made. Otherwise, we will see the end of 
this Fund in as early as 2 to 3 years, leaving a tremendous 
amount of debt in its wake. CBO noted in October 2003 that 
``[t]he revenue stream that would be generated by this 
legislation is highly uncertain.''\3\ Today, we still do not 
know everyone who will pay into the $140 Billion Fund.
---------------------------------------------------------------------------
    \3\Congressional Budget Office Cost Estimate, 2. 1125, Fairness in 
Asbestos Injury Resolution Act of 2003, 16 (2003).
---------------------------------------------------------------------------
    One of the greatest threats facing this Fund is insolvency. 
Insolvency is most likely to result from the Medical Criteria 
in S. 852. In April 2004, CBO had a sunny forecast for last 
year's bill. CBO made optimistic assumptions that fewer than 
one in four claimants would qualify for payment under the 
medical criteria.\4\ However, David Austern, the Manville 
Trust's General Counsel noted in a letter to the Senate 
Judiciary Committee that under a previous version of this bill 
``there is almost no likelihood that as many as 85% of the 
nonmalignant claims filed pursuant to S. 1125 will qualify only 
for Level I * * * Our best estimate * * * is that over two-
thirds and as many as three-quarters of the nonmalignant claims 
filed pursuant to S. 1125 will qualify for compensation at 
Level II or higher.''\5\ Additionally, Dr. Crapo has stated 
repeatedly that thousands of claimants will qualify 
inappropriately for payment under two of the malignant claims 
levels, Level VI and VII.
---------------------------------------------------------------------------
    \4\Letter from Congressional Budget Office to Senator Don Nickles 
of April 20, 2004, at 6.
    \5\Letter from David Austern to Senate Committee on the Judiciary.
---------------------------------------------------------------------------
    These forecasts are deeply troubling. If we do not make 
some significant changes to the Medical Criteria in S. 852, 
this Fund will go under in 2-3 years, leaving a larger mess 
than exists now.
Changes needed to the disease levels
    Substantial occupational exposure to significant levels of 
inhaled asbestos may cause a number of diseases. These diseases 
include Mesothelioma, Lung Cancer, and the nonmalignant lung 
conditions Asbestosis and Pleural Reactions. However, 
``[i]ndividuals may develop similar diseases but without 
contributory causation from asbestos exposure.''\6\ Also, 
individuals who are exposed to asbestos may develop pleural 
reactions that are asymptomatic, such as a pleural plaque which 
``can be characterized as a callus on the chest wall'' but 
``does not involve the lung. Pleural plaques are a marker of 
asbestos exposure but do not cause impairment. Pleural plaques 
or thickening, unless extensive, do not affect lung function. 
In medical textbooks these are most commonly referred to as 
`benign pleural plaques' and not `pleural disease.'''\7\
---------------------------------------------------------------------------
    \6\Testimony of Dr. James D. Crapo, Professor of Medicine, National 
Jewish Medical and Research Center, before the Senate Committee on the 
Judiciary, April 26, 2005, at 1 (Attachment B).
    \7\Id. at 2.
---------------------------------------------------------------------------
    Because claimants may suffer from diseases that may or may 
not have been caused by asbestos exposure, and because asbestos 
exposure may leave markers without impairment or illness, it is 
essential that this Fund contains medical criteria and exposure 
requirements that distinguish claimants, based on medical and 
scientific standards, who have disease caused by asbestos 
exposure from those who do not. Unfortunately, S. 852, as 
written, will result in many individuals receiving compensation 
who are not, in fact, sick from asbestos exposure. Many changes 
need to be made to the medical criteria to ensure that the Fund 
remains viable, so that those individuals who are truly sick 
from asbestos exposure receive compensation.

                        THE NONMALIGNANT LEVELS

    As mentioned above, the presence of benign pleural plaques 
in a claimant's chest, while indicating asbestos exposure, does 
not necessarily indicate asbestos-related illness. As Dr. Crapo 
explained before the Senate Judiciary Committee:

          In certain rare cases, very extensive pleural 
        thickening can lead to entrapment of the lung and cause 
        impairment. This is called diffuse pleural thickening 
        and is properly termed a disease. Fortunately, new 
        cases of asbestos-induced diffuse pleural thickening 
        are extremely rare since high-level occupational 
        exposures have been virtually eliminated for almost 20 
        years. In addition, the presence of pleural plaques or 
        pleural thickening due to asbestos exposure does not 
        increase the risk of developing either asbestosis or 
        lung cancer. When compared to other individuals with 
        similar asbestos exposure but no pleural 
        manifestations, patients with pleural plaques have not 
        been shown to be at increased risk of more serious 
        asbestos-related diseases.\8\
---------------------------------------------------------------------------
    \8\Id.

    Because the presence of pleural plaques or pleural 
thickening does not indicate that someone is impaired or likely 
to become impaired, ``bilateral pleural disease'' should be 
deleted as a qualification for compensation in Levels II, III, 
IV, and V.\9\ Additional changes are needed to these levels to 
ensure that they compensate the appropriate claimants.
---------------------------------------------------------------------------
    \9\Fairness in Asbestos Injury Resolution Act of 2005, S. 852 109th 
Cong. Sec. Sec. 121(d)(2)(A), 121(d)(3)(A). 121(d)(4)(A), 121(d)(5)(A) 
(2005).
---------------------------------------------------------------------------

Nonmalignant level II (mixed disease with impairment)

    In the Committee Report, the stated purpose of Nonmalignant 
Level II is to compensate individuals who are ``impaired due to 
a combination of asbestosis and other causes, typically chronic 
obstructive pulmonary disease.'' However, the Fund would allow 
individuals who have obstructive pulmonary disease to receive 
compensation by the Fund even when they do not have asbestosis, 
which is a restrictive pulmonary disease. Section 121(d)(2)(B) 
allows someone to receive compensation under Level II who has 
``evidence of TLC less than 80 percent or FVC less than the 
lower limits of normal, and FEV1/FVC ratio less than 65 
percent.''\10\ However all cases of mild obstruction, including 
those commonly found in smokers, show an FVC less than the 
lower limit of normal and an FEV1/FVC ratio less than 65%. As 
drafted, non-malignant II does not compensate individuals with 
mixed restrictive and obstructive disease, as intended. 
Instead, it compensates smokers who also have pleural plaques 
(but not asbestosis or any impairment related to airway 
restriction). Consequently, the Fund allows a smoker with 
airway obstruction to receive Level II compensation.\11\
---------------------------------------------------------------------------
    \10\S. 852 Sec. 121(d)(2)(B).
    \11\See Email from Dr. James D. Crapo to Senator Tom Coburn 
(Attachment C); Crapo, James D., supra note 1, at 2.
---------------------------------------------------------------------------
    Level II should therefore be stricken from the Fund, or in 
the alternative, the ``or'' in Section 121(d)(2)(B) should be 
changed to ``and.'' This will ensure that a claimant under 
Level II truly has mixed disease--both restrictive and 
obstructive pulmonary disease.

Non-malignant levels III (Asbestosis/Pleural Disease B), IV (Severe 
        Asbestosis) and V (Disabling Asbestosis)

    As discussed above, for non-malignant levels III, IV, and 
V, ``[t]he presence of pleural disease should not be allowed to 
substitute for a radiographic diagnosis of asbestosis * * * 
Pleural plaques do not cause a severe restrictive lung disease. 
There are no studies or publications that would support this 
concept.''\12\ Nonetheless, this Fund would allow compensation 
under levels III, IV, and V with ``diffuse pleural thickening, 
or bilateral pleural disease of B2 or greater'' without a 
radiographic diagnosis of asbestosis.\13\ This quoted language 
should be stricken so that only those individuals who truly 
have asbestosis are compensated under Levels III, IV, and V of 
the Fund.
---------------------------------------------------------------------------
    \12\Email from Dr. James D. Crapo to Senator Tom Coburn.
    \13\S. 852 Sec. Sec. 121(d)(3)(A), 121(d)(4)(A), 121(d)(5)(A).
---------------------------------------------------------------------------
    Additionally, Level V of the Fund allows the use of the 
single-breath diffusing capacity of the lung (carbon monoxide) 
technique (DLCO). Instead, the Fund should rely on decreases in 
TLC and in FVC, which is the ``gold standard,'' to determine 
disabling asbestosis.\14\ In contrast, ``DLCO is more highly 
variable, non-specific and is not closely correlated with 
functional disability. It should not be used as a substitute 
for decreases in TLC and FVC to qualify for Level V. Keeping 
DLCO as an alternated criteria for PFT changes in Level V will 
result inappropriately qualifying individuals for Level V that 
should be Level IV.''\15\
---------------------------------------------------------------------------
    \14\Crapo, James D., supra note 6 at 5.
    \15\Id. Dr. Crapo also notes that ``DLCO is most commonly 
influenced by smoking.'' Email from Dr. James D. Crapo.
---------------------------------------------------------------------------
    Notably, claims against the Manville trust decreased from 
101,000 in 2003 to 14,500 in 2004 due to reforms done by the 
trust.\16\ One of the reforms was to remove the DLCO as a 
payment criterion. The DLCO was removed because it was one of 
the tests easily abused. S. 852 should not allow this abuse to 
begin, by striking the use of DLCO from the Fund.
---------------------------------------------------------------------------
    \16\Roger Parloff, Diagnosing for Dollars, Fortune Magazine, June 
13, 2005, at 102.
---------------------------------------------------------------------------

                          THE MALIGNANT LEVELS

Malignant level VI (other cancer)

    Dr. Crapo succinctly stated in his written testimony to the 
Judiciary Committee that Level VI ``would result in large 
compensations to large numbers of individuals who develop a 
cancer for which there is no established causal relationship to 
asbestos exposure.''\17\ While some have argued that there are 
studies to support the claim that asbestos exposure may be 
linked to other cancers, such as cancer of the gastrointestinal 
tract, larynx, kidney, liver, pancreas, ovary, and 
hematopoietic systems, Dr. Crapo explained the problems with 
the studies that these individuals cite:
---------------------------------------------------------------------------
    \17\Crapo, James D., supra note 6 at 5.

          Many of those studies involved case-reports or case-
        control studies. The best assessment of risk 
        association is done with cohort studies and not case-
        control studies since exposure assessment in case-
        control studies is usually derived from questionnaires 
        and is frequently inaccurate. Since those early 
        studies, a substantial number of additional studies of 
        this issue were undertaken, and the weight of current 
        medical and scientific information suggests no clear 
        association between asbestos and cancers other than 
        lung cancer and mesothelioma.\18\
---------------------------------------------------------------------------
    \18\Id. at 4.

    According to a meta-analysis of appropriately conducted 
studies, ``there is either no evidence of a significant 
association with asbestos exposure or no dose-response effect * 
* * Besides lung cancer and mesothelioma the only cancer for 
which a possible association with asbestos exists is laryngeal 
cancer[,] * * * however, variance in these studies was large 
and there was no evidence of a dose-response effect, raising 
serious question as to whether cancer of the larynx has a true 
correlation with asbestos exposure,'' without the elimination 
of the confounding variables of alcohol and tobacco use.\19\
---------------------------------------------------------------------------
    \19\Id..
---------------------------------------------------------------------------
    Other physicians agree. Dr. J. Bernard L. Gee stated for 
the record in 2003, with regard to cancer of the larynx and 
pharynx: ``The confounding factors previously mentioned, namely 
smoking and alcohol, remain major often-unadjusted factors in 
these diseases * * * We reviewed 24 prospective and 17 
retrospective studies out of which only three or four showed 
any excess risk. We concluded that asbestos exposure does not 
cause these cancers, as did Liddell reporting for the U.K. 
health authorities.''\20\ Regarding esophageal cancer, he 
stated that ``there is no evidence relating them to asbestos.'' 
For kidney cancer, he stated that ``analysis pointed toward a 
lack of an association between asbestos exposure and renal 
cancer.'' Dr. William Weiss stated that ``[f]or colorectal 
cancer the evidence indicates no causality between asbestos and 
colorectal cancer.'' Dr. Michael Goodman stated that ``[d]ata 
for urinary cancers (bladder, kidney, prostate), 
gastrointestinal cancers (esophagus, stomach, colon, rectum) 
and lymphohematopoietic cancers (lymphoma, myeloma, leukemia) 
failed to demonstrate a consistent statistically significant 
increase in risk. Analysis for laryngeal cancer was suggestive 
of a causal association, but not as conclusive as the analysis 
for lung cancer.'' However, Dr. Gee made the following comment 
on Dr. Goodman's study:
---------------------------------------------------------------------------
    \20\S. Rep. No. 108-239, at 98-103 (3003). To supplement his 
additional views in the Committee Report for S. 1125, the Fairness in 
Asbestos Injury Resolution Act of 2003, Senator Jon Kyl posed three 
questions to four experts, Dr. James D. Crapo (Professor of Medicine of 
the National Jewish Medical and Research Center), Dr. William Weiss 
(Emeritus Professor of Medicine, Drexel University), Dr. Michael 
Goodman (Senior Managing Scientist, Exponent Health Group), and Dr. J. 
Bernard L. Gee (Emeritus Professor of Medicine Yale University School 
of Medicine). The questions were: (1) Do pleural plaques or pleural 
thickening constitute an injury or impairment? Are they a useful 
predictor of future injury? (2) If an asbestos exposure was not 
significant enough to cause clinically significant asbestosis, could it 
nevertheless have cause lung cancer? (3) Can asbestos exposure cause 
colorectal cancer,or cancer of the larynx, pharynx, esophagus, or 
stomach?

          [The study] noted an overall excess laryngeal cancer 
        risk rate that was about 1.6 but there was no dose 
        response, no correlation with increasing mesothelioma 
        rates and importantly, no adjustment in the original 
        cohort data for the confounding effects of smoking, 
        alcohol or their combination. Thus, this value of 1.6 
        is suspect and the absence of a dose response with 
        asbestos exposure suggests alternative factors cause 
        these cancers. Other data show a correlation between 
        lung and laryngeal cancer rates that is most likely due 
        to a common smoking origin.\21\
---------------------------------------------------------------------------
    \21\Id. See also, S. Rep. No. 108-239, at 144-183 (2003) (Letters 
submitted to the Committee Report at the Request of Senator Jon Kyl).

    Because there is truly no reliable science that links 
asbestos exposure to forms of cancer besides Lung Cancer and 
Mesothelioma, these cancers should not be compensated in the 
Fund.\22\ S. 852 provides for a study by the Institute of 
Medicine to determine whether there is a causal link between 
asbestos exposure and other cancers. If the study determines 
that there is not a link, then no claimants should be 
compensated under Level VI. However, keeping Level VI in the 
Fund without knowing if there is a causal link is the same as 
putting the cart before the horse. Level VI should be removed 
from S. 852 unless and until the Institute of Medicine's study 
is completed and shows a causal link.
---------------------------------------------------------------------------
    \22\See also, John F. Gamble, Asbestos and Colon Cancer: A weight-
of-the-Evidence Review, Environ Health Perspect. 1994 Dec; 
102(12):1038-50, 1038 (``Population-based case-control studies of colon 
cancer do not show any consistent risk associated with asbestos 
exposure. Long-term ingestion studies show no evidence of an increased 
incidence of colon cancer in animals by this route of exposure and do 
not provide biological plausibility for a causal association between 
asbestos exposure and colon cancer.''); David H. Garabrant, Ruth K 
Peters, & David M. Homa, Asbestos and Colon Cancer: Lack of Association 
in a Large Case-Control Study, Am J Epidemiol 1992; 135:843-53, 843 
(``Previous studies linking exposure to asbestos with human colon 
cancer have used mortality rather than incidence as their endpoint and 
have neither assessed nor controlled for confounding by diet, genetic 
factors, or other risk factors for colon cancer * * * This study 
suggests not only that occupational exposure to asbestos is not a risk 
factor for colon cancer in the general population of Los Angeles, but 
also that observed associations between asbestos and colon cancer 
should not be interpreted as causal unless confounding by 
nonoccupational factors has been evaluated and controlled.''); Joshua 
E. Muscat & Ernst L. Wynder, Tobacco, Alcohol, Asbestos, and 
Occupational Risk Factors for Laryngeal Cancer, May 1, 1992, Vol. 69, 
No 9 2244-2251, 2249 (``With regard to asbestos exposure, our study 
adds evidence to the body of literature that does not show a 
significant relationship with laryngeal cancer.''); Robert W. Morgan, 
Donna E. Foliart & Otto Wong, Asbestos and Gastrointestinal Cancer, 
West J. Med 1985 Jul; 143:60-65, 60 (``We conclude that more studies 
are required before stomach and colorectal cancers are documented as 
asbestos-related diseases.'').
---------------------------------------------------------------------------
    Additionally, specific criteria should be included in S. 
852 to guide IOM in their study. The Institute of Medicine 
evaluation should be based only on one of three criteria: (1) 
multicentered, double-masked, placebo-controlled, randomized 
clinical trials with explicit data safety and monitoring boards 
incorporated into the data acquisition process, or; (2) on a 
single-centered, masked, non-randomized clinical trials, or; 
(3) by using meta-analysis of all available studies. The 
Institute of Medicine should not consider any studies that did 
not take out the confounding variables.

Malignant level VII (lung cancer with pleural disease)

    Level VII is another compensation level that will lead to 
thousands of inappropriate claims and will lead to the 
insolvency of this Fund. Malignant Level VII allows for 
compensation for lung cancer when there has been exposure to 
asbestos and pleural plaques are present on the lungs. However, 
Dr. Crapo stated that pleural plaques ``do not predict enhanced 
risk of lung cancer.''\23\ Rather, ``[t]he enhanced lung cancer 
risk is with very high level of asbestos exposures that cause 
asbestosis. This will be compensated in Level 8.''\24\
---------------------------------------------------------------------------
    \23\Crapo, James D., supra note 12.
    \24\Id.
---------------------------------------------------------------------------
    Dr. William Weiss agrees. He stated in an article that 
adequately designed studies in the literature support the 
hypothesis that ``excess lung cancer risk in worker cohorts 
exposed to asbestos occurs only among those with 
asbestosis.''\25\ His review concluded that:
---------------------------------------------------------------------------
    \25\William Weiss, Asbestosis: A Marker for the Increased Risk of 
Lung Cancer Among Workers Exposed to Asbestosis. Chest 115:536-549, 
1999.

          Only a few cohort studies have addressed directly the 
        issue of asbestosis as a marker for increased risk of 
        lung cancer among workers exposed to asbestos. What 
        evidence exists supports the hypothesis that asbestosis 
        is such a marker as reviewed in the first section 
        above. Additional circumstantial evidence has been 
        described in subsequent sections: (1) there is no 
        excess risk of lung cancer in cohorts with no deaths 
        from asbestosis; (2) workers with pleural plaques but 
        no asbestosis have no increased risk of lung cancer in 
        well-designed studies; and (3) the association between 
        asbestosis and excess lung cancer rates in much 
        stronger than the association between cumulative 
        asbestos exposure and the relative risk of cancer.\26\
---------------------------------------------------------------------------
    \26\Id. at 546.

    Therefore, Level VII should be eliminated.\27\
---------------------------------------------------------------------------
    \27\See also, S. Rep. No. 108-239, at 98-103 (2003).
---------------------------------------------------------------------------

Malignant level VIII (lung cancer with asbestosis)

    There is an increased risk of lung cancer in individuals 
who have asbestosis. Therefore, it is appropriate for Level 
VIII to compensate individuals suffering from lung cancer and 
asbestosis, who meet the appropriate exposure requirement. 
However, the CT scan should not be used for diagnostic purposes 
in Malignant Level VIII, because its use will lead to the 
inappropriate compensation of many claimants. ``The use of 
Chest CT as a diagnostic criteria is problematic because it is 
highly sensitive and there are no scientific standards or 
criteria for reliably using subtle CT findings to define 
individuals with enhanced risk for lung cancer. The chest 
radiograph should remain the standard for defining this 
relationship.'' Dr. Crapo elaborated that ``[v]irtually all 
heavy smokers who are those for greatest risk for lung cancer 
would have CT changes showing small markings in the lower lung 
fields and can qualify under the criteria of the bill if CT 
were included. In the absence of standards for interpretation 
of CT for the diagnosis of early asbestosis, this test should 
be eliminated from the Trust.''\28\ If the use of the CT scan 
is not eliminated, its use ``will bankrupt the trust 
rapidly.''\29\
---------------------------------------------------------------------------
    \28\Crapo, James D., supra note 1.
    \29\Crapo, James D., supra note 1, at 5.
---------------------------------------------------------------------------
    In the alternative, guidelines should be developed for the 
use of the CT Scan for the detection of early asbestosis. 
However, until these guidelines are completed, CT Scans should 
not be used for diagnostic purposes under the Fund. Presently, 
S. 852 provides for an Institute of Medicine Study on the use 
of CT Scans ``as a diagnostic tool for bilateral pleural 
plaques, bilateral pleural thickening, or bilateral pleural 
calcification.''\30\ S. 852 also provides that the 
Administrator ``shall commission the American College of 
Radiology to develop, in consultation with the American 
Thoracic Society, American College of Chest Physicians, and 
Institute of Medicine, guidelines and a methodology for the use 
of CT scans as a diagnostic tool for bilateral pleural plaques, 
bilateral pleural thickenings, or bilateral pleural 
calcification under the Fund. After development, such 
guidelines and methodology shall be used for diagnostic 
purposes under the Fund.''\31\ While the inclusion of these 
provisions is commendable, CT scans should not be used until 
the American College of Radiology's guidelines are completed.
---------------------------------------------------------------------------
    \30\S. 852, Sec. 121(f).
    \31\S. 852, Sec. 121(h).
---------------------------------------------------------------------------

                           EXCEPTIONAL CLAIMS

    This Fund provides for exceptions to the medical and 
exposure requirements. These ``exceptional cases'' exist where 
``[a] claimant who does not meet the medical criteria 
requirements'' may seek compensation by providing comparable 
medical evidence.\32\ In order to determine if these claimants 
are eligible for exceptional claims, they must be reviewed by a 
Physicians Panel made up of ``physicians with experience and 
competency in diagnosing asbestos-related diseases.''\33\ 
However, there is no point having medical criteria if claimants 
are able to seek compensation under the Fund without meeting 
that criteria. Every person who does not qualify for the 
medical criteria will have nothing to lose by trying to qualify 
for an exceptional medical claim. While Physicians Panels will 
examine these claims, physicians are patient advocates. They 
will always err on the side of supporting their patient's claim 
for compensation. Furthermore, the Fund is not set up as an 
adversarial body. The Administrator will largely be forced to 
rely on the recommendations of the Physicians panels.
---------------------------------------------------------------------------
    \32\S. 852, Sec. 121(g).
    \33\S. 852, Sec. 105.
---------------------------------------------------------------------------
    As long as medical criteria are part of this bill, they 
should be followed. The exceptional claims provision should be 
stricken from the Fund.

Take-home exposure

    S. 852 provides an alternative to satisfying the medical 
criteria requirements for those individuals who suffer from 
``take-home exposure.'' These individuals must ``allege their 
exposure to asbestos was the result of living with a person 
who, if the claim had been filed by that person, would have met 
the exposure criteria for the given disease level, and the 
claimant lived with such person for the time period necessary 
to satisfy the exposure requirement, for the claimed disease 
level.''\34\ These claims are submitted as exceptional medical 
claims and are reviewed by a Physicians Panel.
---------------------------------------------------------------------------
    \34\S. 852, Sec. 121(c)(3).
---------------------------------------------------------------------------
    This provision provides a huge problem for the Fund. Take-
home exposure criteria greatly expand the number of claimants 
who will meet the criteria for standard and heavy asbestos 
exposure. Any individual born prior to 1971, whose mother or 
father was a worker or a bystander in workplace that used 
virtually any type of asbestos-containing product would have 
met most of the exposure criteria in the Trust by the time they 
were five years old. Further, the group of individuals who were 
born in the three decades between 1941 and 1971 are now the 
principal group developing lung cancer. The majority of these 
people were raised in families where one or more parents worked 
in an environment that would qualify, under the trust, as 
either standard or heavy exposure. If a physician diagnoses 
these individuals with lung cancer, and finds small changes in 
the lung parenchyma on a chest CT scan, they will qualify for 
payment under the Trust.\35\
---------------------------------------------------------------------------
    \35\See Crapo, James D., supra note 1, at 5.
---------------------------------------------------------------------------
    The provision allowing compensation for take-home exposure 
should be stricken from the Fund.

 EXPOSURE CRITERIA, THE ASBESTOS BAN, AND NATURALLY OCCURRING ASBESTOS

    As the Committee Report states, the Fund includes exposure 
criteria for each disease level. A claimant must meet the 
appropriate exposure criteria to qualify for a certain disease 
level. The Committee is correct in stating that such criteria 
are necessary because someone is more likely to develop 
asbestos-related disease if they have had long- term and 
intense exposure to asbestos. However, there are two large 
problems with the exposure criteria as they are written.
    First, the Fund creates a presumption that individuals who 
worked for certain industries had sufficient exposure to 
receive compensation under the Fund, based on the Manville 
Personal Injury Settlement Trust.\36\ While this presumption is 
mitigated by part (C) of the provision, which states that 
``nothing in subparagraphs (A) or (B) shall negate the exposure 
or medical criteria requirements in section 121, for the 
purpose of receiving compensation from the fund,'' the 
presumption present in the Fund may still effectively undermine 
the exposure requirements in the bill. The Fund does not set up 
an adversarial system. The burden should not be on the Fund to 
rebut the presumption that each claimant who worked for a 
certain industry in a certain job received substantial 
occupational exposure. Furthermore, the Manville Trust is a bad 
example to follow. The Manville Trust included broad categories 
defining who qualified for compensation, but gave out smaller 
payments. The Manville Trust's exposure criteria will break 
this Trust.
---------------------------------------------------------------------------
    \36\S. 852, Sec. 12(c)(5).
---------------------------------------------------------------------------
    Second, an individual who worked with asbestos containing 
products where the fibers are encapsulated should not qualify 
for substantial occupational exposure.\37\ Instead, the 
definition of ``substantial occupational exposure'' should 
``include a requirement that the regular exposure to asbestos 
fibers must also be to a substantial concentration of airborne 
fibers.''\38\ As Dr. Crapo explained in his testimony, someone 
who uses a product with a fiber release under work conditions 
that are ``equivalent to or even an order of magnitude less 
than the current OSHA PEL'' should not be able to receive 
compensation.\39\ Dr. Crapo recommends that ``a minimum 
exposure fiber concentration be specified using a time weighted 
average. This exposure level should be on the order of 2-5 
fibers per cc if it is to apply to work durations as short as 5 
weighted years. This concept should also be included in the 
definitions of Moderate and Heavy exposure.''\40\ Dr. Crapo's 
recommendation should be incorporated into the exposure 
requirements.
---------------------------------------------------------------------------
    \37\See email from Dr. James D. Crapo.
    \38\Crapo, James D., supra note 6, at 5.
    \39\Id.
    \40\Id.
---------------------------------------------------------------------------
    In what is a closely associated issue, the ban on asbestos 
is unnecessary because not all use of asbestos is 
hazardous.\41\ Furthermore, it might be shortsighted to 
completely ban a product that might be needed in the future. 
Finally, this ban is outside of the Judiciary Committee's 
jurisdiction. Any changes to OSHA regulations of asbestos, much 
less an outright ban, should be decided by the Committee on 
Environment and Public Works (``EPW''). Chairman James M. 
Inhofe and Ranking Minority Member James M. Jeffords requested 
that Title V, Section 501 of S. 852 be removed or sequentially 
referred to their Committee.\42\
---------------------------------------------------------------------------
    \41\S. 852, Title V.
    \42\Letter from James M. Inhofe and James M. Jeffords to Chairman 
Arlen Specter and Ranking Minority Member Patrick Leahy, April 27, 
2005.
---------------------------------------------------------------------------
    Finally, the EPW also objects to the Judiciary Committee's 
jurisdiction over Title V, Section 502 of S. 852. This 
provision requires the U.S. Environmental Protection Agency 
(EPA) to conduct a study to determine the feasibility of 
establishing national ambient air quality standards (NAAQS) for 
naturally occurring asbestos and implement interim standards 
while the study is being completed, as well as create 
guidelines, testing protocols, best management practices, 
remedial measures, and a grant program. The EPW objects because 
authorization and direction of EPA activities and resources is 
within the purview of the EPW. Again, Senators Inhofe and 
Jeffords request that this provision be removed or sequentially 
referred to their Committee.\43\
---------------------------------------------------------------------------
    \43\Id.
---------------------------------------------------------------------------

          WHAT ALL OF THIS MEANS TO THE VIABILITY OF THE FUND

    Without the changes recommended above, ``the trust fund 
could go bankrupt in three to five years.''\44\ Dr. Crapo 
explains the largest problems best:
---------------------------------------------------------------------------
    \44\Crapo, James D., supra Note 1, at 2.

          Under Level V compensation for disabling asbestos 
        ($850,000) is allowed for claimants with only pleural 
        changes (a common finding in minimally exposed asbestos 
        workers), a low DLCO and five years of weighted 
        exposure. DLCO is a highly variable parameter that is 
        decreased in many diseases--and in many smokers--and 
        for which there is high variability between 
        laboratories. Thus, large numbers of people would 
        qualify as having ``disabling asbestosis'' with only 
        five years weighted exposure, pleural changes and a low 
        DLCO.
          Level VI: Colorectal, laryngeal, esophageal, 
        pharyngeal and stomach cancer have not been clearly 
        associated with asbestos exposure. The compensation of 
        these cancers ($200,000) when the individual has 
        evidence of benign pleural changes and 15 years of 
        weighted exposure will allow large numbers of 
        individuals to qualify for compensation under the 
        Trust. This problem is magnified by the fact that both 
        bystander exposure and take-home exposure (which could 
        be to a bystander) will markedly expand the number of 
        individuals who meet the required 15-year exposure 
        criterion (Note: Most Americans older than 44 years 
        whose parent was a blue collar worker would meet the 
        exposure criteria).
          Malignant Level VIII: The minimal criteria for 
        compensation ($600,000, $975,000 or $1,100,000) at this 
        level are a diagnosis of lung cancer, a finding of 
        asbestosis by chest CT scan and ten years of weighted 
        exposure. Since most lung cancers are in heavy smokers 
        with substantial inflammatory changes in their lungs, 
        one can expect their CT scans to be read as qualifying 
        under the criteria of this Trust. There are no rigorous 
        criteria for the diagnosis of early asbestosis by chest 
        CT scan. One would expect the diffuse markings seen on 
        chest CT scans of smokers to rapidly become the 
        standard for acknowledging the possibility of early 
        asbestosis in these subjects, qualifying virtually all 
        of them for payment under this Trust.\45\
---------------------------------------------------------------------------
    \45\Id. at 2-3.

    This analysis leads to the question--what does this mean 
for the fund? The attached table (Attachment D) provides the 
number of new cases per year of lung cancer and each of the 
cancers compensated under Level VI of the Fund. These numbers 
are then multiplied by 10% (of cases per year), 5% (of cases 
per year), and 1% (of cases per year). The resulting numbers 
are multiplied by how much recovery is available under the 
Fund. The results are staggering. If 10% of new lung cancer 
patients claim the lowest level of compensation available to 
lung cancer patients, $300,000, that will cost the fund 
$5,213,100,000.00 per year. Over the course of 30 years, it 
will cost the fund $156,393,000,000.00. In other words, lung 
cancer compensation alone will swallow the 140 billion dollar 
trust fund. Even a more moderate approach is devastating. If 
only 1% of Patients with Lung, colorectal, stomach, Esophageal, 
Laryngeal, and Pharyngeal cancers claim the lowest level of 
compensation available under the Fund, that will cost the fund 
$891,010,000.00 per year. Over the course of 30 years, that 
amount adds up to $26,730,300,000.00, or nearly 20% of the 
Fund. This is not even counting payments to Mesothelioma and 
nonmalignant claimants, or administrative costs. If 10% of 
these patients seek compensation, that will equal 
$267,303,000,000.00 over the course of 30 years, 
$107,303,000,000 more than is planned for the Fund.
    This bleak outlook for the solvency of the Fund 
demonstrates why improvements to the medical criteria are 
desperately needed.

                               CONCLUSION

    There is no question that many individuals have lost their 
lives or are presently suffering because of occupational 
exposure to asbestos. There is also no question that asbestos-
related litigation--much of it legitimate, but much of it 
frivolous--has led to bankruptcy for many companies in the 
United States. The system needs to change. Stronger medical 
criteria are essential to our goal of compensating those ill 
from asbestos exposure and providing finality for companies.

                                   Tom Coburn.
                                   John Cornyn.
                                   Jon Kyl.
                                   Charles Grassley.
                              ----------                              

               National Jewish Medical and Research Center,
                                    Denver, Colorado, May 25, 2005.
Senator Arlen Specter,
Chairman, U.S. Senate Committee on the Judiciary,
Washington, DC.
    Dear Senator Specter: I am enclosing my responses to the 
questions provided to me by Senator John Kyl arising from the 
United States Senate Judiciary Committee hearing entitled 
``Asbestos'' on April 26, 2005.
    Please let me know if I can provide further assistance.
            Sincerely,
                                      James D. Crapo, M.D.,
                                             Professor of Medicine.

              RESPONSE TO QUESTIONS ON SENATE BILL S. 852

    Question 1: What portion of American industries do you 
believe operate under conditions that create the possibility of 
the type of occupational exposure to asbestos that would 
satisfy the exposure criteria of S. 852? Can you cite examples 
of common, high-volume-employment industries that would satisfy 
the bill's exposure criteria?
    The asbestos exposure criteria described in S. 852 are 
sufficiently liberal that they will enable workers in a 
substantial proportion of American industries to qualify under 
the bill's exposure criteria. A ``substantial occupational 
exposure to asbestos'' is defined in Section 121(a)(14)(iii) as 
altering, repairing or otherwise working with an asbestos-
containing product that involves regular airborne emission of 
fibers. No minimal fiber release level is required. Thus work 
with almost any asbestos-containing product would qualify. If 
the worker directly works with the asbestos-containing product, 
it is defined as a heavy exposure and each year of exposure 
counts for two years under the weighting criteria. If the 
worker works in the vicinity where another worker handles an 
asbestos-containing product, he would be a bystander and each 
year of work would count as one year under the weighted 
criteria.
    Asbestos products were used ubiquitously on pipes and in 
heating facilities in virtually all factories and industrial 
work places. Asbestos was used as insulation on electrical wire 
and cable, as fillers in construction materials, adhesives, 
roofing material and tiles. Asbestos was used for friction 
materials and for fabrics. All of these materials were common 
in most industrial work places. Examples of major industries 
that would satisfy the bill's exposure criteria include all 
construction trades, factory environments, and automotive 
service. In addition, sales employees who regularly enter 
storage or repair facilities could qualify under the criteria 
in this bill.
    Question 2: In addition to the medical criteria required by 
the bill, S. 852 also requires that a claimant obtain a 
doctor's diagnosis that his otherwise-compensable condition is 
caused by exposure to asbestos. Even if the bill's medical 
criteria are too liberal and would compensate large numbers of 
people without an asbestos-related injury or illness, wouldn't 
the requirement of a doctor's diagnosis protect the Fund 
against successful claims by persons who do not suffer from a 
condition that is actually caused by occupational asbestos 
exposure? If not, why not?
    The requirement for a doctor's diagnosis would not protect 
this fund against claims by individuals who do not suffer from 
an injury caused by occupational asbestos exposure. It is well 
known that doctors commonly function as patient advocates and 
often have little experience in the subtleties of legal 
proceedings independent from the practice of medicine. A 
physician's natural tendency is to support patients in making 
application for compensation for work-related injuries. It 
would be foolish to expect physicians to protect the Trust from 
having too liberal medical criteria. In the current litigation 
setting, plaintiffs have had no difficulty finding large 
numbers of physicians who will support frivolous claims.
    Question 3: Do any of the medical criteria in S. 852 
include flaws that pose a substantial risk of bankrupting the 
Trust Fund?
    There are a number of serious flaws in the medical criteria 
of S. 852 that will likely lead to bankrupting the trust fund. 
The major flaws I identify are:
          1. Exposure criteria that allow a bystander to the 
        above worker to also qualify as a ``moderate 
        exposure.''
          2. Exposure criteria that allow a bystander to the 
        above worker to also qualify as a ``moderate 
        exposure.''
          3. Exposure criteria that allow a take-home exposure 
        to the above bystander to qualify.
          4. Allowing smoking-induced airway obstruction to 
        move a claimant from Level I to Level II.
          5. Allowing DLCO of less than 40% predicted to show 
        functional disability in Level V.
          6. Providing for compensation of laryngeal, 
        pharyngeal, esophageal and stomach cancer to be 
        compensated in Level VI.
          7. Allowing CT scans to be used for the diagnosis of 
        asbestosis in Level VIII.
    Question 4: Viewed as a whole, do you expect the S. 852 
version of the Fund to go bankrupt? If yes, how many years do 
you estimate that it might take for the Fund to go bankrupt?
    In a worst case analysis the trust fund could go bankrupt 
in three to five years. The greatest risks for anticipated 
costs against the fund are in Levels V, VI and VIII.
    Under Level V compensation for disabling asbestosis 
($850,000) is allowed for claimants with only pleural changes 
(a common finding in minimally exposed asbestos workers), a low 
DLCO and five years of weighted exposure. DLCO is a highly 
variable parameter that is decreased in many diseases--and in 
many smokers--and for which there is high variability between 
laboratories. Thus, large numbers of people would qualify as 
having ``disabling asbestosis'' with only five years weighted 
exposure, pleural changes and a low DLCO.
    Level VI: Colorectal, laryngeal, esophageal, pharyngeal and 
stomach cancer have not been clearly associated with asbestos 
exposure. The compensation of these cancers ($200,000) when the 
individual has evidence of benign pleural changes and 15 years 
of weighted exposure will allow large numbers of individuals to 
qualify for compensation under the Trust. This problem is 
magnified by the fact that both bystander exposure and take-
home exposure (which could be to a bystander) will markedly 
expand the number of individuals who meet the required 15-year 
exposure criterion. (Note: Most Americans older than 44 years 
whose parent was a blue collar worker would meet the exposure 
criteria.)
    Malignant Level VIII: The minimal criteria for compensation 
($600,000, $975,000 or $1,100,000) at this level are a 
diagnosis of lung cancer, a finding of abestosis by chest CT 
scan and ten years of weighted exposure. Since most lung 
cancers are in heavy smokers with substantial inflammatory 
changes in their lungs, one can expect their CT scans to be 
read as qualifying under the criteria of this Trust. There are 
no rigorous criteria for the diagnosis of early asbestosis by 
chest CT scan. One would expect the diffuse markings seen on 
chest CT scans of smokers to rapidly become the standard for 
acknowledging the possibility of early asbestosis in these 
subjects, qualifying virtually all of them for payment under 
this Trust.
    There are 100,000 lung cancers in the United States today. 
If one-half of them were blue collar workers in industries with 
some type of asbestos exposure (or bystanders or families of 
those workers) and if only half of these lung cancers had the 
expected ``positive'' CT scan, 25,000 cases per year would 
qualify. This would cost the Trust $15 billion to $25 billion 
per year for this level alone.
    Question 5: In his testimony before the Judiciary 
Committee, Dr. Philip Landrigan cited a Scandinavian study that 
he says shows that a history of asbestos exposure alone--
without evidence that the patient has clinically significant 
asbestosis, or even physical evidence of exposure such as 
pleural plaques--can reliably point to asbestos exposure as the 
cause of a lung cancer. Are you familiar with this study? Can 
you describe the nature of this study? Do you believe that this 
study's conclusions are supported by medical literature?
    I cannot identify the study cited by Dr. Landrigan. A 
number of studies have demonstrated that workers in industries 
with high levels of asbestos exposure have a higher incidence 
of lung cancer than do unexposed individuals. However, when a 
study divides the asbestos-exposed individuals into those with 
asbestosis and those without, the findings have consistently 
shown that asbestos-exposed individuals without asbestosis have 
no elevated risk of lung cancer. It is those asbestos-exposed 
individuals who develop asbestosis who have a substantially 
increased risk of lung cancer.
    Question 6: The attorneys' fee limits in S. 852 have 
presented as a feature of the bill that will reduce the 
incentive for large numbers of claims to be filed against the 
Fund. In light of these fee limits, and in light of other 
aspects of the Fund, do you believe that a large number of 
claimants will learn of and choose to file claims against the 
Fund?
    In my opinion the requirements for application for 
compensation under the Trust are sufficiently simple that large 
numbers of claimants will choose to file claims on their own. 
This is particularly true given the increasing access and use 
of the internet. I would expect simplified, how-to-do-it forms 
for claims applications to be available on the internet once 
this Trust is formed. Second, the bill provides for a possible 
$7 billion of attorneys' fees (5% of $140 billion). Given the 
simplicity of finding and filing claims under this Trust, I 
would expect that a $7 billion incentive will be sufficient to 
drive that process.
    Question 7: How many individuals on an annual basis in the 
United States today do you estimate contract significant or 
substantial cases of asbestosis? Do you believe that the annual 
incidence of asbestosis in the United States has been 
increasing or decreasing? If you believe that the annual number 
of cases has been increasing or decreasing, since approximately 
what years do you believe that increase or decline in the rate 
of cases has been occurring?
    Very few individuals in the United States are developing 
new cases of asbestosis today. In the 1960s, 1970s and 1980s 
these cases were common. Most pulmonologists rarely or never 
see a case of new asbestosis today. The decrease in exposure 
that occurred as a result of federal regulations in 1970s and 
1980s incidence of asbestosis to have begun in the mid 1980s 
(i.e., a few years following the implementation of stricter 
guidelines for occupational asbestos exposure).
    Unfortunately the medical criteria in the bill for severe 
asbestosis (Level IV) and disabling asbestosis (Level V) are so 
flawed that many claims will occur by individuals having only 
pleural plaques--a very common occurrence today.
    There are a large number of fibrotic lung diseases that 
look similar to asbestosis. For example, lung fibrosis occurs 
in non-asbestos-related collagen vascular diseases, rheumatoid 
arthritis, and idiopathic pulmonary fibrosis. These 
interstitial lung diseases occur commonly. Under the criteria 
of the Trust, many of these individuals will qualify for 
payment under Levels IV and V. Such individuals would have a 
fibrotic lung disease not related to asbestos but would qualify 
under the liberal exposure criteria of the Trust.
    Question 8: I understand [that] Mr. Irving Selikoff, in his 
study of a cohort of asbestos workers with no clinically 
significant asbestosis, originally did not find that those 
workers suffered from an elevated incidence of lung cancer. 
Later, however, reviewing the same dat[a], Selikoff found that 
those same workers did in fact suffer from an elevated 
incidence of lung cancer. Do you have a view as to why Selikoff 
was able to later reach a new conclusion from the same data?
    I have not been able to explain why Dr. Selikoff modified 
his opinions on this subject in his later publications. 
Numerous subsequent studies that have looked at the incidence 
of lung cancer in asbestos-exposed workers with and without 
asbestosis have found that workers without asbestosis do not 
have an increased incidence of lung cancer.
    Question 9: The latest version of S. 852 allows the use of 
CT scans to identify sign of asbestosis in claimants seeking 
compensation from the Fund for lung cancer. Do you believe that 
this is a reliable technique for identifying asbestos exposure 
as a cause of lung cancer? What do you believe will be the 
effect of allowing the use of CT scans to prove that asbestos 
exposure played a role in a lung cancer?
    The addition of the use of CT scans to identify asbestosis 
in Level VII is the largest flaw in the medical criteria of S. 
852 that makes this Trust vulnerable to rapid bankruptcy. Chest 
CT scans are far more sensitive than chest x-rays in detecting 
small changes in the lung. Unfortunately, these small changes 
are also less specific and the etiology of such small changes 
is generally not discernible by chest CT scan. Findings on 
chest CT scan have not been correlated with a risk of 
developing lung cancer in asbestos-exposed workers. There are 
no established criteria for using chest CT scans to define 
early asbestosis in individuals with lung cancer. I believe the 
effect of allowing a chest CT scan diagnosis of early 
asbestosis to qualify a lung cancer case to be compensated 
under this Trust will bankrupt the trust rapidly.
    Question 10: S. 852 allows compensation from the Fund to be 
based on ``take home'' exposure to asbestos. By how much do you 
believe that the ``take home'' exposure provision expands the 
number of potential claimants who can meet the bill's criteria 
for ``heavy exposure'' to asbestos?
    The take-home exposure criteria in S. 852 dramatically 
expand the number of potential claimants who will meet the 
criteria for both heavy and standard exposure to asbestos. Any 
individual born prior to 1971 and whose mother or father was a 
worker or a bystander in a factory or workplace that used 
virtually any type of asbestos-containing product would have 
met most of the exposure criteria in this Trust by the time 
they were five years old.
    This criterion is not included in the Manville Trust, whose 
demographics are used to estimate the financial liabilities 
under the Trust. It will open up the Trust to large numbers of 
claims by individuals who do not have an asbestos-related 
disease. The cohort of individuals who were born in the three 
decades between 1941 and 1971 are now the primary group 
developing lung cancer. The majority of these people will have 
been raised in families where one or more parents worked in an 
environment that would qualify as either standard or heavy 
exposure under this Trust. These individuals will require only 
the diagnosis of lung cancer, and the finding of small changes 
in the lung parenchyma on a chest CT scan to qualify for 
payment under the Trust.
                              ----------                              


                Written Statement of Dr. James D. Crapo


                              INTRODUCTION

    My name is James Crapo, M.D. I am certified in Internal 
Medicine and Pulmonary Diseases. I am currently Professor of 
Medicine at the National Jewish Medical and Research Center in 
Denver, Colorado. National Jewish is a specialty hospital that 
is the nation's top ranked hospital in pulmonary disease. I am 
also a Professor of Medicine at the University of Colorado 
Health Sciences Center. I am a Past President of the American 
Thoracic Society. I am the current President of the Fleischner 
Society, a leading international society of selected 
specialists in radiology and pulmonary medicine. A copy of my 
curriculum vitae is attached. I have more than 25 years of 
experience with asbestos-related issues, including medical 
research and clinical treatment of patients suffering from 
asbestos-related diseases. I have published in the field of 
environmental toxicology, including the basis of asbestos-
induced lung injury. My research involving asbestos was funded 
by the National Institute of Environmental Health Sciences. My 
current research is funded by the National Heart Lung and Blood 
Institute, and I currently serve on the Board of External 
Advisors for this Institute. I have previously served as an 
expert witness on behalf of defendants involved in asbestos 
litigation.
    This written statement is intended to supplement the 
statement I provided to the Senate Committee on the Judiciary 
on June 4, 2003, related to S.1125, The ``FAIR Act of 2003.'' I 
have reviewed the Medical Criteria in S. 852 and will confine 
my comments to assessment of these Medical Criteria.

       MEDICAL CRITERIA FOR IDENTIFYING ASBESTOS-RELATED DISEASES

    Occupational exposure to significant levels of inhaled 
asbestos causes a number of diseases including:
           Mesothelioma
           Lung Cancer
           Nonmalignant Lung Conditions
                  --Asbestosis
                  --Pleural Reactions
    The challenge in writing medical criteria for a national 
trust is that the above conditions are not always related to 
asbestos exposure and some do not involve functional 
impairment. Individuals may develop similar diseases but 
without contributory causation from asbestos exposure. 
Distinguishing non-asbestos-related cases from those caused by 
asbestos exposure, based on scientific and medical standards, 
is an important element in setting up a valid trust.
    One of the Primary challenges for this trust is to ensure 
that those individuals with a significant injury and impairment 
from exposure receive an appropriate compensation while 
minimizing inappropriate compensation of individuals who have 
no impairment due to asbestos exposure including those whose 
disease or injury is similar to, but not caused by asbestos. If 
large amounts of trust funds are distributed to individuals who 
do not have an asbestos related injury it puts the entire trust 
at risk and could lead to those with asbestos related injury 
not being compensated.
    I have review the medical criteria in the current version 
of S. 852. There are a number of changes from S. 1125 that lead 
to my comments below. To begin, two important changes that 
strengthen S. 852 are the addition of the concept of requiring 
a ``substantial occupational exposure'' to asbestos, and the 
deletion of compensation for Exposure-only lung cancers (old 
Level VII).
    There remain two major areas in the proposed bill that in 
my opinion will lead to high level compensation for large 
numbers of individuals who do not have an asbestos related 
injury or impairment. These involve those with pleural 
reactions and those with ``other cancers.''

                     PLEURAL REACTIONS AND DISEASES

    S. 852 should include medical criteria for payment of 
claims for pleural reactions only when there is evidence of 
significant impairment related to extensive pleural disease.
    Pleural reactions in the lungs are different than 
asbestosis. Most pleural reactions are asymptomatic (i.e., do 
not have any discernible physical effect). For example, a 
pleural plaque can be characterized as a callus on the chest 
wall. It does not involve the lung. Pleural plaques are a 
marker of asbestos exposure but do not cause impairment. 
Pleural plaques or thickening, unless extensive, do not affect 
lung function. In medical textbooks these are most commonly 
referred to as ``benign pleural plaques'' and not ``pleural 
disease.''
    In certain rare cases, very extensive pleural thickening 
can lead to entrapment of the lung and cause impairment. This 
is called diffuse pleural thickening and is properly termed a 
disease. Fortunately, new cases of asbestos-induced diffuse 
pleural thickening are extremely rare since high-level 
occupational exposures have been virtually eliminated for 
almost 20 years.
    In addition, the presence of pleural plaques or pleural 
thickening due to asbestos exposure does not increase the risk 
of developing either asbestosis or lung cancer. When compared 
to other individuals with similar asbestos exposure but no 
pleural manifestations, patients with pleural plaques have not 
been shown to be at increased risk of more serious asbestos-
related diseases.
    I would recommend deleting bilateral pleural disease as a 
qualification for compensation in the following Levels:
           Level II: Pleural plaques do not cause the 
        airway obstructive disease that would meet the PFT 
        requirements in Level II. A smoker with mild airway 
        obstruction and who has pleural plaques would qualify 
        for Level II, but would not have an impairment due to 
        asbestos exposure.
           Levels III, IV and V: These Levels describe 
        increasing levels of restrictive impairment due to 
        asbestosis. To qualify for these levels the claimants 
        should have asbestosis as defined by radiographic and 
        clinical data. Bilateral pleural disease does not cause 
        this type of impairment and should not be used to meet 
        the radiographic criteria for these levels.
           Level VII: Pleural plaques and pleural 
        thickening are not independent risk factors for 
        enhancing the risk of lung cancer. This level will 
        primarily compensate smoking induced lung cancers.

                             OTHER CANCERS

    S. 852 should not include claims for cancer other than lung 
cancer and mesothelioma because current medical science does 
not establish a causal relationship between asbestos exposure 
and these other cancers.
    At least 69 cohorts have been studied for the risk of lung 
cancer from occupational exposure to asbestos. Of those, nine 
cohorts were larger than 5,000 persons. The lung cancer risk of 
those nine cohorts is shown in the table below. Note that two 
of the cohorts showed no increase of lung cancer risk (Relative 
Risks (RR) of 0.84 and 1.03). Five of the cohorts showed modest 
increases in lung cancer risks (RR's ranging from 1.25 to 
1.96), and two cohorts showed high lung cancer risk (RR's 2.64 
and 3.7).

                               TABLE.--LUNG CANCER RISK IN ASBESTOS COHORTS >5000
----------------------------------------------------------------------------------------------------------------
                                                                   N         Observed     Expected        RR
----------------------------------------------------------------------------------------------------------------
Rossiter and Coles, 1980....................................        6,292           84        100.0         0.84
Newhouse and Sullivan, 1989.................................        8,404          229        221.4         1.03
McDonald et al., 1980.......................................       11,379          230        184.0         1.25
Hughes et al., 1987.........................................        6,931          154        115.5         1.33
Clemmesen et al., 1981......................................        5,686           47         27.3         1.72
Raffin et al., 1989.........................................        7,996          162         89.8         1.80
Acheson et al., 1984........................................        5,969           57         29.1         1.96
Armstrong et al., 1988......................................        6,916           91         34.5         2.64
Selikoff et al., 1991.......................................       17,800        1,008          269        3.70
----------------------------------------------------------------------------------------------------------------
Goodman et al. in 1999 did a meta-analysis on all 69 cohorts to determine the magnitude of association between
  asbestos exposure and lung cancer. He found that overall the increased risk of lung cancer associated with
  asbestos exposure was about 50%, as shown in the table below. (A RR (Relative Risk) of 1.00 means no increased
  risk over that of a non-exposed population.)


      TABLE.--LUNG CANCER MORTALITY--ASBESTOS COHORTS META-ANALYSIS
------------------------------------------------------------------------
                  Asbestos Exposure                            RR
------------------------------------------------------------------------
69 Cohorts...........................................         1.48-1.63
------------------------------------------------------------------------
M. Goodman et al., Cancer Causes and Control 10:453, 1999

    While it is well accepted that exposure to asbestos is 
associated with mesothelioma and lung cancer, no meaningful 
association with other cancers has been established. In the 
past, several epidemiological studies suggested a relationship 
between asbestos and malignancies at sites such as the 
gastrointestinal tract, larynx, kidney, liver, pancreas, ovary 
and hematopoietic systems. Many of those studies involved case-
reports or case-control studies. The best assessment of risk 
association is done with cohort studies and not case-control 
studies since exposure assessment in case-control studies is 
usually derived from questionnaires and is frequently 
inaccurate. Since those early studies, a substantial number of 
additional studies of this issue were undertaken, and the 
weight of current medical and scientific information suggests 
no clear association between asbestos and cancers other than 
lung cancer and mesothelioma.
    As of 1999, fourteen cohorts had been evaluated for various 
aspects of gastrointestinal cancer and its relationship to 
asbestos exposure. In addition, three cohorts evaluated kidney 
and/or bladder cancer. Two cohorts evaluated prostate cancer 
and one cohort has evaluated leukemia and other lymphatic or 
hematopoietic malignancies. A recent meta-analysis of these 
cohorts shows that for these cancers there is either no 
evidence of a significant association with asbestos exposure or 
no dose-response effect. The table below shows the results of 
that meta-analysis. Besides lung cancer and mesothelioma the 
only cancer for which a possible association with asbestos 
exists is laryngeal cancer where the meta-analysis showed an 
SMR of 1.57. However, variance in these studies was large and 
there was no evidence of a dose-response effect, raising 
serious question as to whether cancer of the larynx has a true 
correlation with asbestos exposure. (Note: A Standard Mortality 
Ratio (SMR) is similar to Relative Risk with the normal or 
control value being 1.00 and a 50% increase in death due to 
that disease being expressed as 1.50.)

              TABLE.--POOLED ANALYSIS OF STUDIES OF THE RISK OF CANCER IN ASBESTOS EXPOSED COHORTS
----------------------------------------------------------------------------------------------------------------
                                                                          With Latency of at Least 10 Years
                                                                    --------------------------------------------
                Cancer Sites by  Systems and Organs                     No. of
                                                                       Cohorts       Meta-SMR         95% CI
----------------------------------------------------------------------------------------------------------------
Respiratory
    Lung...........................................................           37            1.63       1.58-1.69
    Larynx.........................................................            4            1.57       0.95-2.45
Gastrointestinal
    Esophagus......................................................            2              --              --
    Stomach........................................................            9            0.92       0.77-1.10
    Colorectal.....................................................            9            0.89       0.72-1.08
    All gastrointestinal...........................................           14            1.03       0.95-1.11
Urinary/Reproductive
    Kidney.........................................................            3            1.20       0.88-1.60
    Bladder........................................................            3            0.98       0.73-1.78
    Kidney and Bladder.............................................            3            1.07       0.87-1.30
    Prostate.......................................................            2              --              --
----------------------------------------------------------------------------------------------------------------
Goodman et al., Cancer in asbestos-exposed occupational cohorts: a meta-analysis. Cancer Causes and Control
  10:453-464, 1999.

    With regard to ``Other Cancers'' I would recommend the 
following:
           Delete Level VI since this level would 
        result in large compensations to large numbers of 
        individuals who develop a cancer for which there is no 
        established causal relationship to asbestos exposure.

OTHER RECOMMENDATIONS ON CHANGES TO THE MEDICAL CRITERIA TO IMPROVE THE 
          FUNCTION OF THE TRUST TO BE ESTABLISHED UNDER S. 852

    Make the requirements for Quality Assurance more rigorous. 
Reliable data is the cornerstone to ensuring that claims under 
S. 852 correctly meet the medical criteria. Currently S. 852 
provides only for random audits. A comprehensive audit 
procedure to review all claims, including an independent B read 
of chest films would significantly strengthen the function of 
this proposed trust. No Quality Assurance is specified for 
Pulmonary Function testing. The medical criteria state that 
PFTs should substantially conform to the ATS criteria. These 
criteria are quite rigorous and many screening PFTs fail to 
meet these standards. The PFTs to be used by the proposed trust 
need a standardized audit procedure to ensure quality.
    Expand the definition and requirement to demonstrate 
``Substantial Occupational exposure.'' The definition of this 
term needs to include a requirement that the regular exposure 
to asbestos fibers must also be to a substantial concentration 
of airborne fibers. As written a claimant could qualify by 
doing repair or other work using a product with encapsulated 
asbestos fibers and which has fiber release under work 
conditions that are equivalent to or even an order of magnitude 
less than the current OSHA PEL. I would recommend that a 
minimum exposure fiber concentration be specified using a time 
weighted average. This exposure level should be on the order of 
2-5 fibers per cc if it is to apply to work durations as short 
as 5 weighted years. This concept should also be included in 
the definitions of Moderate and Heavy exposure.
    Delete the use of DLCO in Level V--The gold standards for 
demonstrating functional disability in severe asbestosis (Level 
V) are decreases in TLC and in FVC. DLCO is more highly 
variable, non-specific and is not closely correlated with 
functional disability. It should not be used as a substitute 
for decreases in TLC and FVC to qualify for Level V. Keeping 
DLCO as an alternated criteria for PFT changes in Level V will 
result inappropriately qualifying individuals for Level V that 
should be Level IV.
    Delete the use of Chest CT scans--Level VIII appropriately 
recognizes the enhanced risk for lung cancer in individuals 
with asbestosis. The use of Chest CT as a diagnostic criteria 
is problematic because it is highly sensitive and there are no 
scientific standards or criteria for reliably using subtle CT 
findings to define individuals with enhanced risk for lung 
cancer. The chest radiograph should remain the standard for 
defining this relationship.

                              CONCLUSIONS

    S. 852 is an appropriate approach to address the arbitrary 
and wasteful manner in which our current court system operates 
to compensate asbestos victims. The medical criteria in the 
current form of the bill will offer compensation to all 
individuals have an asbestos related disease or impairment, but 
unfortunately will also expend a large portion of the proposed 
trust's assets compensating individuals with pleural plaques 
and no impairment or with cancers that are not caused by 
asbestos exposure. These issues should be addressed to preserve 
the assets of the trust to compensate those who are truly 
impaired by a occupational exposure to asbestos.
                                               James D. Crapo, M.D.
                              ----------                              

    Dear Senator Coburn: I appreciate the opportunity to meet 
with you and your staff yesterday and am in strong support of 
your position to improve the medical criteria in S. 852. The 
following are my thoughts about important changes that should 
be made in the medical criteria. Please feel free to use these 
concepts as you deem appropriate.

                            PLEURAL DISEASE

    --The only meaningful difference between Levels 1 and 2 is 
the requirement in Level 2 or ``evidence of TLC less than 80% 
or FEC less than the lower limits of normal with an FEV1/FVC 
ratio less than 65%. This is billed as indicating mixed lung 
disease but, in fact, only identifies obstructive lung disease. 
All cases of mild obstruction show an FVC less than the lower 
limit of normal and an FEV1/FVC ratio less than 65%. This 
occurs commonly in smokers. Non-malignant 2, as written, does 
not compensate individuals with mixed restrictive and 
obstructive disease. It compensates smokers who also have 
pleural plaques. You should either argue for elimination of 
this level or in this phrase above change the word ``or'' to 
``and''. If you require a low TLC and evidence of obstruction, 
then there is evidence of mixed disease. One does not have 
mixed disease by only requiring one or the other--that would 
then point to the common element of simple obstructive disease.
    --For non-malignant levels 4 and 5, these are defined as 
severe asbestosis and disabling asbestosis under the awards 
schedule. The presence of pleural disease should not be allowed 
to substitute for a radiographic diagnosis of asbestosis in 
these two levels. Pleural plaques do not cause a severe 
restrictive lung disease. There are no studies or publications 
that would support this concept.
    --Under Level 5, the use of DLCO as an alternative 
criterion for meeting pulmonary function requirements should be 
deleted. DLCO is highly variable between laboratories. It is 
very sensitive and goes down markedly early in lung diseases of 
all types. It has no reproducible correlation with functional 
disability. It cannot be used to establish disabling 
asbestosis. DLCO is most commonly influenced by smoking and its 
use in this trust would allow large numbers of inappropriate 
claims under Level 5.
    --Level 6--Other Cancers. This level should be deleted for 
all the reasons that we have previously discussed and that you 
know.
    --Malignant Level 7--Lung Cancer. Association with 
bilateral pleural plaques. This entire level should be deleted 
for the same reason that the old Level 7 was deleted. Plaques 
are a marker of exposure. They do not predict enhanced risk of 
lung cancer. The enhanced lung cancer risk is with very high 
level of asbestos exposures that cause asbestosis. This will be 
compensated in Level 8. The analysis of the literature showing 
that asbestosis is required for enhanced risk of lung cancer is 
somewhat complex and best laid out in a recent article by Dr. 
Weiss. A copy of that article is attached as a PDF. The data 
summarized by Dr. Weiss clearly show that there is not a 
credible scientific basis for compensation of lung cancer in 
individuals with pleural plaques but no evidence of asbestosis.
    --Malignant Level 8. The use of CT scans in this level 
should be deleted. CT scanning is highly sensitive but not 
specific in terms of etiology for small changes in the lung 
parenchyma. Virtually all heavy smokers who are those for 
greatest risk for lung cancer would have CT changes showing 
small markings in the lower lung fields and can qualify under 
the criteria of this bill if CT were included. In the absence 
of standards for interpretation of CT for the diagnosis of 
early asbestosis, this test should be eliminated from the 
Trust.

                        OTHER SIGNIFICANT ISSUES

    On page 5 of my report, I delineated two additional issues 
that should be addressed in modifying the Trust.
    1. Require quality assurance to be more rigorous and, in 
particular, require that there be quality assurance for the 
pulmonary function tests. The vast majority of PFTs used in 
litigation today would fail to meet ATS standards, yet these 
criteria are essential elements of the classification for 
payment under the Trust.
    2. Change the concept of substantial occupational exposure 
to include not only duration but intensity of dose. Work with 
asbestos containing products where the fibers are encapsulated 
should not qualify an individual for a substantial occupational 
exposure.
    Please give me a call if I can provide further assistance.
                                               James D. Crapo, M.D.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  10% of cases per   5% of cases per    1% of cases per
                                                                  No. of new     Payment per      year multiplied    year multiplied    year multiplied
                             Cancer                               cases per        claimant         by payment/        by payment/        by payment/
                                                                     year                             claimant           claimant           claimant
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Year:
    Lung.......................................................      173,770        $300,000.00     $5,213,100,000     $2,606,550,000       $521,310,000
    Colorectal.................................................      130,000         200,000.00      2,600,000,000      1,300,000,000        260,000,000
    Stomach....................................................       21,860         200,000.00        437,200,000        218,600,000         43,720,000
    Esophageal.................................................       14,520         200,000.00        290,400,000        145,200,000         29,040,000
    Laryngeal..................................................        9,880         200,000.00      1,976,000,000         98,800,000         19,760,000
    Pharyngeal.................................................        8,590         200,000.00        171,800,000         85,900,000         17,180,000
                                                                                                --------------------------------------------------------
      Total....................................................  ...........  .................    $10,688,500,000     $4,455,050,000      $891,010,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--The payment per claimant for Lung Cancer is for Level VII smokers--the lowest payment available for lung cancer.


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               10% of cases per   5% of cases per
                                                                  No. of                       year multiplied    year multiplied   1% of cases per year
                            Cancer                              new cases     Payment per        by payment/        by payment/         multiplied by
                                                                 per year       claimant           claimant           claimant        payment/claimant
                                                                                               multiplied by 30   multiplied by 30    multiplied by 30
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cancer:
    Lung......................................................    173,770        $300,000.00   $156,393,000,000    $78,196,500,000       $15,639,300,000
    Colorectal................................................    130,000         200,000.00     78,000,000,000     39,000,000,000         7,800,000,000
    Stomach...................................................     21,860         200,000.00     13,116,000,000      6,558,000,000         1,311,600,000
    Esophageal................................................     14,520         200,000.00      8,712,000,000      4,356,000,000           871,200,000
    Laryngeal.................................................      9,880         200,000.00      5,928,000,000      2,964,000,000           592,800,000
    Pharyngeal................................................      8,590         200,000.00      5,154,000,000      2,577,000,000           515,400,000
                                                                                             -----------------------------------------------------------
      Total...................................................  .........  .................   $267,303,000,000   $133,651,500,000   $26,730,300,000.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
*New Case statistics provided by the American Cancer Society (2005), and National Cancer Institute (2004).


          ADDITIONAL VIEWS OF SENATORS KYL, CORNYN, AND COBURN

    In July 2003, a statement of additional views to the report 
for a previous version of this bill ``survey[ed] the publicly 
available evidence that fraud is the predominant feature of 
asbestos litigation as it is conducted today.'' The additional 
concluded that ``[t]his evidence indicates that the large 
asbestos-litigation plaintiffs firms routinely coach their 
clients to lie under oath about their exposure to asbestos 
products; that these law firms routinely rely on fraudulent 
readings of chest x-rays and pulmonary-function tests, in order 
to manufacture false evidence of asbestos injury; and that 
invalid medical testimony routinely is employed in litigation 
to support the existence of asbestos injuries that do not or 
could not exist.''\1\
---------------------------------------------------------------------------
    \1\Senate Report No. 108-118, p. 82 (Additional Views of Senator 
Kyl).
---------------------------------------------------------------------------
    In December 2003, Professor Lester Brickman of Cardozo 
School of Law published a law-review article on asbestos 
lawsuits that began by noting that ``the weight of the evidence 
* * * indicates that much asbestos litigation today involves 
the production and use of specious evidence including PFT 
[Pulmonary Function Test] printouts, other medical evidence 
produced by a small number of B-readers and doctors hired for 
their propensity to find high rates of asbestosis, and 
testimony of claimants according to prepared scripts.''\2\ 
Professor Brickman concluded that ``for the most part, asbestos 
litigation consists of a massive client recruitment effort 
which relies on the creation and use of specious evidence in a 
process which has corrupted the civil justice system.''\3\
---------------------------------------------------------------------------
    \2\Lester Brickman, On the Theory Class's Theories of Asbestos 
Litigation, 31 Pepperdine L. Rev. 33 (2004) (hereinafter ``Theories of 
Asbestos Litigation'').
    \3\Id.
---------------------------------------------------------------------------
    On January 7 of this year, the President of the United 
States participated in a public dialogue about asbestos 
litigation with Professor Brickman. The President noted that in 
U.S. asbestos litigation, ``those with no major medical 
impairment now make up the vast majority of claims.'' He then 
asked Professor Brickman to ``tell us what the problem is.'' 
This is what Professor Brickman told the President:

          ``[L]awyers have taken [the asbestos-exposure 
        medical] tragedy and turned it into an enormous 
        moneymaking machine, in which, as you say, baseless 
        claims predominate.
          In the year 2003, 105,000 new claimants came into the 
        asbestos litigation system. * * * [M]ore than 90,000 of 
        these claimants have no illness related to asbestos 
        exposure, as recognized by medical science. These are 
        truly meritless claims. Nonetheless, they're supported 
        by medical testimony from a handful of medical experts 
        routinely selected by plaintiff lawyers who are not 
        acting in good faith, in terms of supplying diagnosis, 
        but are, in fact, responding to enormous financial 
        incentives, which is to say, millions of dollars in 
        fees that they generate for reading the X rays in the 
        right way.
          These meritless claims are also supported by the 
        activities of screening companies hired by the 
        plaintiff lawyers, who administer pulmonary function 
        tests, which fail to adhere to medical standards, and 
        produce false evidence of lung impairment. And finally, 
        these meritless claims are supported by false witness 
        testimony. Witnesses in asbestos litigation, including 
        claimants, are prepared to testify by their lawyers. 
        It's a remarkable fact that every time a company goes 
        bankrupt, the witness testimony about what their 
        exposure was, what products they were exposed to, 
        immediately shifts to inculpate new defendants, new 
        deep pockets.
          I have written about this extensively, and I've 
        called it subornation of perjury. * * * The consequence 
        is that we've had, out of approximately 850,000 
        claimants since asbestos litigation began, perhaps 
        600,000 of these are largely baseless claims. 
        Nonetheless, they have generated tens of billions of 
        dollars in payments, and billions of dollars in fee 
        income for lawyers, which is why they're brought.\4\
---------------------------------------------------------------------------
    \4\A transcript of this conversation is available on the White 
House internet website, in the news releases section, at http://
www.whitehouse.gov/news/releases/2005/01/20050107-8.html.

    On April 6 of this year, Thomas Donohue, the President of 
the U.S. Chamber of Commerce, sent a letter to United States 
Attorney General Alberto Gonzales in which he noted that ``over 
the last several years, considerable evidence has emerged 
indicating the existence of substantial and systematic fraud in 
---------------------------------------------------------------------------
asbestos litigation.'' The letter continued:

          A handful of asbestos plaintiffs' lawyers have hired 
        a small number of doctors with an extraordinary 
        propensity to diagnose asbestosis. The specious 
        evidence for which the doctors are responsible, coupled 
        with medical testimony supporting the existence of 
        asbestos injuries that do not or could not exist, has 
        led to enormous settlements and judgments.

    Mr. Donohue's letter then cited the following evidence of 
widespread fraud in asbestos litigation:

          (1) the recent Gitlin study, which examined x-rays 
        submitted by plaintiffs lawyers in support of 
        asbestosis claims and discovered, in Mr. Donohue's 
        words, ``a gaping disconnect between asbestos claims 
        and actual asbestos illness.''
          In [the Gitlin] study of 492 chest x-rays obtained by 
        plaintiffs' lawyers and entered as evidence in lawsuits 
        against former employers, the original x-ray readers 
        claimed to find evidence of possible asbestos-related 
        lung damage in 96 percent of cases. In contrast, when 
        the same x-rays were re-read by six unbiased 
        physicians, unaware of the original findings or that 
        the x-rays were part of court cases, the doctors found 
        only 4.5 percent showed signs of asbestos injury.

    The Gitlin study concludes by noting that ``[t]here is no 
support in the world literature on x-ray studies of workers 
exposed to asbestos and other mineral dusts for the high levels 
of positive findings recorded by the initial readers in this 
report.''

          (2) the recent silica MDL in the Southern District of 
        Texas, in which plaintiffs' doctors disavowed their own 
        diagnoses when deposed, leading the district judge to 
        note the presence of ``great red flags of fraud.'' Mr. 
        Donohue noted that:
          [t]he stunning revelations in the silica MDL directly 
        bear on the asbestos litigation because many of the 
        doctors who have repudiated their own silica findings 
        also have diagnosed thousands of patients with an 
        asbestos related disease, often using essentially the 
        same techniques that are used to diagnose asbestosis. 
        In fact, it appears that virtually 60% of the [tens of 
        thousands of] plaintiffs in the silica MDL had made 
        prior asbestos claims, many times diagnosed by the same 
        physicians with asbestosis and silicosis. These 
        asbestos related diagnoses are particularly troubling 
        because experts agree that there is only a small 
        likelihood that an individual could have both asbestos-
        related and silica-related disease;

    and

          (3) ``evidence of asbestos plaintiffs' lawyers 
        coaching their clients to lie'' about their exposure to 
        asbestos products.

    Mr. Donohue's letter to Attorney General Gonzales concludes 
as follows:

          Based on the evidence outlined in these materials, I 
        request that the Justice Department immediately open a 
        formal investigation into the conduct of lawyers, 
        doctors and others who are responsible for the 
        explosion of meritless and abusive asbestos claims 
        across the country in recent years.
          * * * The longer the government waits to act, the 
        greater the harm. I strongly encourage the Department 
        of Justice to take immediate action to investigate the 
        compelling evidence of fraud underpinning the ongoing 
        asbestos litigation across the country.

    Mr. Donohue's letter also notes why it is necessary for the 
Justice Department to investigate this matter--i.e., why the 
remedies available to private parties in litigation are 
inadequate:

          Unlike private law firms, the U.S. Department of 
        Justice is immune to the threats and tactics that have 
        been employed by the asbestos plaintiffs' bar to 
        squelch efforts to challenge the practices that are 
        outlined in this memorandum. In addition, the 
        Department's subpoena power is a critical tool in 
        assembling the evidence that will connect the dots and 
        expose the systemic problems with asbestos litigation. 
        Accordingly, a formal government investigation is 
        critical to exposing and bringing an end to the 
        extensive pattern of highly questionable behavior that 
        continues to occur in asbestos litigation.

    Today, we add our voice to this request. We join the U.S. 
Chamber of Commerce in its call for a federal investigation 
into the practices of the large asbestos plaintiffs' law firms 
and their retained physicians and screening companies. Evidence 
of routine fraud in the creation of asbestos legal claims is 
now overwhelming. Further, these practices may violate federal 
criminal statutes. This matter demands further inquiry. When 
this nation's leading academic expert on asbestos litigation 
publicly confronts the President of the United States with 
allegations that an enormous economic fraud is being 
perpetrated against the American people, and when the premier 
trade association for American business formally requests a 
federal investigation into the same activities, it is 
appropriate for the Attorney General to act.
    There is little to add here to the publicly available 
record of evidence of the need for an investigation into 
asbestos fraud. In particular, Professor Brickman's law-review 
article Theories of Asbestos Litigation, described by others as 
``prodigiously researched,''\5\ provides a useful compendium of 
the most recent evidence of widespread asbestos fraud, as well 
as a guide to possible avenues of investigation.
---------------------------------------------------------------------------
    \5\Roger Parloff, Diagnosing for Dollars, Fortune Magazine, June 
13, 2005, at 98.
---------------------------------------------------------------------------
    This statement of views elaborates on only the following 
additional points: first, there is a complete disconnect 
between the number of asbestos injury legal claims filed in 
recent years and the actual amount of asbestos injury in the 
U.S. population. This gap recently has grown so massive that 
litigation fraud is the only possible explanation for its 
existence. Second, this statement briefly describes the 
enormous costs imposed on the U.S. economy by asbestos 
litigation fraud: tens of billions of dollars stolen, tens of 
thousands of manufacturing jobs destroyed, and pension plans 
devastated. Third, the statement describes some of the 
revelations from the recent hearings in the silica MDL in 
Texas. These hearings suggest that silica litigation has the 
potential to become an ugly offshoot of asbestos litigation. 
And finally, the statement briefly discusses why a federal 
investigation is the appropriate means of addressing this 
crisis.

                    THE MISSING ASBESTOSIS EPIDEMIC

    At the time that the 2003 Additional Views were published, 
it was noted that:

          Asbestos-injury legal claims * * * have ``prov[en] 
        impervious to the predictions of medical science.'' 
        ``Contrary to expectations, the numbers of claims filed 
        increased rapidly during the 1990s.'' Only 
        ``[a]pproximately 20,000 claims were filed annually 
        against major asbestos defendants in the early 1990s.'' 
        But in 2001, at least 90,000 new asbestos claims were 
        filed--a three-fold increase over the number filed in 
        1999.\6\
---------------------------------------------------------------------------
    \6\S. Rep. 108-118 at 83-84 (citations omitted).

    Since that time, the 2001 record has been broken. ``In 
2003, more than 110,000 new claimants surfaced--the most ever 
in a single year.''\7\
---------------------------------------------------------------------------
    \7\Statement of Lester Brickman, Subcommittee on Commercial and 
Administrative Law of the U.S. House of Representatives Committee on 
the Judiciary, July 21, 2004 (hereinafter Brickman 2004 Testimony).
---------------------------------------------------------------------------
    As described in the 2003 Additional Views, the recent 
years' surge in asbestos claims is utterly contrary to the 
expectations of medical science:

          According to Dr. James Crapo, one of the nation's 
        leading specialists in pulmonary medicine, ``[d]ue to 
        federal regulation of asbestos that began in the early 
        1970s, current occupational exposure levels are a tiny 
        fraction of those that existed in the 1940s and 1950s. 
        All of the asbestos-related diseases are considered 
        dose-dependent, and the pre-1973 exposures to asbestos 
        that resulted in severe asbestosis and lung cancer are 
        not present today.''
          Today, ``[i]t has been more than 30 years since the 
        government began imposing strict limits on workplace 
        exposure to asbestos dust,'' and ``[i]t has been 20 to 
        30 years since most asbestos-containing products were 
        phased out of production completely.''
          ``John Dement, an associate professor for 
        environmental and occupational medicine at Duke 
        University and the former deputy director for lung 
        disease research at the National Institute for 
        Occupational Safety and Health, [has] said there were 
        far fewer cases of serious asbestosis today than 5 to 
        10 years ago.'' According to Dr. Dement, ``What we're 
        seeing right now is the downswing.'' Epidemiological 
        data confirm these observations. ``[C]ancer deaths in 
        the United States attributable to asbestos exposure are 
        already falling, and are estimated to have peaked in 
        1992 at 9700 per year.'' Indeed, almost a decade ago--
        in 1994--the medical text Occupational Lung Disorders 
        describe[d] asbestosis as a ``disappearing 
        disease.''\8\
---------------------------------------------------------------------------
    \8\S. Rep. 108-118 at 82-83 (citation omitted).

    Since the publication of the 2003 Additional Views, 
additional evidence has emerged that suggests that the 110,000 
asbestos injuries purported to have manifested themselves in 
2003 are a medical impossibility.
    Theories of Asbestos Litigation cites several sources in 
support of the proposition that ``almost no new actual cases of 
asbestosis have manifested in the past ten years.''\9\ These 
sources include a 1994 study of asbestos-exposed workers whose 
authors, doctors specializing in the field, note that ``we have 
not seen a single case of significant asbestosis with first 
exposure [to asbestos occurring] during the past 30 years;'' a 
1988 study that notes that ``[a]sbestosis appears to be a 
disappearing disease;'' and an interview with a Harvard Medical 
School professor indicating that ``medical students have 
recently started questioning their professors as to why 
asbestosis is even part of the curriculum, since it is 
virtually never seen in patients outside of mobile x-ray 
trailers set up by plaintffs' lawyers.''
---------------------------------------------------------------------------
    \9\Theories of Asbestos Litigation, 62 & n.85 (citations and 
quotations omitted). See also id. at 36 & n.5; Brickman 2004 Testimony 
at 7, 8.
---------------------------------------------------------------------------
    The same medical reality is described by a Mobile, Alabama 
pulmonologist who has treated shipyard workers for asbestosis. 
In an interview with the Mobile Register, this doctor also 
comments on the asbestos-testing companies that are employed by 
plaintiffs' lawyers:

          Dr. Marc S. Gottlieb, a Mobile pulmonologist, said he 
        and his professional colleagues in the area are well 
        aware of the testing companies and have little regard 
        for their work.

           *       *       *       *       *       *       *

          Gottlieb frequently sees people who make appointments 
        after receiving letters from screening companies 
        informing them they tested positive. ``Unfortunately, 
        the percentage of people who go through these testing 
        mills and test positive is probably real high, like 75 
        percent,'' he said.
          ``If they were going to clinical physicians--somebody 
        who's not trying to make a buck off of it--the 
        percentage of those people who really have it would be 
        on the order of 20 to 25 percent, and people who are 
        really disabled by it, like 5 to 10 percent.''

           *       *       *       *       *       *       *

          Gottlieb, who has practiced medicine in Mobile since 
        1981, said he saw far more serious cases of asbestosis 
        during his first 10 or 15 years than he does now.
          ``Thousands and thousands of men who worked in the 
        shipyards in World War II were exposed, and they have 
        no safeguards. There were lots and lots of warships 
        along the Gulf Coast.
          ``The old-timers would wrap pipe, and the air was all 
        white, and they came out looking like snowmen'' from 
        the asbestos, he said.
          But these days, when Gottlieb makes a diagnosis of 
        asbestosis, it's usually a mild case with no disability 
        or with disabilities caused by other factors, like 
        heavy smoking, he said.\10\
---------------------------------------------------------------------------
    \10\Eddie Curran, ``Myster Companies, Massive Payouts,'' Mobile 
Register, March 28, 2004.

    The same Mobile Register article also provides the 
following account of recent statements about asbestos 
---------------------------------------------------------------------------
litigation made by the American Bar Association:

          [T]he ABA stated that asbestosis claims were 
        substantial in the early 1990s--about 15,000 to 20,000 
        per year--but ``were fairly predictable.'' The 
        statistics suggested that non-malignant claims might 
        begin trailing off as ``the period of most intensive 
        industrial use of asbestos had drifted further into the 
        past.''
          The ABA continued: ``In retrospect, however, it is 
        clear that a countervailing trend was emerging and 
        accelerating in the 1990s: for-profit litigation 
        screenings began systematically generating tens of 
        thousands of non-malignant claims each year by 
        individuals who had some degree of occupational 
        asbestos exposure, but did not have, and probably would 
        never get, an impairing asbestos-related disease.''\11\
---------------------------------------------------------------------------
    \11\id.

    One month ago, Dr. James Crapo repeated his previously 
expressed views about the actual incidence of asbestos disease 
in the United States, in his answers to written questions that 
Senator Kyl posed to him following this committee's April 26, 
---------------------------------------------------------------------------
2005 hearing regarding the asbestos bill. Dr. Crapo stated:

          Very few individuals in the United States are 
        developing new cases of asbestosis today. In the 1960s, 
        1970s, and 1980s these cases were common. Most 
        pulmonologists rarely or never see a case of new 
        asbestosis today. The decrease in exposures that 
        occurred as a result of federal regulations in the 
        1970s and 1980s has virtually eliminated new cases of 
        asbestosis. I would thus state the decline in the 
        incidence of asbestosis to have begun in the mid 1980s 
        (i.e., a few years following the implementation of 
        stricter guidelines for occupational asbestos 
        exposure).\12\
---------------------------------------------------------------------------
    \12\Dr. James Crapo, Professor of Medicine, National Jewish Medical 
and Research Center, Response to Questions on Senate Bill S. 852, May 
25, 2005. A copy of Dr. Crapo's answers to written questions is 
included as an attachment to Senator Coburn's additional views to this 
report.

    Dr. Crapo and other medical experts' observations are 
confirmed by an unexpected additional source: former paralegals 
and attorneys of Baron & Budd, one of the principal plaintiffs' 
law firms behind the wave of asbestos lawsuits. In interviews 
with Dallas newspapers, these sources have confirmed that over 
the course of the 1980s and 1990s, the firm encountered fewer 
and fewer clients with significant asbestosis. As one former 
paralegal notes, in the late 1980s, if a potential client only 
had pleural plaques--benign spots on the lining of the lung 
that indicate exposure to asbestos but do not constitute a 
disease or even predict future development of disease--the law 
firm would not take the case. But in later years, ``that's all 
they had.''\13\
---------------------------------------------------------------------------
    \13\S. Rep. 108-118 at 92. For information about pleural plaques, 
see id. at 98-99.
---------------------------------------------------------------------------
    Running as it may from the best medical research facilities 
in the nation to the paralegals of Baron & Budd, the view that 
incidence of asbestosis has been declining in the United States 
in recent decades is not unanimously held. One report, recently 
issued by the Department of Labor and entitled ``Work Related 
Lung Diseases Surveillance Report,'' purports to show an 
increase in incidence of asbestosis in the United States over 
the past ten years.
    The Labor Department's findings, if they were correct, 
would be noteworthy for several reasons. Not only would these 
findings suggest that the best physicians currently performing 
research and practicing in the field of pulmonary medicine 
utterly have failed to detect a revival of asbestosis incidence 
in the United States; these findings also would suggest that 
the occupational health regulations that universally were 
thought to have sharply limited asbestos exposures after 1972 
have in fact failed to do so, and that the problem of 
occupational exposure to asbestos actually has grown worse 
since the time when those regulations were implemented. Either 
that would have to be the case, or the Labor Department's 
findings would suggest that everything that modern medicine 
thought that it knew about asbestosis is in fact wrong--that 
the disease is not dose-dependent, or is not even caused by 
exposure to asbestos at all.
    Or the Labor Department could be wrong. A persuasive case 
for the latter interpretation is made by Dr. James Crapo. In a 
letter response to an inquiry from Senator Kyl, Dr. Crapo notes 
the following about the Labor Department report:
    This report is in conflict with the general experience in 
pulmonary medicine throughout the United States today, which is 
that the incidence of patients with clinically significant 
asbestosis is declining. In the 1980s it was common to see 
patients with asbestosis and many of these cases were severe or 
disabling. In my experience and in that of most pulmonologists 
I know, the incidence of such patients has declined steadily 
during the 1990s. It is now rare to see severe, disabling 
asbestosis except as cases that developed much earlier and who 
are returning for chronic follow-up.
    The problem with the NIOSH report is that its data is 
contaminated by the large-scale screenings done by law firms 
during the 1990s looking for cases of asbestosis that could 
enter our legal system. These screenings have been shown to 
lead to large numbers of inappropriate diagnoses of asbestosis 
(see Gitlin JN, LL Cook, OW Linton and E Garrett-Mayer. 
Comparison of ``B'' readers' interpretations of chest 
radiographs for asbestos related changes. Acad Radiol 11:843-
856, 2004).
    In the NIOSH Report, Appendix A, page A-3, it states that 
their multiple cause of death data came from the National 
Center for Health Statistics (NCHS): ``Each death record 
includes codes for up to 20 conditions listed on the death 
certificate including both underlying and contributing causes 
of death.'' Appendix B, page B 1, in describing the methods 
states: ``in this report the number of deaths for each 
occupational respiratory condition is the number of decedents 
for which the condition was coded as either underlying or 
contributing cause of death.'' For this purpose, International 
Classification of Diseases (ICD) codes were used.
    In my judgement, it is likely that mass screenings done by 
law firms in the 1990s resulted in large numbers of patients 
being given an incorrect diagnosis of asbestosis and assigned 
an ICD9 code for this diagnosis. With the enhanced used of 
computer technology during the 1990s, ICD9 codes were often 
permanently tracked for each patient and ultimately included in 
death certificate or hospital discharge information. In the 
case of asbestosis, this likely indicates only that the 
individual had participated in a mass screening exercise, not 
that asbestosis was identified by the treating physician as a 
significant cause of death.
    In my judgement, the actual incidence of clinically 
significant asbestosis in the United States has been steadily 
decreasing throughout the 1990s.\14\
---------------------------------------------------------------------------
    \14\A copy of Dr. Crapo's letter to Senator Kyl is attached to this 
statement. Unfortunately, the Labor Department's data are uncritically 
reproduced in the most recent RAND Corporation report on asbestos 
litigation. Because the RAND reports routinely are used as a reference 
source by many commentators on asbestos litigation, it is likely that 
the Labor Department's dubious data will be repeated again and again. 
RAND even speculates in its report that the current rise in asbestosis 
``reflects the delayed effects among workers exposed to asbestos during 
its peak use'' in the United States. It bears mention that virtually 
everyone agrees that the types of sustained exposures to friable 
asbestos that cause asbestosis were substantially eliminated in the 
United States after 1972, and experts generally agree that the latency 
period for asbestosis is 15 to 30 years. Simple math thus suggests that 
the last wave of exposures in the late 1960s and early 1970 would have 
begun to cross the 15- to 30-year latency threshold in the mid-1980s, 
and that most of the tail of this final large exposed cohort would have 
crossed that threshold by 2003. Again, assuming that the controls 
imposed by 1972 did have some effect on exposure, the Labor Department 
data on which RAND relies make sense only if one is willing to believe 
that asbestosis is not primarily caused by exposure to asbestos.
---------------------------------------------------------------------------
    Dr. Murray Janower, the past chairman of American College 
of Radiology Committee on Ethics, reviewed Dr. Crapo's analysis 
of the Labor Department report and concluded that he ``could 
not agree with Dr. Crapo more.'' Dr. Janower further states:

          I trained and was on the staff at the Massachusetts 
        General Hospital for the decade of the sixties. 
        Initially we saw a number of cases from the plumbers 
        and pipe fitters at the Boston ship yards, but the 
        cases were only a trickle at the end of the decade. In 
        fact, when I wrote the first (or second) paper on 
        mesothelioma in the American literature in 1970 
        (AJR:Vol. 108; p 53-59), we only had six cases.
          Again, asbestosis is a dying disease. * * * Almost 
        all of the money being paid out [in the litigation 
        system] goes to perfectly well people and the trial 
        lawyers.

    Dr. Janower also notes:

          While it has been estimated that about 90% of 
        claimants are walking well, based on my experience, I 
        would say that the number is closer to 95% or higher 
        and that there are very few cases of true disease.
          [T]here have been no workers exposed to significant 
        concentrations of asbestos in over thirty years, and 
        most exposure occurred prior to that in shipyards and 
        related industries during the second world war. Most of 
        the war workers have passed away, as expected given 
        their old age. And of course, the cause of death of the 
        dying workers is the usual causes of death, including 
        heart attacks, strokes, accidents, etc.

    Dr. Janower concludes:

          If one were to survey the 126 university radiology 
        departments, one would find that the departments 
        probably see less than 6-10 cases per year. Community 
        hospitals only see a case or two per year. I always 
        tell my medical students and residents not to study 
        asbestosis as it is such a rare disease.\15\
---------------------------------------------------------------------------
    \15\Electronic message to Senator Jon Kyl, June 29, 2005 (on file 
with the Judiciary Committee).

    The fact that 110,000 asbestos-injury legal claims were 
filed in 2003--over 90% of which asserted asbestosis and were 
generated by attorney-sponsored screenings--is itself nearly 
conclusive evidence of widespread fraud in asbestos litigation. 
The actual medical experience of asbestos-related injury in the 
United States simply cannot account for the sharp rise in, and 
sheer volume of, recent asbestos-injury legal claims. Fraud is 
the only plausible explanation for this phenomenon.

 ASBESTOS FRAUD HAS COST THE UNITED STATES TENS OF BILLIONS OF DOLLARS 
                     AND TENS OF THOUSANDS OF JOBS

    In his testimony last year before the House Commercial and 
Administrative Law Subcommittee, Professor Brickman gave an 
overview of the current and projected impact of asbestos 
litigation on the United States economy:

          In 2003, more than 110,000 new claimants surfaced--
        the most ever in a single year. Since each claimant 
        files claims against approximately 30-60 different 
        defendants and bankruptcy trusts, this translates into 
        approximately 5,000,000 new claims which will have been 
        generated by just these claimants. While approximately 
        750,000 claimants have so far filed claims against over 
        8500 different defendants, it is estimated that 
        1,600,000 to 2,100,000 new claimants will yet emerge. 
        Moreover, while defendants and their insurers have so 
        far paid out over 70 billion dollars, it is estimated 
        that former asbestos-containing product manufacturers, 
        owners of premises containing asbestos, and their 
        insurers will have to pay out an additional $130-$140 
        billion before the litigation is concluded.
          So far the litigation has accounted for approximately 
        70 bankruptcies including, in recent years, such 
        companies as Owens Corning, W.R. Grace, Armstrong World 
        Industries, Babcock & Wilcox, Federal Mogul, and 
        Combustion Engineering. I note that negotiations are 
        currently underway in the Senate to remove the 
        litigation from the judicial system and provide an 
        alternative administrative resolution. No end is yet in 
        sight, however, as what has become a weapon of mass 
        business destruction cuts deeper and deeper into the 
        American industrial process and product distribution 
        system. If the litigation continues along its current 
        path, many more bankruptcies will ensue--scores if not 
        hundreds of companies, big and small, will almost 
        certainly succumb as will a number of insurance 
        companies.\16\
---------------------------------------------------------------------------
    \16\Brickman 2004 Testimony, supra, at 3-4.

    Professor Brickman has estimated that ``[m]eritless 
asbestos claiming thus far approaches $28.5 billion.''\17\ 
``One researcher has calculated that * * * the [Manville] trust 
alone may have paid $190 million dollars for inauthentic or 
inflated claims between 1995 and 2001.''\18\
---------------------------------------------------------------------------
    \17\Brickman, Theories of Asbestos Litigation, at 59 n.66.
    \18\Id. at 132.
---------------------------------------------------------------------------
    This economic devastation exacts a human toll. According to 
a RAND Corporation study, ``the number of jobs that [asbestos] 
defendants would have created if they had not had to reduce 
their capital investments by $33 billion is estimated to be 
423,000.''\19\ Moreover, ``[b]ecause of the [asbestos] 
bankruptcies, an estimated 52,000-60,000 employees of asbestos 
defendants lost both their jobs and an average of 25% of the 
value of their 401(k) accounts.''\20\ For example, ``the value 
of Federal Mogul stock in the accounts of its 22,000 employees 
declined by more than $70 million.''\21\
---------------------------------------------------------------------------
    \19\Id. at 37 n.10.
    \20\Id.
    \21\Id.
---------------------------------------------------------------------------
    Real people are being hurt by what is happening with 
asbestos litigation. Tens of billions of dollars have been 
stolen, tens of thousands of workers have lost their jobs, and 
billions of dollars have been confiscated from workers' pension 
plans. This is a massive scandal.

                              SILICA FRAUD

    Today, no discussion of fraud in asbestos litigation is 
complete without a discussion of silica. The committee has good 
reasons to include in the trust-fund bill a provision that 
seeks to prevent asbestos claimants from also filing silica 
claims. Again, Professor Brickman provides a useful summary of 
events--in testimony before this committee earlier this year:

          Only recently has silica litigation exploded. In the 
        first half of 2003 alone, more than 17,000 plaintiffs 
        filed suit. While one company was facing 3,505 claims 
        in 2002, the next year it was facing 22,000 silica 
        claims. Similarly, as of September 2003, one insurer 
        identified 30,000 silica cases brought against its 
        insureds, compared to 2,500 cases it had one year 
        earlier. Illustrating this trend is the Federal Silica 
        MDL 1553 (``MDL'') that now involves over 10,000 
        plaintiffs predominately from cases initially filed in 
        the Mississippi state courts and removed to Federal 
        court.
          This rise in silica claims in the last few years 
        seems incompatible with observations in the medical 
        literature. I am not a medical doctor, but a few 
        examples from the medical literature demonstrate the 
        lack of a medical epidemic. From 1950 to 1979, for 
        example, Massachusetts General Hospital reported only 
        15 cases of silicosis and coal worker's pneumoconiosis. 
        From 1980-1987, the Mayo Clinic found only 10-25 cases 
        of silicosis per year from the approximately 250,000 
        patients seen annually. Between the two periods of 1969 
        to 1981 and of 1982 to 2001, the death rate for 
        silicosis had dropped 70%. As one journalist noted, 
        ``litigation is rising at the same time deaths from 
        silica are falling * * * .''
          Further, prior to 2001, there had never been a year 
        in which more than 1,000 plaintiffs filed suit for 
        silica related injuries. Yet in 2003 alone, 19,389 
        plaintiffs filed suit--more than in the previous thirty 
        years combined.

           *       *       *       *       *       *       *

          One obvious question is why has there been such a 
        marked increase in silica claims in the last few years 
        when the medical evidence points to a disappearing 
        disease. The answer is simple. It involves the same 
        reasons that account for the hundreds of thousands of 
        non-malignant asbestos claims which I describe in my 
        Pepperdine article. It is the application of the 
        entrepreneurial model to silica, beginning with mass 
        screenings sponsored by lawyers who have the economic 
        incentive to convert asbestos claims to silica claims--
        perhaps motivated by the concern that the asbestos 
        litigation end game has begun. Heath Mason, the co-
        owner of the mass screening entity N&M, Inc., testified 
        that the reason his company started focusing on silica 
        cases was because of a previous version of the very 
        legislation that is before this Committee:
          Q. With respect to testing that's being done by N&M 
        these days, would you say that N&M is doing more silica 
        testing versus asbestosis or what is the breakdown?

           *       *       *       *       *       *       *

          A. I would say at the particular time that we did 
        those tests we were doing more silica than we were 
        doing asbestos.
          Q. And is that true today?
          A. As of the last month with the Hatch bill, yes, 
        sir, I would say that it is.
          Q. And has the Hatch bill influenced your business?
          A. For sure.\22\
---------------------------------------------------------------------------
    \22\Statement of Lester Brickman, U.S. Senate Committee on the 
Judiciary, February 2, 2005. For an excellent overview of the explosion 
of fraud in silica litigation, see also Roger Parloff, Diagnosing for 
Dollars, Fortune Magazine, June 13, 2005, at 98.

    Professor Brickman also notes that the silica plaintiffs' 
attorneys ``are following the same practices and procedures 
that have been used to generate the massive number of non-
malignant asbestos tort claims.''
    One particularly noteworthy aspect of the silica litigation 
is the large number of silica claimants who also have filed 
asbestosis claims. ``One plaintiffs' law firm admitted that it 
represents over 3,500 MDL silicosis plaintiffs who had prior 
asbestosis diagnoses.''\23\ And just one doctor--Ray Harron--
has ``diagnosed about 1,500 patients with silicosis after he 
had earlier found them to be suffering from asbestosis.''\24\
---------------------------------------------------------------------------
    \23\Recent Screening Developments: The Silica MDL 1553 Daubert 
Hearing, Harris Martin Publishing 12, 2005.
    \24\Neal Falgoust, Defense Goes After Doctors--Physicians Paid to 
Read X-Rays, Work Histories, Corpus Cristi Caller-Times, February 17, 
2005.
---------------------------------------------------------------------------
    These dual diagnoses are noteworthy in light of the fact 
that several experts have testified before this committee that 
such overlap is virtually nonexistent in the real world. Dr. 
Paul Epstein, a pulmonary physician and Clinical Professor of 
Medicine at the University of Pennsylvania who has wide 
experience in treating occupation lung disease, noted that 
``[s]ilicosis has quite a different appearance [from 
asbestosis] on the chest x-ray.''\25\ He continued: ``When 
people have both diseases, (that is, both asbestosis and 
silicosis) the characteristic clinical and x-ray manifestations 
are each discernible as separate features and the diagnosis of 
dual disease process can be made with relative ease.'' Dr. 
Epstein concluded:
---------------------------------------------------------------------------
    \25\This and the subsequent testimony is from the hearing entitled 
Asbestos: FELA and Mixed-Dust Issues, U.S. Senate Committee on the 
Judiciary, February 2, 2005.

          Over the course of the past 30 years I have 
        personally examined approximately 17,000 individuals 
        who have been occupationally exposed to asbestos. These 
        workers have held many different jobs, including those 
        of shipyard workers, oil refinery employees, 
        construction workers, steel mill employees, chemical 
        workers, insulators, electricians, painters, and 
        riggers, to name a few. Additionally, I have evaluated 
        many workers who were occupationally exposed primarily 
        to silica, including coal miners, sandblasters, stone-
        quarry workers, glass makers, and refractory brick 
        manufacturers. A large number of these workers were 
        exposed to both silica and asbestos.
          While it is theoretically possible to have combined 
        disease consisting of asbestosis and silicosis, it has 
        been my clinical experience that the overwhelming 
        majority of patients I have seen with asbestos-related 
        diseases have had no evidence of silicosis. In fact, I 
        can recall no more than a dozen or so individuals who 
        have had combined asbestosis and silicosis and these 
        were people who had substantial occupational exposure 
        to silica, often in jobs that were separate from their 
        subsequent jobs that involved exposure to asbestos. For 
        this reason, it is my professional opinion that the 
        dual occurrence of asbestosis and silicosis is a 
        clinical rarity.

    Similar testimony was presented to the committee by Dr. 
Theodore Rodman, a retired professor of medicine at Temple 
University who has 50 years' experience in medical practice, 
teaching, and research. Early in his career, Dr. Rodman 
developed an interest in occupationally related lung diseases--
he examined hundreds of such patients, and reviewed the x-rays 
of thousands. He concluded:

          Of the hundreds whom I examined, I can remember only 
        one or two who gave a clear-cut history of significant 
        occupational exposure to both asbestos and silica--not 
        surprising considering the disparity in occupations in 
        which asbestos and silica exposure commonly occur.
          Among the thousands of chest x-rays which I reviewed 
        in asbestos and silica exposed individuals, I cannot 
        remember a single chest x-ray which showed clear-cut 
        findings of both asbestos exposure and silica exposure.
          During the decades of the seventies, eighties, and 
        nineties, in connection with the asbestos litigation, I 
        evaluated a large number of litigants.
          Not one of them had medical records suggesting a 
        history of significant silica exposure.
          I found evidence of asbestos related changes in many.
          I found no evidence of silica related changes in any.
          I found no evidence in the reports of any physician--
        whether retained by the plaintiff or the defendants--
        that concluded that the patient had silica related 
        changes.
          On the basis of this personal experience, I have 
        concluded that both asbestos and silica related changes 
        and disease are common but rarely occur in the same 
        patient.
          The medical literature and textbooks with which I am 
        familiar are consistent with my conclusion.

    Finally, the committee heard testimony from Dr. David 
Weill, an associate professor in the Division of Pulmonary and 
Critical Care Medicine at the University of Colorado Health 
Sciences Center. He stated: ``silicosis and asbestosis are 
different diseases; they are not easily confused in practice; 
and it is very rare for one person to have both diseases.''
    Dr. Weill also indicated that ``[i]n the Spring of 2004, I 
had the privilege of serving as a visiting professor at the 
National Institute of Occupational Medicine and Poison Control 
in Beijing, China.'' He noted: ``During my time in China I saw 
hundreds of cases of asbestosis and silicosis, many involving 
very serious and advance stages of the disease. The Chinese 
experience is sobering, and far different from what I have seen 
in the U.S., where genuine cases of these diseases are quite 
rare.'' Regarding the dual-disease litigation phenomenon, Dr. 
Weill commented that:

          Although asbestosis and silicosis are different 
        diseases that look different on x-ray films, it is 
        theoretically possible for one person to have both 
        diseases. A person could be exposed to both silica and 
        asbestos in sufficient quantities to cause either 
        disease, but it would be extremely unusual for one 
        person in a working lifetime to have sufficient 
        exposure to both types of dust to cause both diseases. 
        In my clinical experience in the United States, I have 
        never seen a case like this and colleagues who saw 
        patients in periods where exposure levels were much 
        higher have difficulty recalling an individual worker 
        who had both asbestosis and silicosis. Even in China, 
        where I saw workers with jobs involving high exposure 
        to asbestos and silica (such as sandblasting off 
        asbestos insulation), I did not see anyone or review 
        chest radiographs of anyone who had both silicosis and 
        asbestosis.

    Dr. Weill also reviewed 300-400 case files from the Texas 
silica MDL. He testified with regard to that litigation that:

          From a medical standpoint, it is puzzling to see so 
        many ostensible silicosis cases in such a short period 
        of time. In my clinical practice and those of 
        colleagues in the occupational medicine field, it is 
        unusual to see new silicosis cases, at least in the 
        United States, largely because of the workplace 
        regulations that have been put in place by OSHA. The 
        situation in China, and the rest of the developing 
        world, is very different.
          Although statistical evidence is incomplete and 
        imperfect from a methodological point of view, few 
        would question the proposition that industrial dust 
        control mechanisms have made silicosis much less common 
        today than it was a generation ago.

           *       *       *       *       *       *       *

          Silicosis and, for that matter, all pneumoconioses 
        are dose-dependent, meaning that increased level and 
        total amount of exposure results in increased risk and/
        or severity of the diseases. Conversely, as workplace 
        exposures have been substantially reduced in the last 
        several decades, silica-related health effects have 
        become less prevalent. The declining incidence of 
        silicosis should be associated with fewer and fewer 
        silica lawsuits, but in my experience exactly the 
        opposite is taking place. Silica lawsuits are sharply 
        increasing even though from a medical perspective 
        silicosis is declining.

    During a Daubert hearing in the Texas silica MDL, one 
witness--a former fellow of pulmonary diseases at the National 
Institute for Occupational Safety and Health--testified that 
the doctors who had diagnosed the claimants as having silicosis 
were not ``intellectually and scientifically honest.'' He 
characterized these diagnoses as ``stunning and not 
scientifically plausible.''\26\
---------------------------------------------------------------------------
    \26\Neal Falgoust, Doctor Decries Testing Process, Corpus Christi 
Caller-Times, February 19, 2005.
---------------------------------------------------------------------------
    Another doctor also described the sheer medical 
impossibility of the thousands of silicosis cases asserted in 
the MDL:

          Defense witness Dr. Gary Friedman, a Houston 
        physician who has testified on behalf of silicosis 
        patients in other lawsuits, said he could not offer a 
        plausible explanation for the apparent outbreak of 
        silicosis that had arisen through the litigation.
          The worst outbreak of the disease occurred in the 
        1930s in West Virginia, when hundreds of workers 
        drilling a tunnel died from inhaling the dust. Some 
        documentaries have called it the nation's worst 
        industrial disaster.
          Friedman said that disaster pales in comparison to 
        the 10,000 cases of silicosis reported in this set of 
        lawsuits.\27\
---------------------------------------------------------------------------
    \27\Id.

    Judge Janis Jack, the federal district judge presiding over 
the MDL, summed up the import of all this evidence: it raises 
``great red flags of fraud.'' ``This is extremely 
serious.''\28\
---------------------------------------------------------------------------
    \28\Neal Falgoust, ``Red Flags of Fraud'' Are Raised, Corpus 
Christi Caller-Times, February 18, 2005.
---------------------------------------------------------------------------

                  THE NEED FOR A FEDERAL INVESTIGATION

    Again, as the Chamber of Commerce noted in its letter to 
the Attorney General, only the Justice Department has the 
investigative tools that are needed to conduct an unimpeded 
investigation into fraudulent practices in asbestos litigation. 
Professor Brickman makes the same point in his 2004 law-review 
article; he repeatedly notes that only grand-jury subpoenas 
could uncover various critical evidence about dishonest 
practices among asbestos plaintiffs' bar.\29\ He also suggests 
that a governmental investigation is the only way to uncover 
corresponding evidence that likely is in the possession of the 
asbestos bankruptcy trusts.\30\
---------------------------------------------------------------------------
    \29\See Brickman, Theories of Abestos Litigation, at 76 n. 20, 141 
n. 399, 164 n, 503.
    \30\See Brickman, 2004 Hearing Testimony, at 55-57, See also S. 
Rep. 108-118 at 95 (describing difficulties encountered by private 
investigators collecting evidence of asbestos fraud).
---------------------------------------------------------------------------
    What is happening with asbestos litigation is not happening 
by accident and it is not happening spontaneously. Indeed, 
there already is substantial evidence that, in addition to the 
screening companies and physicians involved, the attorneys at 
the top of the asbestos-litigation pyramid are fully aware that 
the legal claims that comprise this litigation are being filed 
on behalf of individuals who are not sick and who were not even 
exposed to the products of the manufacturers who are being 
sued.\31\ If these attorneys are aware of the practices of 
which their own paralegals suggest that they are aware, these 
attorneys may be violating federal criminal statutes.
---------------------------------------------------------------------------
    \31\S. Rep. 108-118 at 85-92.
---------------------------------------------------------------------------
    Asbestos litigation has become a cancer on the American 
economy and a disgrace to the American justice system. As the 
2003 claims-filing data and the developments in silica 
litigation demonstrate, this cancer is not receding--it is 
spreading. Even if Congress enacts an asbestos trust fund and 
preempts all future asbestos litigation, the patterns and 
practices developed in asbestos litigation inevitably will 
migrate to other toxic-torts litigation--unless the cancer is 
cured at it source. This is a problem that will not go away on 
its own. It is a problem that must be addressed.

                                   Jon Kyl.
                                   John Cornyn.
                                   Tom Coburn.

          ADDITIONAL VIEWS OF SENATORS CORNYN, KYL, AND COBURN

    One particularly concerning problem has been the lack of 
information that is available to the committee with regard to 
the underlying financial analysis of the trust fund. Further, 
and on a related note, we are concerned that the underlying 
assumptions regarding those expected to pay into the fund, the 
amount to be paid into the fund and the total cost of the fund 
have not been sufficiently explained to us.
    While each of us supports the mission and objectives of 
this legislation, the success of the trust fund requires that 
the financial analysis be sufficiently thorough and performed 
by an adequate number of objective parties to give us a high 
degree of confidence that the trust fund is sustainable. 
Sustainability of the trust fund is absolutely imperative if we 
are to treat victims fairly and get them the awards they 
deserve. Unfortunately, the two primary analyses we have seen 
to date vary significantly as we await the opinion of the 
Congressional Budget Office (CBO) with regard to S. 852.
    At its core, the trust fund boils down to cash inflows and 
cash outflows. Inflows, scheduled to be capped at $140 billion 
over the life of the trust fund, consist of payments by 
defendant companies, insurers and, possibly, existing asbestos 
trusts. Outflows consist of all expenses associated with the 
trust fund, including all victim compensation payments, all 
administrative expenses and, at least as currently 
contemplated, all debt and interest expenses.
    Our responsibility to perform basic due diligence dictates 
that we have at our disposal, at a minimum, a comprehensive 
understanding of the history of asbestos-related payments by 
defendant and insurance companies expected to pay into the 
fund, a reasonable idea of the expected defendant and insurance 
companies that will pay into the trust fund by tier and the 
amount each will pay, a firm understanding of the expected 
numbers of victims to be paid by claims level per year, a 
thorough projection of the costs associated with managing the 
trust fund at the Department of Labor, a comprehensive 
projection of potential interest expense and, generally, a 
comprehensive year-by-year financial analysis that details the 
expected cash flows for the trust fund.
    In virtually all respects, the information available to us 
is less comprehensive than we would prefer in order to be 
confident in the viability of the trust fund. In addition, 
based on what we know, the fairness of the allocations formula 
is questionable and the likelihood that the trust fund will 
remain solvent currently is, at best, a guess.

                     LACK OF AVAILABLE INFORMATION

    As of the writing of this committee report, we have been 
able to analyze only limited information. Senators have made 
repeated requests to see greater detail but only with limited 
success. Accordingly, we are left in the uncomfortable position 
of largely guessing about the impact of any proposals offered 
to deal with many of the issues we face on this bill.
    Perhaps most troubling is our fundamental lack of 
understanding of those expected to pay into the trust fund and 
the amounts they are expected to pay. We have seen two 
separate, but significantly different, presentations of the 
estimated numbers of companies expected to pay into the trust 
fund by tier. We know that Tier 1, representing bankrupt 
companies that have filed for Chapter 11, has approximately 20 
companies in it. Beyond that, however, the story is less clear. 
We have been told that Tier 2 companies number between 30 and 
78; Tier 3 between 28 and 80; Tier 4 between 230 and 360; Tier 
5 between 150 and ``hundreds;'' and Tier 6 simply between 400 
and ``hundreds.''\1\ Generally, we have heard estimates of 
total contributing companies from fewer than 1000 to over 
1700.\2\ While a few companies have volunteered the tier and 
subtier in which they expect to fall, for the most part we have 
very little idea about the amount most companies will pay.
---------------------------------------------------------------------------
    \1\Verbal presentation from the National Association of 
Manufacturers Asbestos Alliance and the Asbestos Study Group on April 
12, 2005.
    \2\Congressional Budget Office Estimate, S. 1125--Fairness in 
Asbestos Injury Resolution Act of 2003, October 2, 2003, at 1.
---------------------------------------------------------------------------
    Additionally, we have very little information detailing the 
estimated historic asbestos-related expenses for any companies 
to give us a reference point from which to compare the 
effective fairness of the trust fund tier values. Without 
knowing who will be paying, it is difficult to know what their 
past expenditures have been. Moreover, even public companies 
don't always have the most information available, so until 
companies are required to or volunteer to submit their data in 
full, we will not have enough information to analyze.
    Information with regard to the trust fund outflows also 
could be more readily available. So far, we have seen only a 
high-level analysis produced by the investment bank, Goldman 
Sachs, who was retained by the pro-reform Asbestos Study Group. 
This analysis, though very helpful for us to understand the 
theory behind the fund, is not the level of detail we require. 
At a minimum, we should be able to see year-by-year cash flow 
summaries with best and worse case scenarios--including the 
impact of possible interest expense if there is ``a run'' on 
the trust fund at any point. Further, while we finally were 
given the baseline projection on which the entire model appears 
to be based, we have not seen any of the detailed modeling and 
analysis built upon those projections.
    We are sympathetic that the information is quite difficult 
to obtain given the complexity of the legislation, the number 
of parties involved and the amount of information involved. 
Nevertheless, it would seem that the burden of proof should 
fall upon those most supportive of the trust fund to show that 
fund will be adequately funded and that it will be fairly 
allocated. As United States Senators voting on a trust fund of 
this magnitude, we should have more information than is 
available to us at this time.

                         TOTAL COST OF THE FUND

    To ensure that those sick from asbestos exposure are 
treated fairly and effectively, we must ensure that the fund 
remains viable. As of the time of this report, we have only two 
analyses on which to base our assessment regarding the fund 
until the CBO provides its analysis in the coming weeks. We 
have the model from Goldman Sachs described above which focuses 
on S. 852 and we have last year's valuation of S. 2290 by the 
CBO.
    According to Goldman Sachs' analysis, we are told that the 
trust fund will pay out claims of approximately $118 
billion.\3\ We have only been provided limited detail regarding 
the assumptions underlying this model, have seen only limited 
summaries of the model and are not certain if it represents a 
best-case, expected or worse-case scenario. The other analysis 
we have is a CBO analysis from April 2004 that indicates the 
fund would cost approximately $140 billion.\4\ Clearly these 
represent a sizable discrepancy.
---------------------------------------------------------------------------
    \3\Verbal presentation from the National Association of 
Manufacturers Asbestos Alliance and the Asbestos Study Group on April 
12, 2005.
    \4\Letter from the Congressional Budget Office to Chairman of the 
Budget Committee Don Nickles dated April 20, 2004 at 3.
---------------------------------------------------------------------------
    To be sure, there have been a number of significant changes 
in the legislation. But some of these changes subtract costs 
and some add costs. For example, since S. 2290 last year, we 
have improved the medical criteria considerably by removing 
from the trust fund the ``Level 7'' claims value which would 
have made payments to individuals without the necessary indicia 
of illness related to asbestos exposure. In addition, the 
number of claimants expected to be paid necessarily has changed 
over time, the claims levels are markedly higher than in S. 
2290 and other changes in the medical criteria may actually 
increase costs significantly. For example, the use of CT Scans 
may cause a substantially larger group of claimants than we 
have contemplated previously. Detailed discussion about the 
issue of medical criteria is contained in separate views in 
this document.
    Making a sound evaluation regarding the overall cost of the 
trust fund is a difficult task. Indeed, the CBO pointed out a 
number of these difficulties with regard to S. 2290, at least, 
in a letter to then Chairman Hatch just last year:

          Any budgetary projection over a 50-year period must 
        be used cautiously, and as we discussed in our analysis 
        of S. 1125, estimates of the long-term costs of 
        asbestos claims likely to be presented to a new federal 
        fund for resolution are highly uncertain. Available 
        data on illnesses caused by asbestos are of limited 
        value. There is no existing compensation system or fund 
        for asbestos victims that is identical to the system 
        that would be established under S. 1125 or S. 2290 in 
        terms of application procedures and requirements, 
        medical criteria for award determination, and the 
        amount of award values. The costs would depend heavily 
        on how the criteria would be interpreted and 
        implemented. In addition, the scope of the proposed 
        fund under this legislation would be larger than 
        existing (or previous) private or federal compensation 
        systems. In short, it is difficult to predict how the 
        legislation might operate over 50 years until the 
        administrative structure is established and its 
        operations can be studied.\5\
---------------------------------------------------------------------------
    \5\Id. at 6.

    In truth, the success of the asbestos legislation depends 
almost entirely on the estimates on which the financial 
assessments are based. Thus far, we have seen a one page table 
of what we believe to be the projections on which the Goldman 
Sachs model is based. We have not seen, however, any detail 
that would demonstrate whether these projections are reasonable 
nor how the model then assesses the impact of these 
projections. In an October 2003 letter to Senator Orrin Hatch 
regarding S. 1125, CBO noted its concerns about the claims and 
potential costs, writing that ``there is a risk that the actual 
number of claims could exceed our estimate.''\6\
---------------------------------------------------------------------------
    \6\Letter from the Congressional Budget Office to Chairman of the 
Judiciary Committee, Orrin Hatch. October 2003 at.
---------------------------------------------------------------------------
    We note that there is a great deal of uncertainty regarding 
the expected number of claimants that actually would qualify 
for an award as opposed to receiving medical monitoring. Again, 
the CBO opined about some of these problems with regard to S. 
2290:

          One area in which the potential costs are 
        particularly uncertain is the number of applicants who 
        will present evidence sufficient to obtain a 
        compensation award for nonmalignant injuries. CBO 
        estimates that about 15 percent of individuals with 
        nonmalignant medical conditions due to asbestos 
        exposure would qualify for awards under the medical 
        criteria and administrative procedures specified in the 
        legislation. The remaining 85 percent of such 
        individuals would receive payments from the fund to 
        monitor their future medical condition.
          If that projection were too high or too low by only 5 
        percentage points, the lifetime cost to the Asbestos 
        Fund could change by $10 billion. Small changes in 
        other assumptions including such routine variables as 
        the future inflation rate could also have a significant 
        impact on long-term costs.\7\
---------------------------------------------------------------------------
    \7\Letter from the Congressional Budget Office to Chairman of the 
Budget Committee Don Nickles dated April 20, 2004 at 6.

    Further, we have great concerns about the necessary funding 
in the early years of the trust fund. As we describe 
separately, the medical criteria give us great concern that the 
trust fund cannot sustain the potential cost. The proposed up-
front funding of approximately $42 billion over the first 5 
years may very well not be enough to cover the cost of the 
pending claims existing today, notwithstanding the additional 
claims that no-doubt will enter the fund right away.
    We eagerly await the CBO's updated analysis and are hopeful 
that it can shed greater light on the expected cost of the 
fund, but regardless of their determination, we stress the many 
concerns we have regarding the current process for estimating 
the cost.

                          ALLOCATIONS CONCERNS

    The Allocations formula for both defendant companies and 
insurers remains as much a mystery as the process for 
determining the total cost of the fund. Insurers, unable to 
come to any agreement thus far regarding a fair allocation 
formula, will leave their fate to an insurance commission if 
they cannot agree. This is not the preferred situation, but 
even worse, the current allocations scheme in place for 
defendant companies strikes us as somewhat arbitrary and 
arguably unfair in at least certain instances.
    Determining a fair allocations formula for defendant 
companies is an extraordinarily complex proposition. The 
current formula attempts to do that, but many companies have 
raised significant concerns that they are not being treated 
fairly. Specifically, the primary concerns seem to be that 
there are a number of companies that believe they will be 
forced to pay significantly higher amounts into the fund than 
they would have paid or expect to pay in the current litigation 
environment. Further, many companies are well insured and 
believe themselves to be sufficiently insured against future 
claims.
    No system we can devise will be perfect. However, we make a 
number of observations:
           A hypothetical company with as much as $1 
        billion in total previous asbestos-related expenditures 
        would be required to pay no more than $27.5 million per 
        year in future years. A similar size company with as 
        few as $75 million in total previous asbestos-related 
        expenditures would pay the same amount.
           A well insured company that has paid few, if 
        any, claims out of pocket and believes itself to be 
        well insured against any possible future claims could 
        be forced to pay millions of dollars into the federal 
        trust fund.
           At least three companies of which we are 
        aware have spent historically just over $100 million in 
        total previous asbestos-related expenditures, and less 
        than $2 million has come out-of-pocket. Under the trust 
        fund, these companies would be expected to pay, most 
        likely, $16.5 million per year into the trust fund.
           Premises companies, often self-insured, make 
        a case that their asbestos liability is not the same as 
        products defendants. According to information we have 
        seen, many of these companies would be expected to pay 
        into the trust fund as much or more than twice the 
        amount they have been spending historically.
    We could offer additional observations, but the point is 
clear that while certain companies will benefit from the 
legislation it is probable that some companies will be made 
worse off by the trust fund, not better. Much is made of the 
``hardship and inequity'' provisions as a way to offset the 
concerns these business have. No doubt these provisions may 
provide the needed relief in some, if not all, instances. 
However, it is of no comfort to the Board of Directors, CEO, 
shareholders and other stakeholders of a corporation that they 
``may'' get an offset from some future Administrator when they 
are seeking access to the public markets, loans from banks, 
ratings from Standard and Poor's or Moody's, or any other 
critical business transaction they care to make.
    The Coalition for Asbestos Reform is a coalition of 
businesses opposed to the legislation that includes a number of 
businesses and we are told it is growing. In a letter to 
Senator Specter dated April 6, 2005, the coalition reiterated 
its concerns about the cost burden on small and medium sized 
businesses, calling it a ``manifestly unfair allocation 
formula,'' and adding:

          The formula for assigning mandatory payments is 
        almost certain to be the direct cause of a number of 
        bankruptcy filings for otherwise financially sound 
        companies. Each version of the FAIR Act has increased 
        the payment burden on defendant companies, and has 
        based each company's ability to pay on its historic 
        asbestos defense costs. These allocations--across all 
        tiers of the FAIR Act--fail to recognize that many 
        defendant companies have paid only insurance premiums 
        related to asbestos defense, and would be obligated to 
        make payments to the trust fund that far exceed their 
        anticipated liabilities under the current tort system. 
        By shifting the burden of paying for asbestos claims 
        from the companies with the greatest asbestos exposure 
        to a host of other businesses--including many small and 
        medium sized entities--the legislation creates a 
        substantial likelihood that a cascading series of 
        defaults will rapidly lead to the insolvency of the 
        trust fund.''\8\
---------------------------------------------------------------------------
    \8\Letter from the Coalition for Asbestos Reform to Chairman of the 
Judiciary Committee, Arlen Specter, April 6, 0025 at 1.

    In addition, we are concerned that should the trust fund 
face insolvency, as we fear may be possible given the limited 
analysis we have been able to conduct, that many of these 
businesses would face the difficult task of paying off the debt 
accumulated by the trust fund at the same time they attempt to 
deal with additional litigation upon reversion to the court 
system.
    Finally, we note that the current funding formula 
contemplates a ``guarantee surcharge'' to ensure that the 
entire $3 billion annual payment is available. Our primary 
concern is that if there remain serious issues with the 
underlying allocations formula, any pro-rata surcharge will 
simply exacerbate the problem for companies facing an unfair 
assessment.
    We feel that any allocation formula must be structured in 
such a way as to give companies the actual finality the fund 
contemplates and that to do so requires as hard and as 
objective a trigger as is possible. We have offered a number of 
alternative solutions, but we prefer anything that will cap, 
for at least smaller companies or companies with smaller 
historic expenditures, annual assessments at an amount 
reasonably related to what they would have expected to pay were 
the trust fund not enacted.

                        CONSTITUTIONAL CONCERNS

    The allocations issue raises at least two notable 
constitutional questions relating to the taking of existing 
bankruptcy trust assets and placing them into the national 
trust; and the abrogation of existing insurance contracts. We 
cannot be certain how these questions would be resolved. 
Nevertheless, any analysis we conduct about a ``worse case 
scenario'' should take into account the possibility that some 
aspects of the trust fund could be held unconstitutional.

Existing bankruptcy trusts

    The first concern deals with the issue of taking existing 
bankruptcy trusts and placing those funds directly into the 
national trust fund. The existing trusts, in many cases, are a 
significant part of the current broken system. Often times, 
asbestos victims are paid only pennies on the dollar through 
these trusts. Yet, some of the bankruptcy trustees feel that 
any forced transition of trust assets to a national trust fund 
would be a serious constitutional problem. In a letter 
addressed to Senator John Cornyn from former Solicitor General 
Ted Olson, he makes the following points:

          In short, the FAIR Act would take resources belonging 
        to victims of asbestos exposure and alter, often in 
        material ways, their rights to recover for their 
        injuries. In the event the bill is not modified--by 
        allowing trusts to opt out of its coverage--the 
        trustees whom we represent would seem to have no choice 
        but to bring a lawsuit challenging these provisions as 
        unconstitutional.

    He then went on to describe that there would be three main 
arguments. First, that the FAIR Act violates the Takings Clause 
of the Fifth Amendment. Second, that the FAIR Act violates 
separation-of-powers principles by ``tampering with final 
judgments of the judicial branch.'' Third, the Act violates 
equal protection principles by ``specifically excluding 
bankruptcy-related recoveries from the Act's general protection 
of recoveries arising out of prior settlements and final 
judgments.''
    Without considering the merits of the possible litigation, 
our concern is that there is a very real possibility that the 
litigation will, in fact, occur and that there is at least the 
possibility that these existing trust fund assets will not be 
available for the national trust fund. Without these funds, the 
liquidity of the trust fund within the earliest years would be 
seriously jeopardized. We are concerned that this likelihood 
has not adequately been contemplated in the current funding 
analysis.
    Furthermore, it still is unclear to us the extent of the 
moneys in question in the existing bankruptcy trust funds. 
Often times, a value of $4 billion is quoted as the amount in 
question. However, this amount was the amount in question at 
the time negotiations were taking place on previous legislation 
in the 108th Congress. Now, as a result of the Halliburton 
bankruptcy and other ``wrapped up'' bankruptcy trusts, there 
may be as much as $7 to 10 billion in question. Again, we 
simply seek a full explanation as to the likely impact of these 
monies becoming unavailable.

Abrogation of insurance contracts

    As explained above, we are concerned about the impact this 
legislation will have on businesses being forced to pay into 
the fund despite previously having only minimal out-of-pocket 
expenses as a result of being well insured (or otherwise). This 
is not a new concern. Some of us raised these concerns in the 
Additional Views signed by Senators Grassley, Kyl, Sessions, 
Craig and Cornyn included in the Committee Report on S. 1125 in 
the 108th Congress:

          The bill also has the potential to create hardships 
        for companies who adequately insured themselves against 
        asbestos litigation exposure. Certain companies could 
        have expected minimal out-of-pocket exposure, but, by 
        virtue of previous litigation expenses that insurance 
        covered, will qualify for a more expensive tier. One 
        company, which expected only ten million dollars in 
        out-of-pocket expenses, calculates that its obligation 
        under the bill would be $500,000,000 over the 27 year 
        life of the fund. During the markup, the Chairman 
        committed to working to resolve this problem prior to 
        floor action because of this type of gross unfairness. 
        Resolution of this is critical.\9\
---------------------------------------------------------------------------
    \9\Senate Report No. 108-118, 108th Congress, 1st Session 76 (July 
30, 2003).

    But the issue is heightened further by the possibility of a 
constitutional challenge. Again, without commenting on the 
merits of the arguments, we are concerned that a number of 
companies will challenge the trust fund on the grounds that the 
legislation ``could be declared unconstitutional, as applied to 
certain defendants, under the Takings and Due Process Clauses 
of the Fifth Amendment.''\10\ This is the contention of at 
least one law professor and constitutional scholar, David 
Strauss, who has been retained by National Service Industries, 
Inc. Such a challenge could, as any other possible 
constitutional challenges, undermine the viability of the trust 
fund.
---------------------------------------------------------------------------
    \10\Letter from Professor David Strauss to Chairman of the 
Judiciary Committee Orrin Hatch, 3/5/2004.
---------------------------------------------------------------------------
    We believe that the allocations concerns explained here 
must be resolved for the trust fund is to be successful. The 
well being of victims of asbestos exposure depends on the long 
term viability of the trust fund and the trust fund cannot 
succeed without a fair allocations formula applied to those 
paying for the fund. We would like to note that Chairman 
Specter has been committed throughout the debate over this 
legislation to working out all serious issues, and that is true 
regarding this problem as well. We will continue to work to 
solve these serious problems in hopes that we can end the 
disastrous effects of the current broken asbestos litigation 
system.

                                   John Cornyn.
                                   Jon Kyl.
                                   Tom Coburn.

          ADDITIONAL VIEWS OF SENATORS CORNYN, KYL, AND COBURN

    A significant concern that the Trust Fund fails to address 
is the issue of 524(g) bankruptcies and a current flaw in the 
statute that should be resolved. A simple fix is required to 
fix the unintended result of inequity among creditor classes 
created by the 524(g) provisions added to the bankruptcy code 
in 1994. Such a fix simply would add language to that provision 
which would make clear that a class created by 524(g) is 
subject to the so-called ``cramdown'' procedures provided under 
11 U.S.C. Sec. 1129(b).
    While the Trust Fund ostensibly eliminates the concern 
going forward with respect to the creation of 524(g) trusts, 
the problem should not be left unresolved for two reasons. 
First, it is bad policy to leave such an apparent and 
troublesome flaw in the code. Second, because the Fund as 
currently written contemplates a reversion to the tort system, 
even if the Trust Fund is enacted it will be reasonably 
possible for the 524(g) provisions to one day again have an 
effect.

                               BACKGROUND

    At the end of the Chapter 11 process emerges a 
reorganization plan. The plan outlines the recovery that each 
class of creditors or stockholders will receive so that the 
company can emerge as a viable entity. For the plan to be 
adopted, it must be approved by each class, with each class 
requiring approval by two-thirds of the total amount and more 
than half of the number, subject to the judge's ``cramdown'' 
power described below.\1\
---------------------------------------------------------------------------
    \1\11 U.S.C. Sec. 1126(c) & (f)
---------------------------------------------------------------------------
    Cramdown is the judge's power to impose a reorganization 
plan over the objections of a class of creditors if the court 
finds it ``fair and equitable.''\2\ Cramdown thus provides a 
critical ``safety valve'' to prevent a creditor or stockholder 
class from vetoing a plan and holding up the proceedings. 
Without the cramdown provision, each creditor or stockholder 
group could hold the process hostage and refuse to allow the 
bankrupt company to emerge from Chapter 11 until its demands 
are met. The prospect of cramdown keeps the parties honest, 
prevents any one class from holding a ``veto'' and generally 
encourages consensus.
---------------------------------------------------------------------------
    \2\11 U.S.C. Sec. 1129(b)
---------------------------------------------------------------------------
The 524(g) bankruptcy code changes
    The 103rd Congress passed the Bankruptcy Reform Act of 
1994, an omnibus law directed at a wide variety of bankruptcy 
issues. One of those changes was the addition of section 524(g) 
and (h) to deal with asbestos bankruptcies. These amendments, 
among other things, create ``channeling injunctions,'' which 
channel all present and future claims to the bankruptcy trust 
and discharges the debtor from liability. In addition, for 
asbestos claimants, Section 524(g) increased the required class 
approval to 75 percent of asbestos claimants (and requires one 
person, one vote).\3\
---------------------------------------------------------------------------
    \3\11 U.S.C. Sec. 524(g)
---------------------------------------------------------------------------
    Most troubling, however, lawyers have argued that asbestos 
claimants created under Section 524(g) are exempt from 
cramdown. Unfortunately, at least one judge has interpreted it 
along these lines and it appears that many now are interpreting 
Section 524(g) as preventing the application of cramdown to any 
asbestos class.\4\ Further, there appears to be no legislative 
history supporting congressional intent to cause this result, 
rather it seems to have been either an oversight whereby the 
drafters of Section 524(g) failed to cross-reference the 
cramdown section that would make clear the same judicial 
override should apply or a simple assumption that it would so 
apply.\5\ It seems highly unlikely that Congress would have 
granted an exemption from such a fundamental tenet of the 
bankruptcy code without any discussion whatsoever.
---------------------------------------------------------------------------
    \4\Report of the National Bankruptcy Commission p. 19.
    \5\See Mark D. Brodsky, Fixing the Asbestos Mess: Step One, January 
14, 2003 at 4
---------------------------------------------------------------------------
Result
    Because of the perceived exemption from cramdown, lawyers 
representing the asbestos classes are able to make significant 
demands of other classes and hold the process hostage if these 
demands are not met. Take, for example, the duration of 
asbestos bankruptcies since passage of 524(g) in 1994 as 
compared to the average duration of all bankruptcies since that 
time.
    The average length of time it has taken for companies to 
emerge from bankruptcy reorganization since enactment of 524(g) 
in 1994 has been slightly less than 15 months.\6\ In stark 
contrast, asbestos related bankruptcies have taken almost 3 
times as long, averaging more than 41 months and counting, as 
most remain pending.\7\ Some of the most complex bankruptcies 
in American history, including Worldcom and Enron, have been 
initiated and concluded subsequent to the filing of the largest 
contested asbestos bankruptcies, all of which languish 
unresolved.
---------------------------------------------------------------------------
    \6\The 2004 Bankruptcy Year and Almanac, p. 71.
    \7\The 2004 Bankruptcy Yearbook and Almanac, p. 195. In addition, 
this is based on available data and does not include, for example the 
recent wrap-up of Halliburton and certain other pre-packaged asbestos 
bankruptcies where there were no significant commercial creditors.
---------------------------------------------------------------------------
    As a result of the asbestos cramdown exclusion, companies 
in bankruptcy, their commercial creditors and their 
shareholders possess very little negotiating power. Even 
financially sound companies with asbestos exposure are 
detrimentally affected as they encounter difficulties in 
raising funds due to their unequal bargaining position in the 
event of a bankruptcy. 524(g) was intended to protect future 
asbestos claimants while allowing companies to emerge from 
Chapter 11 bankruptcy as viable entities. Instead, 524(g) has 
created a stalemate on both these fronts--preventing all 
parties to a bankruptcy from realizing a positive outcome.

                                SUMMARY

    The Asbestos Trust Fund contemplated under S.852 should 
include a fix to this seemingly unintended result. To do so 
would restore some sanity to the process in the unfortunate, 
but possible, event of a reversion to court should the Trust 
Fund become insolvent.

                                   John Cornyn.
                                   Jon Kyl.
                                   Tom Coburn.

              ADDITIONAL VIEWS OF SENATORS KYL AND COBURN

    When this committee reported an asbestos-trust fund bill in 
2003, some members 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.
    We have voted to report this bill out of committee, in no 
small part out of appreciation for the Chairman's extensive 
efforts to address our concerns about the bill. We 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 needs to work--we cannot shift victims 
back and forth between the tort system and the fund, especially 
those with malignant conditions who likely do not have long to 
live.
    Nevertheless, when we voted for this bill, we each 
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. We remain deeply concerned that this fund 
will run out of money and prove unable to pay all qualifying 
claimants. Allow us to explain why we are concerned about the 
fund's finances.
    In written questions to Dr. Francine Rabinovitz, who has 
been retained by trust-fund backers to estimate future claims 
under the Fund, Senator Kyl asked her about the experience 
under the asbestos bankruptcy trust funds. Those bankruptcy 
funds are the closest analog to what we are doing here--no-
fault funds that compensate all asbestos claimants that 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.
    We thank Dr. Rabinovitz for her candor. This is what she 
had to say:

          To my knowledge, none of the bankruptcy trust created 
        prior to 2002 have been able to pay over the life 
        anywhere close to 50% 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% (Manville) to 
        a high of 31.7% (Western McArthur). The only currently 
        operating Trust to pay 100% of its scheduled values is 
        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% payout 
        first to 10% and then 5% 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 we 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 worse. And the award values are high 
enough, with many categories in the hundreds of thousands of 
dollars, and several approaching or exceeding $1 million, that 
there inevitably will be intense interest among potential 
claimants in seeking an award from the Fund.
    Another precedent for this Fund that also should give us 
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 finally has enough revenue to 
pay current claimants, but is unable to service its debt--each 
year's interest is simply added on to the total debt. This is 
no way to run a trust fund.
    It is telling to read the history of this Fund and why it 
has become so overburdened. The narrative should sound familiar 
to anyone who has closely followed the proceedings in this 
committee. A June 12, 2002 report from the Congressional 
Research Service provides the following account:

          Defining and diagnosing the medical conditions that 
        should qualify one for compensation have been 
        contentious issues throughout the legislative, 
        regulatory, and adjudicative history of the [Black 
        Lung] program. The statutory definition of black lung 
        is less specific than the currently accepted medical 
        criteria for CWP. The law makes a person eligible if 
        one has ``a chronic dust disease of the lung and its 
        sequelae, including respiratory and pulmonary 
        impairments, arising out of coal mine employment'' (30 
        U.S.C. 902(b)). This clearly includes clinically-
        defined CWP but it could also include chronic 
        obstructive pulmonary disease (COPD), e.g., bronchitis, 
        emphysema or asthma. While CWP is almost always 
        associated with mine employment, COPD has many other 
        common causes, including smoking. The current 
        Department of Labor regulation (20 C.F.R. 718.201) 
        explicitly allows for COPD to be compensated as black 
        lung, but the Department emphasizes that the burden of 
        persuasion lies with the claimant to show that the 
        disease arose out of his coal mine employment.

    In other words, the Black Lung Fund's drafters ignored 
medical science when setting 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 unfavorable. The same 
CRS report goes on to note:

          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.
          [It was expected when the Black Lung Fund was created 
        that] the number of new cases would rapidly dwindle due 
        to the dust control measures mandated by the mine 
        safety act, and in the interim a federal ``Part C'' 
        benefit, administered by the Labor Department and 
        funded mostly by the employers of the claimants 
        (``responsible operators''), would serve as a temporary 
        backstop. What happened, though, was that claims were 
        much more numerous than expected, while it proved 
        difficult to find responsible operators, litigate their 
        challenges, and collect from them. Even so, the rate of 
        claim rejections was high enough to produce widespread 
        dissatisfaction and elicit a liberalization of criteria 
        via the 1972 and 1977 amendments.

    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.
    The committee already has 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 an utter 
disaster. We cannot let it happen.
    We wish that the 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 this 
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 us concern:
    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.
    Allocation. This is an emerging problem, the scope of which 
we are only gradually becoming aware. The bill requires 
companies to pay into the Fund based on their past ``asbestos 
expenditures''--judgments and 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 these companies' insurance 
contracts creates colorable takings claims against the Fund. It 
also creates some serious inequities. Companies which had found 
their asbestos liabilities to be manageable for many years 
suddenly will find themselves facing unaffordable Fund 
assessments. We still lack adequate data about who is actually 
paying for this Fund. Until such data is available, it is 
impossible to attempt to reallocate the Fund's burdens in order 
to assess inequities and other problems.
    Start Up. Much progress was made during the last days of 
mark up toward fixing the Fund's start-up provisions. 
Nevertheless, the Fund still ultimately allows claims to return 
to court if there are delays in start up, with no limits on 
awards and no offset from future Fund payments for 
participants. Other, much simpler trust funds, such as that 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 
and limits, such a start-up reversion would be disastrous for 
many companies.
    Pending Claims. The Fund allows claims that already have 
advanced to trial to remain in the tort system, with no offset 
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 apply 
to the start-up provisions, such continued litigation could be 
very damaging.
    Medical Criteria. Although improved over the 2003 committee 
bill--especially with regard to the 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 have expressed the view to us that these problems will 
bankrupt the Fund. For example, the continued use of CT scans 
to diagnose asbestosis in lung-cancer patients could alone 
devour all of the Fund's revenues. The Fund also still allows 
payments for colorectal, stomach, and other common cancers with 
no proven relation to asbestos exposure. These flaws in the 
bill would be less severe if the Fund contained some self-
correction mechanism that allowed tightening the medical 
criteria in the event of insolvency caused by non-meritorious 
claims, but the Fund currently contains no such mechanism.
    This bill remains a work in progress, and we are committed 
to addressing its problems as it advances through Congress. The 
bill is important to many people--to mesothelioma and other 
asbestos victims seeking compensation that might at least take 
care of their families, to businesses with only marginal 
connections to asbestos that nevertheless face bankruptcy 
through litigation, and to workers and pensioners who see their 
jobs and retirement accounts destroyed by the litigation 
juggernaut. This bill is too important for us to let it fail.

                                   Jon Kyl.
                                   Tom Coburn.

         ADDITIONAL VIEWS OF SENATORS BROWNBACK AND TOM COBURN

    The Senate Judiciary Committee's passage of a legislative 
solution to the asbestos litigation crisis long was thought--
and for some time, properly so--to be impossible. The 
Chairman's hard work, willingness to compromise, and ability to 
accommodate myriad interested parties overcame the substantial 
odds against progress and enabled Members to report favorably 
S. 852, the Fairness in Asbestos Injury Resolution Act of 2005, 
to the Senate floor.
    I write separately for two purposes: first, to commend the 
inclusion in the reported bill of two amendments I offered in 
Committee; and second, to promote for future consideration one 
amendment I circulated to my Judiciary Committee colleagues but 
refrained from formally introducing during the Committee's 
deliberation on S. 852.

  I. IMPROVEMENTS MADE: EXPLANATION OF BROWNBACK AMENDMENTS TO S. 852 
                           WHICH WERE ADOPTED

A. Tier VI contributors
    S. 852 appropriately separates contributors to the Asbestos 
Injury Claims Resolution Fund (hereinafter, ``Fund'') into 
different tiers, with assessments to be made on the general 
principle that contributions should be proportionate to a 
contributor's asbestos-related liability, as measured by its 
average annual expenditure on claims of injury from 
occupational asbestos exposure. While I approve of this 
principle, I was concerned that the bill as introduced could 
work an unfairness and/or hardship on Tier VI contributors, 
whose required contributions in some cases could greatly 
outstrip the amounts they had spent to fulfill settlements and 
satisfy judgments of asbestos exposure claims before 2003.\1\
---------------------------------------------------------------------------
    \1\I focused on the period prior to 2003 specifically because in 
that year, during the 108th Congress, this body began in earnest to 
search for a comprehensive, permanent legislative solution to the 
problem of asbestos litigation. See S. 1125, 108th Cong., 1st Sess. 
(2003). This, of course, has been the path recommended repeatedly by 
the Supreme Court, most recently in Norfolk & Western Ry. Co. v. Ayers, 
538 U.S. 135 (2003). It seems proper to assume that 2002 was the latest 
year in which plaintiffs, manufacturers, and insurers faced litigation 
incentives and made settlement decisions which were relatively 
unaffected by expectations of Congressional action.
---------------------------------------------------------------------------
    In order to preserve the general principle of 
proportionality in contributions, I circulated and introduced 
the following amendment:

          In section 203, page 132, line 13, insert after 
        ``following:'' the following:
          Notwithstanding any other provision of subsection 
        (g), any person or affiliated group within Tier VI 
        whose required subtier payment in any given year would 
        exceed such person's or group's average annual 
        expenditure on settlements and judgments of asbestos 
        disease-related claims over the ten years prior to 
        enactment of this Act shall make the payment required 
        of the immediately lower subtier or, if the person's or 
        group's average annual such expenditure over the ten 
        years prior to enactment of this Act is less than 
        $100,000, shall not be required to make a payment under 
        this Act.

    To ensure that the core of this amendment was included in 
the bill, I agreed to both a slight modification of the 
amendment and the inclusion of the modification in the Second 
Managers' Package of amendments, which ultimately was accepted 
by voice vote on May 11, 2005. The modified amendment, inserted 
within section 203(g) of the bill as reported, read as follows:

          (3) Other Payment for Certain Persons and Affiliated 
        Groups.--
          (A) In General.--Nothwithstanding any other provision 
        of this subsection, and if an adjustment authorized by 
        this subsection does not impair the overall solvency of 
        the Fund, any person or affiliated group with Tier VI 
        whose required subtier payment in any given year would 
        exceed such person's or group's average annual 
        expenditure on settlements, and judgments of asbestos 
        disease-related claims over the 8 years before the date 
        of enactment of this Act shall make the payment 
        required of the immediately lower subtier or, if the 
        person's or group's average annual expenditures on 
        settlements and judgments over the 8 years before the 
        date of enactment of this Act is less than $100,000, 
        shall not be required to make a payment under this Act.
          (B) No Further Adjustment.--Any person or affiliated 
        group that receives an adjustment under this paragraph 
        shall not be eligible to receive any further adjustment 
        under section 204(d).

    I am pleased that the amendment was adopted as part of the 
Second Managers' Package. The reported bill now clearly 
provides that any Tier VI contributor whose subtier 
contribution exceeds its average annual expenditure on 
asbestos-related settlements and judgments during the eight-
year period preceding enactment is entitled to a one-subtier 
stepdown (e.g., a Tier VI, subtier 1 contributor would instead 
make a subtier 2 level contribution). For a Tier VI, subtier 3 
contributor whose required contribution ($100,000, per section 
203(g)(2)(C)) exceeded its average annual expenditure on 
asbestos-related settlements and judgments, no contribution 
would be required, given that this is the lowest subtier within 
Tier VI.
    This amendment provides fairness to small businesses and to 
other companies that have carefully managed their asbestos 
liabilities, and I laud its ultimate inclusion in the bill as 
reported.
B. Post-certification opt-out
    The most obvious and fundamental purpose of every asbestos 
litigation reform bill in recent memory, including this one, is 
to provide a complete and predictable substitute to the 
idiosyncratic vagaries of the tort system. Yet S. 852 as 
introduced contained a major loophole that, if not filled, 
would have created an unsustainable dual-track recovery system 
which would be worse than the status quo.
    Specifically, section 106(f)(3)(E)(ii) of S. 852 originally 
provided that after the Administrator certified to Congress 
that the Fund was operational and was paying valid asbestos 
claims at a reasonable rate, claimants who had filed a lawsuit 
that had not yet proceeded to trial could still choose to stay 
in the tort system, instead of being required to channel that 
claim into the Fund (the bill deemed such claims to be 
``reinstated'' against the Fund).
    Thus, even after the Fund was up and running, hundreds of 
thousands of claimants who previously filed complaints in the 
tort system could have decided to opt out of the Fund 
altogether. The risk of this result would have been all the 
greater because plaintiffs' attorneys would have had a strong 
incentive post-certification to advise their clients against 
opting into the Fund: attorneys would receive one-third or more 
of their clients' recovery in litigation, but five percent at 
most in the Fund (as S. 852 consistently has provided).
    To fix this flaw, I circulated an amendment which stated 
simply as follows: ``In section 106(f)(3)(E)(ii), page 45, 
lines 14-15, strike `, may, at the option of the claimant,' and 
insert `shall.''' This provision aimed to prevent the combined 
chaos of an unpredictable tort system and a leaking Fund by 
requiring claims to be deemed reinstated against the Fund once 
the Administrator certified to Congress that the Fund is 
operational. Under my amendment, claimants would receive prompt 
and just recovery under the Fund for their injuries, and 
defendants and insurers would avoid the prospect of paying 
billions of dollars into both the Fund and the tort system at 
the same time.
    I am pleased that this amendment was included as part of 
the Second Managers' Package, which was accepted on May 11, 
2005. The bill now clearly precludes the post-certification 
opt-out of the Fund by asbestos claimants whose cases have not 
reached trial.

 II. AN AREA FOR IMPROVEMENT: ADMINISTRATION OF THE FUND BY A PRIVATE, 
                         NON-PROFIT CORPORATION

    Although I voted for S. 852 on final passage in Committee, 
I believe the bill could be made better. One particular item on 
which I recommend future consideration involves private 
administration of the Fund.
    Both as introduced and as reported, S. 852 provides for the 
administration of the Fund by the Department of Labor. See S. 
852, 109th Cong., 1st Sess., at Sec. 101(a)(1); Committee 
Report, supra at 36 (``The FAIR Act establishes the Office of 
Asbestos Disease Compensation (the Office) within the 
Department of Labor for the purpose of providing timely and 
fair compensation to individuals with asbestos-related injuries 
in a no-fault, non-adversarial manner.''). It is my belief that 
housing the Fund in the Department of Labor would not be the 
best way to achieve the laudable goals of just compensation for 
victims, certainty for manufacturers and insurers, and 
efficiency. Rather, administration of the Fund by a private, 
non-profit corporation would accomplish each of these goals 
much more effectively. I circulated an amendment which would 
have created such a non-profit corporation; the text of this 
amendment is included with these Additional Views as Appendix 
A.

A. Dangers of public administration

    Administration of the Fund by a federal agency could create 
an expectation that the federal government stands behind the 
Fund and is committed to ensuring its long-term solvency. That, 
in turn, would create a serious risk that taxpayers ultimately 
may have to bear huge unintended costs. Moreover, S. 852 as 
reported provides that the Fund may borrow directly from the 
Treasury, creating the danger that any default would come at 
the taxpayers' expense. See Sec. 221(b).\2\
---------------------------------------------------------------------------
    \2\Specifically, the Fund will be able to borrow up to five years' 
worth of anticipated assessments from the Federal Financing Bank.
---------------------------------------------------------------------------
    Extended experience with the Black Lung Trust Fund, also 
administered by the Department of Labor, demonstrates that the 
risks enumerated above are significant. In 1969, Congress 
passed the Coal Mine and Safety Health Act,\3\ which 
established a black lung compensation program to be 
administered by the Secretary of Labor. Separate legislation in 
1977 established a trust fund for the payment of black lung 
disability benefits.\4\ That Fund was to be financed by excise 
taxes levied on coal extracted and sold within the United 
States. But the Fund also could access financing from the 
Treasury to cover early claims. Proponents expected that the 
Fund would repay early advances from the Treasury (with 
interest) within a few years. But that did not happen. Instead, 
the Fund owed $2.8 billion to the Treasury by the end of 1985. 
Congress then instituted a five-year moratorium on interest 
charges by the Treasury, transferring a significant portion of 
the ongoing costs of the Fund to U.S. taxpayers by effectively 
requiring them to subsidize the Fund's financing.\5\ And the 
worst may still be to come: The Fund's debt currently exceeds 
$8 billion, and should the Fund default in ultimately repaying 
its debt, the taxpayers will again have to pay the charge. For 
further information on the problems which have attended the 
Black Lung program since its inception, see generally CRS 
Report for Congress, ``The Black Lung Benefits Program'' (June 
12, 2002) (included as Appendix B); Id. at CRS-2 (``The program 
is administered by the Division of Coal Mine Workers' 
Compensation, which is a component of the Office of Workers' 
Compensation Programs in the Department of Labor.''); id. at 
CRS-4 (``Virtually all of the expectations for the Black Lung 
Benefits Act when it was enacted in 1969 * * * were 
contradicted by subsequent experience. * * * As a consequence, 
the trust fund has perennially been in a position of growing 
deficit,'' which is financed at taxpayer expense.).
---------------------------------------------------------------------------
    \3\Pub. L. 91-173, 83 Stat. 792-798.
    \4\Black Lung Benefits Reform Act of 1977, Pub. L. 95-239, 92 Stat. 
95.
    \5\Consolidated Omnibus Reconciliation Act of 1985, Pub. L. 99-272, 
Sec. 13203(b).
---------------------------------------------------------------------------

B. Advantages of private administration

    Private administration of the Fund would yield several 
advantages. First, a non-profit corporation would process 
claims more efficiently than a government agency and would 
speed up the process for delivering justice to victims. A 
primary reason is that a corporation could adopt streamlined 
personnel, management, regulatory, and government contracting 
processes. For example, the corporation would be able to use 
time-saving personnel mechanisms from the private sector, such 
as hiring temporary personnel from employment agencies and 
hiring personnel who have outstanding qualifications without 
having to wait until a certain amount of time had passed before 
the positions could be filled. Because the new corporation 
would be staffed more quickly than a government agency, it is 
likely that the corporation would also be able to pay the most 
meritorious and exigent claims more quickly than a federal 
government agency could.
    Next, the corporate governance of the non-profit would be 
structured to insulate the start-up process so that those 
charged with administering the Fund would be focused solely on 
doing so responsibly. The corporation would be run by a Board 
of Directors appointed by the President (perhaps cabinet 
secretaries serving ex officio, as with the Pension Benefit 
Guaranty Corporation). The day-to-day operations of the 
corporation would be managed by a Chief Executive Officer 
appointed and removable by the Board--thus ensuring a high 
level of accountability and responsiveness. Administering the 
Fund responsibly, and compensating victims fairly and 
expeditiously, would be the only priorities of the 
corporation's directors and officers.
    Additionally, a non-profit corporation, much more so than a 
traditional federal program, could be set up to minimize the 
potential for changing course mid-stream. Unfortunately, 
compensation schemes run by the federal government have a 
history of changing the rules in the middle of the game. Most 
recently, for example, the energy workers compensation program 
has expanded substantially in size and scope. In the asbestos 
context, private stakeholders have signaled their willingness 
to participate in a trust fund solution precisely because it 
provides the certainty they need to resume job-creating 
activities. Private administration would minimize the risk of 
disrupting contributors' reliance on the Fund's sound 
operational structure.
    Third, a non-profit corporation provides the best hope for 
ensuring that the Fund will not end up requiring a taxpayer 
bailout of private defendants and private insurance companies. 
Legislation can be crafted to impose structural controls and 
constraints on the corporation to ensure even-handed 
administration of the Fund and institutional discipline to 
prevent defaults and shortfalls.
    Administering the fund through a non-profit corporation, as 
my amendment would have provided, would give Congress the 
flexibility of allowing the corporation to borrow from 
alternative sources, and would have reduced the likelihood of 
depending, during any part of the life of the Fund, upon the 
public fisc.

C. Ample precedents for private administration

    Creating a non-profit corporation to serve important 
governmental objectives would hardly be unprecedented. To the 
contrary, Congress has routinely created non- profit 
corporations of various types. Perhaps the most well known is 
the Corporation for Public Broadcasting. The Public 
Broadcasting Act of 1967 ``authorized to be established a 
nonprofit corporation * * * which will not be an agency or 
establishment of the United States Government.''\6\ The 
Corporation was established under the laws of the District of 
Columbia and operates as a nonprofit, non-political 
organization. Similarly, Congress established the Legal 
Services Corporation as a 501(c)(3) ``private nonmembership 
nonprofit corporation,''\7\ and created the Neighborhood 
Reinvestment Corporation, which ``shall not be considered a 
department, agency, or instrumentality of the Federal 
Government.''\8\ Non-governmental features of these non-profits 
include exemptions from the Freedom of Information and Federal 
Advisory Commission Acts, the ability to sue and be sued, and 
to invest funds and acquire property. Each congressionally 
created non- profit has its own unique governance structure, 
but all perform functions in the public interest. And each non-
profit corporation embodies a legislative judgment that 
Congress's objectives could best be met outside the normal 
federal bureaucracy.
---------------------------------------------------------------------------
    \6\See 47 U.S.C. Sec. 396.
    \7\P.L. 93-355; 42 U.S.C. Sec. 2996.
    \8\P.L. 95-557; 42 U.S.C. Sec. 8101.
---------------------------------------------------------------------------
    More recently, in the Sarbanes-Oxley Act of 2002, Congress 
created the Public Company Accounting Oversight Board (``the 
Board''), as a private-sector, non-profit corporation that 
``shall not be an agency or establishment of the United States 
Government.''\9\ The Board oversees the auditors of public 
companies in order to protect the interests of investors and 
further the public interest in the preparation of informative, 
fair, and independent audit reports--a decidedly public 
function. Congress provided that funds to cover the Board's 
annual budget are to be collected from ``issuers'' in the form 
of an ``accounting support fee.'' Once each year, the Board 
computes the fees based on the Board's budget for that year, as 
approved by the Securities and Exchange Commission. Using its 
discretion, the Board allocates fees based on the average 
monthly U.S. equity market capitalization of publicly traded 
companies, investment companies and other equity issuers. Thus, 
like the Asbestos Injury Claims Resolution Corporation my 
amendment envisioned, the Board plays a substantial role and 
exercises significant discretion both in the collection of fees 
and the expenditure of resources.
---------------------------------------------------------------------------
    \9\P.L. 107-204; 15 U.S.C. Sec. 7201.
---------------------------------------------------------------------------
    The record of other congressionally created non-profit 
corporations confirms that operations would begin quickly. For 
example, the Pension Benefit Guaranty Corporation, which was 
established on September 2, 1974,\10\ received its first 
premium from a participating employer less than three weeks 
later. The Corporation for Public Broadcasting, which was 
established on November 7, 1967,\11\ made its first broadcast 
just over three months later. And the Tennessee Valley 
Authority, which was established on May 18, 1933,\12\ began 
work on its first construction project less than five months 
later. As these examples show, the non-profit corporation's 
initial steps would be taken almost immediately.
---------------------------------------------------------------------------
    \10\See 29 U.S.C. Sec. 1302.
    \11\See 47 U.S.C. Sec. 396.
    \12\See 16 U.S.C. Sec. 831.
---------------------------------------------------------------------------

D. The constitutional propriety of private administration

    Despite the fact that Congress has routinely created 
various non-profit corporations, some critics might suggest 
that creating a non-profit to administer the asbestos trust 
fund might offend the Constitution. That criticism is based on 
the premise that the non-profit corporation would be 
``private'' for constitutional purposes. As Chairman of the 
Subcommittee on the Constitution, Civil Rights, and Property 
Rights, I do not take that criticism lightly. Careful review, 
however, reveals that the premise upon which it rests is 
legally flawed.
    Under the rule laid down by the Supreme Court in Lebron v. 
National Railroad Passenger Corp., 513 U.S. 374 (1995), a non-
profit corporation created to house the asbestos trust fund 
would be deemed part of the federal government for 
constitutional purposes. The Court stated in Lebron that 
``where * * * the Government creates a corporation by special 
law, for the furtherance of governmental objectives, and 
retains for itself permanent authority to appoint a majority of 
the directors of that corporation, the corporation is part of 
the Government * * *.'' Id. at 400. The creation of a non-
profit corporation to administer the asbestos trust fund would 
satisfy both prongs of the Lebron test. First, there is no 
dispute that the non-profit corporation would be created by 
Congress to further specific ``governmental objectives.'' 
Second, the government would ``retain[] for itself permanent 
authority to appoint a majority of the directors'' under the 
proposal, which provides for Presidential appointment of the 
Board of Directors. For constitutional purposes, then, the non-
profit corporation would be deemed a part of the federal 
government and would stand on the same footing as an office 
located in a federal agency.
    For this reason, objections to the corporation on grounds 
that it violates the Seventh Amendment and the non-delegation 
doctrine are misplaced. As to the former, the Seventh Amendment 
guarantees the right to a jury trial in suits involving common-
law claims, but the Seventh Amendment does not apply to claims 
brought against the government. See, e.g., Glidden Co. v. 
Zdanok, 370 U.S. 530, 572 (1962). Where, as here, ``the United 
States abolishes a cause of action and then sets up a separate 
administrative remedy against itself, * * * the seventh 
amendment does not require that it must also provide a jury 
trial.'' In re Consolidated U.S. Atmospheric Testing 
Litigation,  820 F.2d 982, 992 (9th Cir. 1987) (quoting Hammond 
v. United States, 786 F.2d 8, 15 (1st Cir. 1986)). Because any 
claim against the corporation would be one against the United 
States for constitutional purposes, the Seventh Amendment does 
not apply.
    As to the latter objection, the non-profit corporation 
would be deemed part of the federal government for 
constitutional purposes and therefore would not trigger the 
heightened scrutiny under the non-delegation doctrine accorded 
to private entities. Rather, were my amendment adopted, the 
legislation establishing the corporation would be subject only 
to the traditionally lenient standard that applies to 
congressional delegations to the executive branch, which the 
legislation would satisfy.
    In sum, nothing in the Constitution or laws of the United 
States bars Congress from creating an asbestos trust fund 
administered by a non-profit corporation, and good government 
militates in favor of such administration. It is therefore my 
hope that this amendment will receive due consideration in 
future deliberation on S. 852.
                                   Sam Brownback.
                                   Tom Coburn.
                               APPENDIX A

                              ----------                              

  On page 6, strike lines 19 through 22, and insert the 
following:
          (1) Chief executive officer.--The term ``Chief 
        Executive Officer'' means the Chief Executive Officer 
        for the Asbestos Injury Claims Resolution Corporation 
        appointed under sections 101(b) and 109(b).

  On page 15, line 1, strike all through page 16, line 11, and 
insert the following:

                  TITLE I--ASBESTOS CLAIMS RESOLUTION

       Subtitle A--Asbestos Injury Claims Resolution Corporation

SEC. 101. ESTABLISHMENT OF ASBESTOS INJURY CLAIMS RESOLUTION 
                    CORPORATION.

  (a) In General.--
          (1) Establishment.--There is established an Asbestos 
        Injury Claims Resolution Corporation (referred to in 
        this Act as the ``Corporation'' to undertake a program 
        on compensation for injuries suffered by exposure to 
        asbestos. The Corporation shall undertake the 
        performance of the duties in this Act.
          (2) Purpose.--The purpose of the Corporation is to 
        provide timely, fair compensation, in the amounts and 
        under the terms specified in this Act, on a no-fault 
        basis and in a non-adversarial manner, to individuals 
        whose health has been adversely affected by exposure to 
        asbestos. Compensation amounts provided by the 
        Corporation shall be subject to the availability of 
        funds in the Asbestos Injury Claims Resolution Fund.
          (3) Expenses.--There shall be available from the 
        Asbestos Injury Claims Resolution Fund to the Chief 
        Executive Officer sums reasonably necessary for the 
        administrative and legal expenses of the Corporation, 
        not to exceed $100,000,000 for the first 6 years, 
        $50,000,000 for the following 10 years, and $25,000,000 
        thereafter.
  (b) Appointment of the Chief Executive Officer.--
          (1) In general.--The Chief Executive Officer shall be 
        appointed by the Board of Directors of the Asbestos 
        Injury Claims Resolution Corporation, to serve for a 
        term of 5 years.
          (2) Removal.--The Chief Executive Officer may be 
        removed at any time by the Board of Directors for any 
        reason the Board determines sufficient.
  (c) Duties of Chief Executive Officer.--
          (1) In general.--The Chief Executive Officer shall be 
        responsible for--

    On page 18, line 21, strike all through page 19, line 12, 
and insert the following:

          (2) Certain enforcements.--For each infraction 
        relating to paragraph (1)(H), the Chief Executive 
        Officer also refers such matters to the Attorney 
        General who may impose a civil penalty not to exceed 
        $10,000 on any person or entity found to have submitted 
        or engaged in a materially false, fraudulent, or 
        fictitious statement or practice under this Act. The 
        Attorney General shall prescribe appropriate 
        regulations to implement paragraph (1)(H).
          (3) Selection of deputy chief executive officers.--
        The Chief Executive Officer shall select a Deputy Chief 
        Executive Officer for Claims Administration to carry 
        out the Chief Executive Officer's responsibilities 
        under this title and a Deputy Chief Executive Officer 
        for Fund Management to carry out the Chief Executive 
        Officer's responsibilities under title II of this Act. 
        The Deputy Chief Executive Officers shall report 
        directly to the Chief Executive Officer.

          On page 46, strike lines 3 through 14, and insert the 
        following:

SEC. 107. AUTHORITY OF THE CHIEF EXECUTIVE OFFICER.

  The Chief Executive Officer on any matter within the 
jurisdiction of the Chief Executive Officer under this Act may 
subpoena persons to compel testimony, records, and other 
information relevant to the responsibilities of the Chief 
Executive Officer under this section. The subpoena may be 
enforced in appropriate proceedings in the United States 
district court for the district in which the person to whom the 
subpoena was addressed resides, was served, or transacts 
business.

SEC. 108. ESTABLISHMENT OF CORPORATION.

  (a) Federal Charter.--There is established a corporation to 
be known as the Asbestos Injury Claims Resolution Corporation 
(``Corporation'').
  (b) Nature of Corporation.--The Corporation is a nonprofit 
corporation and shall have no capital stock. The Corporation is 
not an agency or establishment of the United States Government.
  (c) Termination of Corporation.--The Corporation shall 
dissolve 40 years after the date of enactment of this Act, 
unless dissolved sooner by the Board. All remaining funds held 
by the Corporation shall be distributed to the defendant 
participants and insurer participants in proportion to the 
percentage of assessments paid into the Corporation.

SEC. 109. BOARD OF DIRECTORS; OFFICERS AND EMPLOYEES; CONFLICTS.

  (a) Board of Directors.--There shall be in the Corporation a 
Board of Directors. The Board shall appoint the Chief Executive 
Officer and formulate the policies of the Corporation.
  (b) Appointment.--The Corporation shall have a Board of 
Directors (``Board''), consisting of 7 members. The Board shall 
be appointed as follows:
          (1) Designated members.--The Secretary of the 
        Treasury, the Attorney General, and the Secretary of 
        Labor shall serve as members of the Board.
          (2) Appointed members.--The remaining 4 members of 
        the Board shall be appointed by the President. The 
        members of the Board shall not, by reason of such 
        membership, be deemed to be officers or employees of 
        the United States.
          (3) Ineligibility.--None of the Directors shall be 
        individuals who, for each of the 5 years before their 
        appointments, earned more than 15 percent of their 
        income by serving in matters related to asbestos 
        litigation as consultants or expert witnesses.
  (c) Operation of the Board.--
          (1) Chair.--The Board shall be chaired by a member 
        elected by the Board, but the Chairperson may not be a 
        full-time Federal employee.
          (2) Meetings.--Meetings of the Board may be convened 
        by the Chairperson upon reasonable notice, but the 
        Board shall meet at least once per year.
          (3) Quorum.--A quorum shall consist of all of the 
        Directors or their representatives.
          (4) Compensation.--The compensation of each member of 
        the Board shall be paid by the Corporation as current 
        expenses. Each member other than members serving by 
        virtue of their Federal office shall be compensated at 
        the daily equivalent of the highest rate payable under 
        section 5332 of title 1, for each day (including travel 
        time) during which the member is engaged in the actual 
        performance of duties as a member of the Board. Members 
        of the Board shall be reimbursed by the Corporation for 
        actual, reasonable, and necessary expenses (including 
        traveling and subsistence expenses) incurred by them in 
        the performance of the duties vested in the Board by 
        this Act.
  (e) Officers and Employees.--
          (1) Status.--Officers and employees of the 
        Corporation are not employees of the Federal Government 
        as a result of their service with the Corporation.
          (2) Chief executive officer.--There shall be in the 
        Corporation a Chief Executive Officer who shall be 
        responsible for carrying out the functions of the 
        Corporation as described in section 101(c) and in 
        accordance with policies established by the Board. The 
        Chief Executive Officer shall be appointed by the Board 
        of Directors under section 101(b) and on such 
        additional terms as the Board may determine and may be 
        removed by the Board of Directors in accordance with 
        section 101(b)(2). The Chief Executive Officer shall 
        receive compensation at the rate provided by law for 
        the Vice President of the United States.
          (3) Appointment.--The Chief Executive Officer shall 
        appoint, remove, and fix compensation for all 
        subordinate officers and employees of the Corporation 
        as determined necessary.
          (4) Compensation.--No officer or employee of the 
        Corporation, other than the Chief Executive Officer, 
        may be compensated by the Corporation at an annual rate 
        of pay which exceeds the rate of basic pay in effect 
        for level I of the Executive Schedule under section 
        5312 of title 5, United States Code.
  (f) Conflicts of Interest.--No part of the Corporation's 
revenue, income, or property shall inure to the benefit of its 
directors, officers, and employees, and such revenue, earnings, 
or other income, or property shall be used for the carrying out 
of the corporate purposes set forth in this Act. No director, 
officer, or employee of the corporation shall in any manner 
directly or indirectly participate in the deliberation upon or 
the determination of any question affecting his or her personal 
interests or the interests of any corporation, partnership, or 
organization in which he or she is directly or indirectly 
interested.
  (g) Regulations.--
          (1) Authority.--The Attorney General, after 
        consultation with the Secretaries of the Treasury and 
        of Labor, shall issue regulations imposing on the Chief 
        Executive Officer, the Deputy Chief Executive Officers, 
        and the Board a fiduciary duty to manage the affairs of 
        the Corporation with prudence in order to provide 
        timely compensation to eligible claimants, giving 
        appropriate priority to those most ill, while also 
        preserving the funds available to the Corporation in 
        order to compensate all eligible claimants.
          (2) Sunset.--Effective 2 years after the enactment of 
        this Act, all authority to issue and revise regulations 
        under this section shall terminate.
  (h) Personal Liability.--The Chief Executive Officer, Deputy 
Chief Executive Officers, and members of the Board shall be 
exempt from civil liability for any act or omission committed 
within the scope of their employment with the Corporation, 
except for acts that constitute gross negligence or intentional 
wrongdoing.
  (i) Corporate Compliance Officer.--
          (1) In general.--The Board of Directors shall 
        establish within the Corporation a Corporate Compliance 
        Office headed by a Chief Compliance Officer selected by 
        the President on the basis of integrity and 
        demonstrated ability in accounting, auditing, financial 
        analysis, law, management analysis, public 
        administration, or investigations.
          (2) Independence.--Neither the Board nor the Chief 
        Executive Officer shall prevent or prohibit the Chief 
        Compliance Officer from initiating, carrying out, or 
        completing any audit or investigation during the course 
        of any audit or investigation.
          (3) Staff.--The Board shall authorize the Chief 
        Compliance Officer to obtain sufficient staff and other 
        resources to carry out the function of the position.
          (4) Duties.--It shall be the duty and responsibility 
        of the Chief Compliance Officer to--
                  (A) provide policy direction for, and to 
                conduct, supervise, and coordinate audits and 
                investigations relating to the programs and 
                operations of the Corporation;
                  (B) recommend policies for, and to conduct, 
                supervise, or coordinate other activities 
                carried out or financed by the Corporation for 
                the purpose of promoting economy and efficiency 
                in the administration of, or preventing and 
                detecting fraud and abuse in, its programs and 
                operations;
                  (C) recommend policies for promotion of 
                economy and efficiency in the administration 
                of, or the prevention and detection of fraud 
                and abuse in, programs and operations 
                administered or financed by the Corporation, or 
                the identification and prosecution of 
                participants in such fraud or abuse;
                  (D) keep the Chief Executive Officer, the 
                Board, and Congress fully and currently 
                informed concerning fraud and other serious 
                problems, abuses, and deficiencies relating to 
                the administration of programs and operations 
                administered or financed by the Corporation; 
                and
                  (E) recommend corrective action concerning 
                such problems, abuses, and deficiencies, and 
                report on the progress made in implementing 
                such corrective action.
          (5) Criminal violations.--In carrying out the duties 
        and responsibilities established under this section, 
        the Chief Compliance Officer shall file a criminal 
        complaint with the Attorney General whenever the Chief 
        Compliance Officer has reasonable grounds to believe 
        there has been a violation of Federal criminal law.

SEC. 110. POWERS; OFFICES; TAX LAWS; AUDIT; ANNUAL REPORT.

  (a) Powers.--In furtherance of the purposes of the 
Corporation, the Corporation may--
          (1) adopt bylaws consistent with law;
          (2) adopt, alter, use, and destroy a corporate seal;
          (3) sue and be sued, complain and defend, in its 
        corporate name and through its own counsel, in courts 
        of competent jurisdiction;
          (4) enter into contracts and modify, or consent to 
        the modification of, any contract or agreement to which 
        the Corporation is a party or in which the Corporation 
        has an interest;
          (5) make advance, progress, or other payments;
          (6) own and dispose of property;
          (7) issue written policies and statements; and
          (8) exercise any and all powers established under 
        this Act and such incidental powers as are necessary to 
        carry out its powers, duties, and functions under 
        section 101 and other provisions of this Act.
  (b) Principal and Branch Offices.--The Corporation shall 
maintain its principal office in the metropolitan Washington, 
DC, area. The Corporation may establish offices in any place or 
places in which the Corporation may carry on all or any of its 
operations and business.
  (c) Tax Laws.--The Corporation, including its franchise and 
income, shall be exempt from the tax laws and from taxation now 
or hereafter imposed by the United States, or any territory or 
possession thereof, or by any State, county, municipality, or 
local taxing authority.
  (d) Audit.--The programs, activities, receipts, expenditures, 
and financial transactions of the Corporation shall be subject 
to audit by an independent certified public accounting firm 
under generally accepted accounting principles that would apply 
to a private not-for-profit corporation. The auditing firm 
shall have access to such books, accounts, financial records, 
reports, files, and such other papers, things, or property 
belonging to or in use by the corporation and necessary to 
facilitate the audit, and they shall be afforded full 
facilities for verifying transactions with the balances or 
securities held by depositories, fiscal agents, and custodians. 
A report on each such audit shall be made by the auditing firm 
to the Board of Directors, to the Secretary of the Treasury, 
and to Congress.
  (e) Annual Report.--Within 6 months after the close of each 
fiscal year, the Corporation shall submit to the President and 
to the Committees on the Judiciary of the Senate and the House 
of Representatives the report on the activities of the 
Corporation during the prior fiscal year required under section 
405 of this Act.
  (f) Annual Report Certification.--Before submission of the 
annual report required under section 405 of this Act, the Chief 
Executive Officer and the Deputy Chief Executive Officers, in 
regard to their particular areas of responsibility, shall 
certify that--
          (1) the signing officer has reviewed the report;
          (2) based on the officer's knowledge, the report does 
        not contain any untrue statement of a material fact or 
        omit to state a material fact necessary in order to 
        make the statements made, in light of the circumstances 
        under which such statements were made, not misleading;
          (3) based on such officer's knowledge, the financial 
        statements, and other financial information included in 
        the report, fairly present in all material respects the 
        financial condition and results of operations of the 
        Corporation as of, and for, the periods presented in 
        the report;
          (4) the signing officers--
                  (A) are responsible for establishing and 
                maintaining internal controls;
                  (B) have designed such internal controls to 
                ensure that material information relating to 
                the Corporation is made known to such officers 
                by others within the Corporation, particularly 
                during the period in which the periodic reports 
                are being prepared;
                  (C) have evaluated the effectiveness of the 
                Corporation's internal controls as of a date 
                within 90 days before the report; and
                  (D) have presented in the report their 
                conclusions about the effectiveness of their 
                internal controls based on their evaluation as 
                of that date;
          (5) the signing officers have disclosed to the 
        Comptroller General and to the independent auditing 
        firm--
                  (A) all significant deficiencies in the 
                design or operation of internal controls which 
                could adversely affect the Corporation's 
                ability to record, process, summarize, and 
                report financial data and have identified any 
                material weaknesses in internal controls; and
                  (B) any fraud, whether or not material, that 
                involves management or other employees who have 
                a significant role in the Corporation's 
                internal controls; and
          (6) the signing officers have indicated in the report 
        whether or not there were significant changes in 
        internal controls or in other factors that could 
        significantly affect internal controls subsequent to 
        the date of their evaluation, including any corrective 
        actions with regard to significant deficiencies and 
        material weaknesses.

    Make all technical and conforming amendments changing 
references from the Administrator to the Chief Executive 
Officer and from the Office of Asbestos Disease Compensation to 
the Asbestos Injury Claims Resolution Corporation.

                               Appendix B

                              ----------                              




                 ADDITIONAL VIEWS OF SENATOR HERB KOHL

    I write separate views on S. 852, the FAIR Act, to 
highlight certain amendments that passed in Committee and to 
specify my reasons for supporting this legislation. This 
version of the FAIR Act represents an improvement over the bill 
as introduced, and a major improvement over past asbestos bills 
considered in the 108th Congress.
    That said, given the complexity of this issue, no bill will 
be a panacea. Perfection is not the standard, rather, the 
proper test is to compare the current tort system with the 
proposed legislation and then determine which will be better 
for victims--both now and in the future. That is the bottom 
line. Despite the bill's shortcomings, I believe that victims 
will be better served by this trust fund than by the tort 
system.
    We would do well to step back and look at why Congress got 
involved in this issue in the first place. A significant 
problem exists for many asbestos victims who simply do not 
receive proper compensation for their injuries. Let me explain 
why. Bringing an asbestos lawsuit today is no easy assignment. 
First, you have to find a company that caused your asbestos 
exposure and then hope that company has not gone bankrupt. 
Considering the fact that many exposures took place decades ago 
and that many of the primary defendants went bankrupt long ago 
illustrates just how difficult it is to find someone to sue.
    Even if the injured person finds someone to sue, many 
victims find themselves stuck in line--oftentimes behind those 
who are not yet sick from asbestos--and wait years for their 
day in court. Even then, if they win a verdict or receive a 
settlement, receiving that money can be delayed by appeals and 
further bureaucratic logjams. And finally, after waiting years 
for compensation, some awards are slapped with subrogation 
suits that seek to reimburse insurance companies that picked up 
the tab for medical bills. Quite simply, this system is broken 
and cannot sustain itself.
    A legislative alternative presents a more optimistic 
picture for victims so long as certain principles are met. 
First and foremost, we must be convinced that victims will get 
a better deal in the trust fund than they do now. Second, some 
of us are concerned that the current bill eliminates 
compensation for certain lung cancer victims. Finally, we all 
should be concerned that the money pledged to this trust fund 
is actually going to be there if and when this bill becomes 
law.
    These primary considerations are highlighted below, 
including comments on my amendments that have addressed some of 
these concerns.
No subrogation of awards
    There have been several improvements to this bill that 
favor victims. For example, it is very important that there 
will be no subrogation of a victim's award received from the 
trust fund. This means that an award will be a real dollar 
amount as promised under this legislation and will not be 
subject to legal hassles to pay back past claims and diminish 
the amount of money in the pockets of the victims.
Mesothelioma research funding
    We must do more for victims than simply writing them a 
check. We owe current and future victims a significant effort 
to find a cure and better treatment options for the deadliest 
asbestos disease, mesothelioma. That is why I worked with 
Senators Specter and Leahy to include an amendment that will 
provide $290 million to support efforts to better diagnose, 
treat, and find a cure for mesothelioma. Specifically, The 
amendment will provide $29 million a year (funded jointly by 
the trust fund and the NIH) for ten years for the following: 
$25 million for ten meso research centers across the country 
($2.5 for each center); $2 million for a meso registry and 
tissue bank which are crucial for research; and $2 million for 
a meso education center that will better educate meso victims 
on treatment options and assistance. My amendment has the 
support of the Mesothelioma Applied Research Foundation (MARF) 
who we worked closely with in drafting this plan. Quite simply, 
if we are going to create a $140 billion trust fund to 
compensate the mass casualties of asbestos exposure, we must 
also commit resources to find a cure and better treatment 
options for the deadliest asbestos disease. This will be money 
very well spent and it also represents some hope for future 
victims.
Institute of Medicine study regarding CT scans
    If we are interested in compensating true victims of 
asbestos-related disease, then we should allow the best and 
most modern medicine to make those determinations. It is 
difficult to accept that some lung cancer victims who were 
exposed to asbestos will not be eligible for compensation under 
this legislation. But, we have done the next best thing by 
adopting my amendment which simply instructs the Institute of 
Medicine (IOM)--which is part of the non-partisan National 
Academies--to find out whether CT scans can be appropriately 
used to detect scarring of the lung caused by asbestos.
    In particular, the IOM would study if CT scans should be 
used to detect this sort of asbestos-caused lung scarring in 
lung cancer victims eligible for compensation under the trust 
fund (the ``Level VII'' claims). The IOM's determination on 
this issue will be binding upon the Administrator. And if the 
Institute makes CT scans available for diagnosing scarring of 
the lung, we expect that the Institute will create a uniform, 
reliable and consistent standard for the use of CT scans.
Funding methodology
    It is the $140 billion question to ask whether or not the 
money pledged to the fund is going to be there for victims. It 
is unsettling to think of this trust fund never getting off the 
ground because the money does not come into the fund as 
envisioned. In an ideal world, I would prefer to delay the 
start-up of the Fund after enactment and allow pending cases to 
continue in the tort system until we have the entire list of 
defendant and insurer contributors and the size of their 
contributions made public. That said, I have studied this issue 
extensively and I feel that Chairman Specter and Senator Leahy 
have made responsible decisions and that the funding 
methodology is as certain as possible.
    The evidence on this point supports the bill. A recent RAND 
report estimates that there are 8400 companies that have been 
named as defendants in asbestos litigation--and the RAND report 
concludes that is a conservative estimate. Combining the large 
number of contributors with the guarantee that this pool of 
defendant companies will contribute $3 billion in the aggregate 
each year for the next thirty years boosts my confidence that 
the money will be there for the victims. The guarantee is 
jointly and severally shared by all companies. This ensures to 
a significant degree the solvency of this fund. In addition, 
tough enforcement provisions are in place to hold contributors 
accountable for their obligation to pay into the fund. And, if 
we are wrong about all of this and the entire system fails, 
then the victims will be able to return to the tort system. 
Clearly, given the dire state of the current system, it is in 
everyone's best interests to see this trust fund work.
    To be sure, voting in favor of this trust fund is a 
calculated risk. And when one considers that we are risking the 
well-being of thousands of asbestos victims, we had better be 
very sure that we get this right. I think we do a good job of 
ensuring that victims will get paid.
    Though this bill is complicated, my support rests on very 
simple and straightforward reasoning. First and foremost, the 
trust fund will put more money in the pocket of the victim than 
the current system. The same RAND study cited earlier also 
found that of all the money spent in the current system--an 
estimated $70 billion--roughly 42 cents of every dollar winds 
up in the victim's pocket. The trust will give at least 95 
cents of every dollar to the victim, and in pro bono cases or 
those where no lawyer is needed, 100 cents of every dollar. 
Further, the trust fund will provide certainty that the money 
will be there, whereas the current system is fraught with 
uncertainty. Between moving court dates, settlement delays, 
appeals, attorney fees and the subrogation of court awards, no 
one with a straight face can tell you how much you will get in 
the current system and when you will get it.
    This legislation and the trust fund it creates is a better 
approach than the current system for making victims whole in a 
timely, predictable and reliable fashion. I look forward to 
continuing to work with Chairman Specter, Ranking Member Leahy, 
and others to make this bill the best possible product it can 
be for asbestos victims and to see it passed on the Senate 
floor.
                                   Herb Kohl.

              ADDITIONAL VIEWS OF SENATOR DIANNE FEINSTEIN

    I write separate views on S. 852, the FAIR Act, to clarify 
amendments that I authored and that were adopted in Committee 
and to highlight the specifics about why I believe these 
amendments were important to the underlying legislation. The 
bill that passed out of Committee reflects a substantial 
improvement over the FAIR Act as introduced and over the bills 
that were under consideration in the 108th Congress.
    Throughout the Committee's consideration of asbestos 
legislation the record has been filled with examples of why 
reform is needed. The State and Federal courts face a 
litigation crisis, businesses and insurers continue to go 
bankrupt, and too often victims are left without recourse 
either because of the backlog of cases or the inability to have 
their awards paid in full. As a result, the sickest victims can 
often wait years before their claims are resolved and paid.
    In California, however, the legal system has served many 
victims well by ensuring that terminal individuals have their 
cases heard in a timely manner. The procedures in my state have 
also led to quick payments and settlements for the most serious 
claims. However, some states do not employ these same 
procedures.
    During consideration of asbestos legislation, I have been 
concerned with two major goals: (1) to ensure that the sickest 
individuals are compensated in a timely and fair manner; and 
(2) to do all that we can to ensure that the trust fund is 
successful for all parties and stakeholders. With these goals 
in mind, I offered several amendments that were adopted.
Transparency amendment
    One of the major concerns with the legislation has been 
regarding whether the amount of money that is expected to be 
paid will actually materialize. This concern has lead to 
questions about which companies are paying; how much they are 
paying; and when the payments will be made.
    The Chairman and Ranking Member have made several 
improvements to the bill to ensure that protections are in 
place in case the underlying assumptions prove inaccurate or in 
case the funding formula has flaws or unintended consequences. 
In addition, they have added numerous ``transparency'' 
provisions to ensure there is wide disclosure and ability to 
correct any inaccurate information that is submitted to the 
Administrator.
    However, there were many Senators, including myself, that 
expressed concern about passing legislation that relies on 
private funding without knowing the actual sources of the 
funding and without having the ability to have public scrutiny 
before the legislation is passed. While I recognize there were 
a variety of reasons this information could not be produced, I 
continued to believe that there needed to be an additional 
incentive for the participant companies and insurers to get 
their contributions into the fund.
    Therefore, the language I authored would prevent the 
Administrator from certifying the Trust as operational until 
sixty days after publication in the Federal Register of all the 
required information necessary to determine each company that 
must pay into the trust and how much they will be required to 
pay under the bill. My language also made clear that insurers 
must provide their information to the Administrator within 30 
days from enactment and that the insurer information must also 
be published in the Federal Register with sixty days provided 
for public scrutiny. Only once both of these preconditions are 
met, may the Administrator take steps to certify that the fund 
is operational and paying all valid asbestos claims at a 
reasonable rate.
    Other amendments with a similar goal were offered which 
would have prohibited the legislation from taking effect until 
a certain time period after the information was produced. These 
approaches, however, could slow down the collection of money 
into the trust and could weaken the ability of the 
Administrator to get the trust operational as quickly as 
possible.
    My amendment was a compromise that allowed the 
Administrator and the Department of Labor to move forward with 
the implementation of the legislation, but prohibited complete 
operation of the fund until there is full and public disclosure 
as well as time to review.
Start up amendment
    The committee report explains operation of the start up in 
detail; however, I believe it is important to succinctly 
summarize the provision and further explain the evolution of 
the language and the intent behind it.
    The language I drafted creates a streamlined process to 
ensure that exigent health claims are resolved and paid on an 
expedited basis following enactment of the Act. Exigent health 
claims are specifically defined to include individuals with 
mesothelioma or a diagnosis of less than one year to live. To 
get their claims resolved, an exigent individual would file 
their claim with the Administrator or claims facility; or they 
could file a notice of intent to seek a settlement. There are 
specific requirements regarding what information that is 
required to file a claim, and the individual is given 60 days 
to complete their claim application.
    The language clarified that the claims facility shall 
operate as an outside contractor of the Administrator and that 
the Administrator is ultimately responsible that the processes 
provided in the legislation is adhered to by the claims 
facility. Specifically, the language states that the 
regulations promulgated under the act will apply to the claims 
facility. This further clarifies that the claims facility is 
acting as an arm of the Administrator and may not act on its 
own accord outside of the statutory requirements or the interim 
regulations issued by the Department of Labor.
    Once the exigent claimant provides all the required 
documentation, the Administrator must determine whether the 
claimant does have an exigent health claim, and if so, what 
their payment must be. Upon certification that the claim is 
exigent, there must be notice to the claimant and the 
defendants. If, for any reason, the Administrator cannot 
certify a claim or pay a claim, then the defendants or insurers 
may pay the terminal individual directly.
    If they fail to do so, there is a penalty, and the amount 
the individual is entitled to receive automatically increases 
to one-hundred-and-fifty percent of what the individual is 
entitled to receive under the trust. If the exigent health 
claim still fails to be paid within the nine month stay, then 
that individual may return to court without any limitations on 
their rights or recovery.
    In addition, the language specifies that Administrative 
appeals can be made from a determination made by the claims 
facility under the same process as is made available when a 
proposed decision is made by the Administrator. Therefore, if 
an exigent individual disagrees with any decision made by the 
claims facility, they may appeal to the Administrator and they 
maintain the same rights to further judicial review as an 
individual whose claim is processed by the trust fund.
    This process should provide terminal individuals an 
expedited path to have their claims paid quickly. I felt this 
was important for a variety of reasons.
    Under California's Rules of Civil Procedure, if a doctor 
certifies that there is ``substantial uncertainty'' about 
whether the individual will live for another six months, those 
cases may be given preferential treatment to be set for trial 
within 120 days. This provision has ensured that terminal 
individuals in California have their cases before a court or 
settled quickly. In addition, it has served to ensure timely 
payment to terminal individuals as well.
    Given that these victims are terminal, I have consistently 
advocated that their cases be prioritized under the 
legislation. Congress is taking a step to strip individuals of 
their fundamental right to a trial, and in doing so, we must 
take every precaution to ensure that those who are sick and 
dying from asbestos exposure are compensated in a fair and 
timely manner, especially individuals who have a short life 
expectancy.
    During the previous Congress, I had originally proposed 
allowing all claims to proceed in the court system until the 
trust fund becomes operational. I felt this was important to 
provide an incentive for businesses and insurers to get their 
money in quickly and for the trust to do all it can to become 
operational as quickly as possible. This also ensured that 
victims would not have their rights abrogated and left without 
recourse for an extended period of time. My amendment that 
incorporated this policy was unanimously adopted by the 
Judiciary Committee.
    However, the amendment ultimately met with significant 
opposition from both the business and insurer communities. 
There was a real concern about the ability of companies to 
simultaneously pay into the trust while continuing to face the 
current caseloads in the courts. In addition, concerns were 
raised about the potential drain on the trust fund and the 
subsequent impact on its stability. In an effort to address 
these issues, I sought to find a compromise that would address 
cash flow limitations of the companies while at the same time 
maintaining necessary protections for victims, especially for 
terminal individuals.
    My initial compromise would have provided a ninety-day 
window to the Administrator to get the trust fund operational. 
If the Administrator was unable to meet this deadline, then 
terminal individuals could proceed in court. I provided an 
extended timeframe to the Administrator for other non-terminal 
victims. This too met with strong opposition and fundamentally 
provided an unrealistic amount of time for the new trust to 
become fully functioning.
    After many negotiations and conversations with stakeholders 
and other members of the Committee, the compromise that is now 
in the bill was struck. This compromise attempts to balance the 
legitimate concerns of all sides. Clearly, it is not what any 
one stakeholder would prefer. Victims and labor organizations 
continue to strongly advocate that my original proposal should 
remain intact, and businesses and insurers continue to advocate 
that victims should never be allowed to proceed in the courts 
during the start up, or that if they are their rights should be 
severely restricted. Neither of these extremes are feasible. 
Instead, a real compromise is the only way to get a bill 
enacted and to achieve a workable solution.
    My amendment combines the changes that were requested by 
business, insurers, and other Senators to narrow the scope of 
the start up provisions to limit the risk businesses and 
insurers must face, while at the same time provide a timely 
process for terminal victims, a safety valve for all 
individuals, and a strong incentive for businesses and insurers 
to cooperate with the Administrator. This was a tough balance 
to achieve, but the language in the bill does just that.
    The biggest change in the start up provisions is to allow a 
claims facility to pay terminal individuals the amount they 
would receive under the trust, and to let a successful 
operation of such claims facility serve as a trigger to stop 
cases from proceeding in court. This provision should help 
ensure that claims are processed quickly. It should also serve 
to limit and alleviate the flood of claims that could overwhelm 
the fund in the initial years.
    In addition, by allowing defendants and insurers the 
opportunity to pay claims directly, the ability to avoid higher 
costs and a possible court case is in their hands and under 
their control. The bill provides that the settlement amount 
automatically rises to one-hundred-and-fifty percent of the 
amount required under the trust if the company tries to avoid 
or delay payment. In addition, the bill provides victims with 
an opportunity to return to court if the company or insurer 
still refuses to pay their claim.
    If the company or insurer does not settle the claims as 
directed under the legislation, it is the company and insurer's 
choice to take that risk and face larger expenses and possibly 
much larger damages in court. Significantly, if an individual 
is forced to return to court to receive their payment, they 
cannot later have their case pulled out of court, nor will 
there be any limits on their rights to recover or secure 
representation.
    Finally, the expedited payment language serves to ensure 
that mesothelioma victims and individuals who have been 
diagnosed with a life expectancy of less than one year receive 
their awards quickly and not force them to wait years for their 
payment. One of the principle purposes of doing this 
legislation and setting up a trust fund is to provide victims 
with a system that takes less time, energy and resources and, 
at the same time, expedites the payments they need and deserve. 
The start up language should assist in achieving this goal.
Judicial review
    Another concern that has consistently been raised is 
whether the courts will determine that the provisions directing 
the trust fund to appropriate the monies from the confirmed 
bankruptcy trusts will be held to be constitutional. Clearly, 
there are strong held beliefs on both sides and the record 
contains legal opinions from many scholars.
    Regardless of how the courts ultimately decide, one thing 
is clear--there will be a constitutional challenge. In order to 
ensure that cases challenging the act do not serve to undermine 
the efficacy of the legislation there must be specific 
provisions in place to ensure enough funding is available to 
cover the costs and claims while a court review is underway. 
The Chairman and the Ranking Member included various provisions 
to address this goal, including a ``guarantee surcharge.'' This 
would raise additional funds to cover the liquidity needs of 
the trust should the bankruptcy trust monies be held up in 
court or fail to materialize altogether.
    In addition, I was concerned that the bill must contain a 
strong and efficient judicial review procedure to ensure cases 
are decided upon as quickly as possible. While language was 
included in the bill as introduced, the McCain-Feingold 
campaign finance legislation that was recently enacted into law 
has had its judicial review provisions tested and proven 
effective. Therefore, I offered an amendment to modify the bill 
to provide that any constitutional challenge of the act or its 
provisions shall be filed in the United States District Court 
for the District of Columbia and heard by a three-judge court 
panel.
    A final decision in the action shall be reviewable only by 
appeal directly to the Supreme Court of the United States. Such 
appeal shall be taken by the filing of a notice of appeal 
within 10 days, and the filing of a jurisdictional statement 
within 30 days, of the entry of the final decision. Since this 
is a tested and successful model it should serve to resolve 
constitutional questions efficiently and effectively.
    It is also important to clarify how this provision 
intersects with the start up provisions. The start up 
provisions as I drafted should proceed even if a court suspends 
operation while it determines constitutional questions. This 
means that the claims facility should continue to make 
settlements with exigent claimants to the extent permitted by 
the court, because the timelines for processing exigent claims 
would remain intact. Therefore, the Administrator must continue 
to work towards ensuring that the claims facility and the 
national trust become operational in order to avoid a reversion 
to the courts. If this administrative process cannot be 
accomplished because of a court order, businesses and insurers 
should on their own initiative, continue to make settlement 
offers to avoid a reversion to the tort system since the 
timelines for when a claim may return to court cannot be 
tolled.
Settlements
    Contamination of asbestos has occurred for decades, and 
individuals who were exposed have been getting sick or dying 
from its use and distribution. Given its significant history, a 
sizable number of victims have already sought relief investing 
years of time and resources to having their situations 
addressed.
    While the trust is designed to provide a more efficient and 
satisfactory solution, there are some claims that should not be 
preempted and should remain in tact. Where to draw the line on 
which claims must go to the trust and which may stay out was 
the subject of much negotiation and many different proposals. 
Finally, a compromise was reached that in principle would allow 
enforceable settlements to remain outside the trust.
    However, defining this principle proved to be complicated 
and it involved several additional layers of negotiations. In 
the bill as introduced, some interpreted the language as wiping 
out enforceable settlements that were not intended to be 
eviscerated. For example, I was concerned that the language 
could be read to eliminate an enforceable settlement between a 
mesothelioma victim and a defendant company simply because the 
company had their outside lawyer sign the settlement rather 
than their CEO. This is a ridiculous outcome and certainly was 
not the intent of the compromise.
    To remedy this, I authored an amendment that would preserve 
settlements even if they were not signed ``directly'' by the 
insurer or the business. My amendment deleted the word 
``directly'' to clarify that the CEO does not need to sign the 
agreement for it to be valid and remain outside the trust. In 
addition, the amendment added language to clarify that 
settlements secured by ``immediate family'' members would also 
remain outside the trust even though they too are not signed 
``directly'' by the plaintiff.
Criminal acts
    Drafting comprehensive asbestos reform legislation has been 
a significant undertaking, and even upon enactment it is clear 
that those who want to maintain the current tort system will 
continue their attacks. In addition, there are provisions that 
could raise various constitutional challenges, like the 
previous bankruptcy trusts discussion. I continue to believe 
that the Congress should do all it can to ensure the trust fund 
is successful and protected from legal challenges that are an 
attempt to induce failure.
    This year the Committee received a letter from Professor 
Erwin Chemerinsky expressing his belief that the provision in 
the bill that would provide a $400,000 floor to individuals 
exposed to vermiculite in Libby, Montana would raise an Equal 
Protection problem.
    He stated, ``I believe that the courts would invalidate 
this provision as violating the Fifth Amendment guarantees of 
equal protection and due process.''
    Whether the courts eventually agree with his assessment, I 
was concerned that the legislation be tightened as much as 
possible to prevent an Equal Protection challenge. Initially, I 
sought to offer an amendment that would apply the $400,000 
floor to any individual whose claim is based on asbestos 
exposure arising from a company's actions that have been the 
subject of a criminal indictment.
    However, this proved to be an ineffective solution since 
the distinguishing characteristics of the exposure in Libby, 
Montana was not simply limited to the type of vermiculite mined 
from the W. R. Grace's plant, but also included the uniqueness 
of the exposure, the proliferation of asbestos fibers, and the 
direct actions that impacted the community.
    Therefore, I worked with the Chairman and the Ranking 
Member and Senator Baucus to strengthen the language in the 
bill and to further develop the record establishing the 
uniqueness of Libby. In the end, as part of a manager's 
package, new language was included in the bill that further 
outlined why the Libby-specific provisions should be protected 
from an equal protection challenge.
Expedited payments amendment
    As discussed in the start up section, one of my primary 
concerns has been to ensure that terminal individuals have 
their claims resolved and paid quickly. I have consistently 
stated that if Congress is going to take an action that would 
eliminate an individual's fundamental right to a trial, we must 
ensure that individuals are being protected and provided a 
system that does not further exacerbate the injustices they 
have already endured.
    I was very concerned when I re-read the bill as introduced 
and realized that the structured payment provisions covered 
individuals with exigent health claims. This meant that 
mesothelioma victims and individuals who have been diagnosed as 
being terminally ill from asbestos-related diseases with a life 
expectancy of less than one year could have their payments 
stretched out over three years, and possibly four years.
    This was unacceptable. How can we tell an individual who 
has less than one year to live they are going to have to wait 
for three years to get their full payment? While the bill 
language provided the Administrator with flexibility to 
establish ``accelerated payments'' for mesothelioma victims and 
``expedited payments'' for exigent cases, there were no time 
frames to quantify these provisions.
    Therefore, my amendment established specific payment time 
frames. Mesothelioma victims would be paid in one lump sum 
within 30 days from the time the claim was approved or six 
months from when the claim was filed, whichever is shorter. 
Other exigent victims would be paid within six months after the 
claim was approved, or one year after the claim was filed, 
whichever is shorter.
    In addition, my amendment addressed concerns raised by the 
business and insurance communities that expedited payments 
could cause a cash flow problem. To respond, my amendment 
provided the Administrator with flexibility to extend payments 
if she determines that solvency of the fund would be severely 
harmed. If such a determination is made payments may be 
extended for mesothelioma cases to six months from the date the 
claim is approved by the Administrator, or eleven months from 
the date when the claim is filed, which ever is shorter; and 
for other exigent cases, one year from the date the claim is 
approved by the Administrator; or two years from the date the 
claim is filed; which ever is shorter.
Naturally occurring asbestos amendment
    As time marches on, unfortunately, new concerns about 
asbestos exposure have come to light. In my home state of 
California, and in some other states across the country, 
communities are discovering veins of naturally occurring 
asbestos in the ground. These veins are not new; however, the 
medical risks associated with them remain unquantifiable and 
raise real concerns.
    With the discovery of naturally occurring asbestos in 
California, I realized that the definition of asbestos 
contained in the legislation did not include the type of 
asbestos found in my state. Clearly, the intent of the 
legislation is to cover all forms of asbestos. Therefore, I 
authored an amendment that modified the language to include 
asbestiform amphibole minerals to ensure individuals from my 
home state who would qualify under the medical criteria are not 
prohibited from receiving an award simply because of an error 
in the definition of asbestos.
    In addition, there has been much confusion about the 
section of the bill entitled ``exceptional medical claims''. 
The intent of this language is to provide a separate path for 
those individuals who do not meet the precise medical criteria 
under the bill, yet do suffer from the specific asbestos-
related diseases enumerated and defined in the bill, to have 
their cases reviewed and evaluated by a medical panel. This 
process would eliminate the presumptions provided to those who 
do qualify under the medical criteria, but it would give 
victims an opportunity to be compensated by the Fund for their 
asbestos-related conditions.
    This exceptional medical claims provision would provide the 
opportunity for those who are exposed to naturally occurring 
asbestos that has been released into the air either because of 
developers or other activities to have their cases considered 
by the trust. However, there were some who felt the language 
was not clear. Therefore, I authored an amendment that made 
this explicit.
    Finally, I authored a comprehensive amendment to more 
thoroughly address the problem of naturally occurring asbestos 
exposure and potential medical health risks to individuals and 
communities. My amendment was initially conceived to address 
the situation in California, however, as I looked into the 
situation I realized that many states across the country are 
dealing with this problem.
    Some have argued that nothing should be done in this area 
because there are not clear cases of individuals getting sick 
or dying from naturally occurring asbestos; this position is 
shortsighted. Congress has sat by for too long watching the 
asbestos crisis grow to outrageous proportions. Rather than 
again sitting back and failing to act unless thousands more 
become sick from a new asbestos threat, Congress should take 
proactive steps in evaluating whether there are potential 
health risks associated with exposure to naturally occurring 
asbestos.
    It is critical that the government evaluate whether there 
are health risks associated with exposure levels to naturally 
occurring asbestos in the communities where it exists. Then if 
there are levels of fibers that create risks, then communities 
need the appropriate tools to determine whether these risks are 
present in their neighborhoods and the tools necessary to 
protect the public from exposure.
    In a recent exposure assessment conducted by the 
Environmental Protection Agency (EPA) in areas of the Sierra 
foothills in California, asbestos fibers were found in almost 
all samples collected in an effort to measure personal 
exposures levels to naturally occurring asbestos during 
simulated recreational activities. The EPA has acknowledged 
concern over the measured exposure levels because of the 
potential for long-term development of asbestos-related 
diseases and the higher toxicity of amphibole asbestos present 
in the area.
    The citizens of the California Sierra foothill areas are 
becoming increasingly concerned and have demanded a 
clarification about potential health risks associated with 
exposure in their communities. The problem is the current risk 
assessment models used to evaluate health risks to asbestos are 
inadequate. They were designed to address the cancer risks 
associated with low-level occupational exposures over long 
periods of time and are insufficient to address variable 
exposures to naturally occurring asbestos or estimate non- 
cancer risks. Given the lack of sufficient information, study 
and evaluation are necessary.
    My amendment addressed this urgent need by requiring the 
EPA to evaluate within one year the appropriateness of the 
existing risk assessment values for naturally occurring 
asbestos and methods of assessing exposure, and to establish 
risk assessment models that incorporate the latest knowledge of 
exposure, toxicity of amphibole asbestos, and understanding of 
non-cancer risks. I urge EPA to complete this evaluation and 
establish a revised risk assessment model as quickly as 
possible.
    This amendment also provides the communities with the 
information, tools, and resources they need to understand how 
to minimize their exposure to naturally occurring asbestos and 
address existing contamination in their schools, public 
buildings and parks, and homes. My amendment also ensures that 
individuals residing in these areas may participate in the 
medical screening programs to detect any health risks early and 
then, hopefully, prevent further damage.
    It is often quoted that an ounce of prevention is worth a 
pound of cure. The time for Congress to move on this issue is 
long overdue and I believe proactively working to prevent 
further asbestos-related diseases from debilitating individuals 
and families is the right place to begin.
                                   Dianne Feinstein.

  XI. MINORITY VIEWS OF SENATORS KENNEDY, BIDEN, FEINGOLD, AND DURBIN

                          OUTLINE OF ARGUMENTS

    I. Introduction
    II. Background
    III. Problems with the Bill
        A. Inadequate Funding
            1. Number of Future Claims Remains Impossible to 
            Ascertain
            2. Up-Front Funding is Inadequate
            3. Resulting Additions to the Budget Deficit and 
            Taxpayer Burden
        B. Unanimously Adopted Medical Criteria Abandoned
            1. Exclusion of Lung Cancer Victims with 
            Substantial Asbestos Exposure
            2. Raising Standard to ``Substantial Contributing 
            Factor''
            3. Requirement for Bilateral Impairment Not Based 
            on Science
            4. Other Problems
        C. Requirement of Occupational Exposure
        D. Fairness Among Contributors
        E. A Risky Startup
        F. Lack of Transparency
        G. A Sunset in Name Only
        H. Inadequate Claims Values
        I. Replacing One Adversarial Process with Another
        J. Collateral Source Rule Not Fair to Victims
        K. Unfair Treatment of Asbestos Victims with Pending or 
        Settled Cases
            1. Even Exigent Cases Are Subject to a Stay
            2. Impact of Multiple Stays and Venue Rules
            3. Abrogating Existing Settlements
        L. Labor Department Delays in Administering the Trust 
        Fund
        M. Litigation Delays
        N. Unfair Restrictions Placed on Victims of Silica 
        Disease
        O. Special Interest Provisions and Changes During 
        Markup
    IV. Winners and Losers
    V. Conclusion

                            I. INTRODUCTION

    We offer these dissenting views on S. 852 because of our 
strong belief that the bill is seriously flawed. The Asbestos 
Trust Fund it creates is both unfair and unworkable. It 
completely excludes large numbers of seriously ill victims who 
are suffering and, in many cases, dying from asbestos-induced 
diseases, providing them with no compensation at all. Nor does 
the Trust Fund have adequate funding to ensure that all of 
those asbestos victims who are eligible to receive compensation 
under the terms of the bill will actually receive what the bill 
promises them.
    We would readily support a properly designed and adequately 
funded trust fund bill. It would have to fairly compensate all 
the victims of asbestos-induced diseases in a timely way. 
Unfortunately, S. 852 is not such a bill. In fact, S. 852 will 
leave a substantial number of the most seriously ill victims 
worse off than they are under current law.
    The real crisis which confronts us is not an ``asbestos 
litigation crisis;'' it is an asbestos-induced disease crisis. 
Asbestos is the most lethal substance ever widely used in the 
workplace, and it has left an unparalleled legacy of illness 
and death in its wake. All too often, the tragedy these 
seriously ill workers and their families are enduring becomes 
lost in a complex debate about the economic impact of asbestos 
litigation on defendant corporations. We should not allow that 
to happen.
    The litigation did not create these costs. Exposure to 
asbestos created them. They are the costs of medical care, the 
lost wages of incapacitated workers, and the cost of providing 
for the families of workers who died years before their time. 
Those costs are real. No legislative proposal can make them 
disappear. All bill can do is shift those costs from one party 
to another. Any proposal which would shift more of the 
financial burden onto the back of these seriously ill workers 
and their families is unacceptable to us.
    It is not enough to say that there are serious inadequacies 
in the way asbestos cases are adjudicated today. That does not 
mean that any legislative solution is better than the current 
system. Our first obligation is to do no harm. We regret to say 
that, despite the best intentions of its sponsors, this bill 
will do harm. We are compelled to oppose S. 852 for the 
following main reasons:
           The Asbestos Trust Fund created by this bill 
        is seriously underfunded. The funding plan in this bill 
        relies on very substantial borrowing in the early years 
        as the only way to pay the hundreds of thousands of 
        initial claims that will flood the system. The result 
        will be huge debt service costs over the life of the 
        Trust that could reduce the $140 billion intended to 
        pay claims by as much as 40 percent or more.\1\ The 
        amount remaining would be far too little to pay the 
        claims of all of those who are entitled to compensation 
        under the terms of the bill. The bill does not 
        guarantee that sufficient resources will be available 
        to keep the commitments which this bill makes to 
        eligible victims, and it fails to adequately protect 
        these victims should sufficient funds not be available 
        to compensate them.
---------------------------------------------------------------------------
    \1\Testimony of Mark A. Peterson, Before the Senate Committee on 
the Judiciary, ``Hearing on a Bill to Create a Fair and Efficient 
System to Resolve Claims of Victims for Bodily Injury Caused by 
Asbestos Exposure, and for Other Purposes,'' 109th Cong., April 26, 
2005, at 2-3.
---------------------------------------------------------------------------
           Seriously ill victims are not allowed to 
        continue their cases in court until the Trust Fund is 
        ready to process and pay claims. These victims will be 
        left in a legal limbo, unable to recover either in the 
        courts or from the Trust Fund, while time is running 
        out for them. Tragically, many of these claimants will 
        die from mesothelioma or other cancers while they wait 
        for the Trust Fund to become operational and for the 
        expected constitutional challenges to be resolved.\2\
---------------------------------------------------------------------------
    \2\As discussed further below, numerous time-consuming legal 
challenges to the bill are likely. See Letter from Theordore B. Olson 
to the Honorable John Cornyn, April 18, 2005; and Letter from Robert A. 
Falise, Chairman and Managing Trustee, Manville Personal Injury 
Settlement Trust, October 21, 2003. See also, Testimony of Eric D. 
Green, Professor of Law, Boston University School of Law, Before the 
Senate Committee on the Judiciary, ``Hearing on a Bill to Create a Fair 
and Efficient System to Resolve Claims to Victims for Bodily Injury 
Caused by Asbestos Exposure, and for Other Purposes,'' 109th Cong., 
April 26, 2005, at 7-8.
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           Tens of thousands of lung cancer victims who 
        have had very substantial asbestos exposure are denied 
        any compensation from the Trust Fund. Under the bill, 
        these victims would lose their right to go to court, 
        but receive nothing from the Trust Fund.
           The bill makes it harder for asbestos 
        victims to recover compensation from the Trust Fund by 
        unfairly raising the standard of proof. Victims should 
        simply have to prove that asbestos exposure was a 
        contributing factor to their disease. That is the 
        standard used in most state courts and workers' 
        compensation proceedings today. This bill requires a 
        much tougher standard.
           Compensation levels for the most severely 
        ill victims of asbestos-induced disease are too low. 
        The amounts were determined more on the basis of what 
        companies are willing to pay than on the basis of what 
        the victims deserve.
           The current bill does not honor all existing 
        court settlement agreements. By voiding these 
        settlements, the bill will force some victims whose 
        claims have been resolved in court to pursue their 
        claims all over again in the Trust Fund. That means 
        they will have to wait years to receive any 
        compensation for their injuries.
           The bill lacks a clear, automatic sunset 
        that allows victims to quickly seek compensation in the 
        courts if the Trust Fund becomes insolvent and unable 
        to pay their claims. The bill the Committee approved in 
        2003 contained such a provision, but the current 
        version of the bill does not. Under the current bill, 
        workers could end up trapped in the Trust with reduced 
        benefits and long delays before receiving their 
        payments.
           There is no compensation category for 
        victims of asbestos-induced diseases, other than 
        mesothelioma, whose exposure did not occur on the job. 
        Their illnesses were also caused by asbestos, and it is 
        unfair to ignore their plight. Their current right to 
        seek compensation through the courts is being taken 
        away, but they will receive no right to compensation 
        from the Trust Fund in return.
           Residents of other asbestos-contaminated 
        communities are denied the same opportunity to receive 
        compensation from the Trust Fund that the residents of 
        Libby, Montana, have under the bill. These residents of 
        Arizona, California, Illinois, Louisiana, 
        Massachusetts, Michigan, New Jersey, Oregon, 
        Pennsylvania, Texas and elsewhere\3\ are permitted to 
        file an ``exceptional medical claim'' seeking 
        compensation only if a study conducted by the Agency 
        for Toxic Substances and Disease Registry finds their 
        community contamination to be ``substantially 
        equivalent'' to Libby, Montana. Even assuming these 
        sick residents of contaminated communities can overcome 
        all of the bill's hurdles, the amount proposed for the 
        Trust Fund has never been calculated to include these 
        individuals. During Committee discussions, it became 
        clear that they have been excluded from compensation 
        solely because it is ``too expensive'' to cover them.
---------------------------------------------------------------------------
    \3\See www.EWG.org for entire list of communities that received 
10,000 tons or more of asbestos-containing material from Libby, 
Montana.
---------------------------------------------------------------------------
           Victims with complex cases will be unable to 
        find a qualified attorney to pursue their claims 
        because the bill imposes an inflexible cap on 
        attorneys' fees that ignores the amount of work that 
        the case would actually require.
           The bill takes away rights from victims of 
        silica disease even though they are not eligible to 
        receive any benefits from the Trust Fund.
           Despite much discussion in Committee 
        regarding the importance of transparency, the bill 
        fails to require full disclosure of the corporations 
        and insurers who will fund the Trust and the amounts 
        each of them will pay before victims lose their right 
        to proceed in court. That information is essential to 
        determine whether the promised $140 billion in funding 
        will actually be provided.
           The financial burden of funding the Trust 
        Fund is not fairly apportioned amongst the affected 
        businesses. Many smaller companies would be required to 
        pay more than they have historically paid in the court 
        system, while some of the largest corporations with the 
        greatest exposure would receive a huge windfall.
    These shortcomings cannot be overlooked. They are too 
fundamental. They will end up hurting the seriously ill victims 
of asbestos disease who we are trying to help. As evidenced by 
the aforementioned list of problems with S. 852, the bill 
focuses too much on providing relief to corporate defendants, 
and not enough on securing fair compensation for the thousands 
of victims of asbestos exposure, and their families.
    We are perplexed at the Committee's decision to report S. 
852 in its current form for Senate consideration. Even the 
bill's proponents recognize that their proposal is flawed and 
needs work. We believe that the bill's deficiencies are so 
significant that it will be impossible to correct them on the 
Senate floor.

                             II. BACKGROUND

    Hundreds of thousands of men and women, including many 
patriotic war veterans and defense workers, have died or become 
severely ill by exposure to asbestos. These deaths and 
illnesses were entirely preventable. Asbestos manufacturers, 
distributors and many employers, including the United States 
government, have known asbestos exposure was deadly since at 
least the 1930s, but workers were not told of the hazards they 
faced until it was too late.\4\
---------------------------------------------------------------------------
    \4\See http://www.ewg.org/reports/asbestos/documents.
---------------------------------------------------------------------------
    Asbestos is the most lethal substance ever widely used in 
the workplace. Between 1940 and 1980, more than 27.5 million 
workers in this country were exposed to asbestos on the job, 
and nearly 19 million of them had high levels of exposure over 
long periods of time. That exposure has irrevocably changed 
many of their lives.
    Each year, 10,000 of these victims die from lung cancer and 
other diseases caused by asbestos.\5\ Each year, hundreds of 
thousands of them suffer from lung conditions which make 
breathing so difficult that they cannot engage in the routine 
activities of daily life. Even more have become unemployable 
due to their medical condition.
---------------------------------------------------------------------------
    \5\See http://www.ewg.org/reports/lungcancer/.
---------------------------------------------------------------------------
    Because of the long latency period of these diseases, not 
only will the damage done by asbestos continue for decades but 
many of the exposed live in fear of a premature death due to 
asbestos-induced disease. In addition, many of the spouses and 
children of these workers, and their neighbors, have now been 
diagnosed with asbestos-related diseases.\6\ The real victims 
of the asbestos nightmare must be the first and foremost focus 
of our concern.
---------------------------------------------------------------------------
    \6\See http://www.ewg.org/reports/asbestos/facts/fact4.php.
---------------------------------------------------------------------------
    Despite the magnitude of the preventable tragedy that has 
been inflicted on working men and women throughout the United 
States, the debate in Committee has, in our view, been focused 
mostly on the harm of asbestos litigation to the economic fate 
of corporate defendants, some of which knowingly exposed 
workers to danger. We believe the innocent victims of asbestos 
exposure deserve as much, if not more, attention. Our position 
has been that appropriate funding for all the victims of these 
horrible diseases should be the precondition for creating a 
trust fund.

                      III. PROBLEMS WITH THE BILL

    S. 852 proposes to replace the current court system with a 
national Trust Fund that would resolve asbestos civil disputes 
and compensate those who have been injured by asbestos 
exposure. Accordingly, it would eliminate the rights of 
asbestos victims to a jury trial and compel them to seek 
compensation from the newly created Federal program.
    The Trust Fund is to be financed by assessments on 
corporations and businesses that have had previous asbestos 
liabilities or have been the subject of asbestos litigation. As 
it stands, it is unclear who this class of businesses includes. 
Supporters of the bill claim that it covers as many as 10,000 
American businesses, including many small and medium-sized 
businesses.
    The general aim of the Trust Fund is to provide victims 
fair and timely compensation on a no-fault basis, relieving 
them of the legal delays and costs associated with the court 
system, while relieving business firms of greater costs than 
they would face in the litigation system. The problem with S. 
852 is that it fails to meet these goals with respect to 
victims of asbestos-induced disease, as well as many of the 
affected business entities. It also likely creates new burdens 
for Federal taxpayers.
    In its current form, S. 852 not only fails to solve the 
asbestos litigation challenges facing the nation today, but it 
would exacerbate them for the overwhelming majority of groups 
that are directly affected by the issue.
    The bill artificially caps defendant and insurer liability 
at levels too low to provide full compensation to victims over 
the expected life of the Trust Fund, while explicitly excluding 
tens of thousands of cancer victims from receiving compensation 
in order to protect the financial interests of participating 
corporations. We believe this is the wrong approach.
    We believe that a Trust Fund paying timely, adequate 
compensation to all victims would be a good idea. But this 
asbestos bill is not, strictly speaking, a Trust Fund at all. 
It is not designed to fully fund payments to all beneficiaries.
    Congress has never before acted to limit compensation to 
victims when the court system was compensating them. S. 852 is 
unique among the compensation programs Congress has considered, 
in that for many victims its effect would be to eliminate a 
right to compensation rather than to create one. Past 
compensation programs have been designed to ensure that victims 
receive compensation when the courts have failed to provide 
relief. In the case of asbestos, Congress is stepping in not to 
protect victims, who some proponents of S. 852 claim receive 
too much, but to protect hundreds of companies from having to 
pay the full costs of the health effects they have caused.
    The essential components of such a fair Trust Fund would 
include:
           Adequate funding to fully compensate present 
        and future victims;
           Medical criteria which fairly reflect the 
        asbestos-related diseases currently compensated by the 
        court system;
           Claims values which reasonably reflect the 
        amount of compensation victims would receive in court; 
        and
           A non-adversarial, efficient claims 
        processing system which would speed payment of claims.
    We do not believe S. 852 meets this test.
    Rather, we believe that S. 852 represents a financial 
windfall for many asbestos defendants and insurers, while 
providing too little to victims of asbestos exposure. We 
believe this Trust Fund will leave many victims worse off than 
they are today. In many respects, S. 852 represents a retreat 
from the bill reported by the Committee during the last 
Congress.
A. Inadequate funding
    In our view, ensuring full funding for the best estimate of 
expected claims is a critical precondition before taking away 
an individual's right to a jury trial. Past efforts to resolve 
the asbestos litigation dilemma, both private and public, have 
foundered over the question of whether there would be enough 
money to pay benefits to future victims. S. 852 suffers from 
the same limitation because it fails to include adequate 
funding to ensure future victims will receive compensation.
    The proposed total funding of $140 billion over 30 years, 
and a proposed $42 billion of up-front funding in the first 5 
years, while large sums, are almost certainly going to prove 
inadequate to ensure fair compensation for asbestos victims 
over the short and long term. Just based on the hundreds of 
thousands of claims the program will face right away, the 
proposed $140 billion is insufficient. This insufficiency has 
resulted from the fact that the figure of $140 billion was 
determined based on what companies were willing to pay, not how 
much the Trust Fund is likely to require to fairly compensate 
individuals.
    Funding for the Trust should be tailored to increase or 
decrease as the needs of the Trust Fund demand. In other 
compensation programs, such as workers' compensation, payors 
must increase the amount they contribute when more claims than 
expected are approved. Under the Trust Fund proposed in S. 852, 
however, victims are faced with the threat that benefits will 
be reduced or medical criteria changed if funding for the Trust 
proves inadequate. Throughout Committee consideration of S. 
852, many suggestions for improvements to the proposal were 
rejected, apparently because of the view that there isn't 
enough money\7\. We do not believe that is an adequate answer. 
Congress has an obligation to protect the rights of the 
claimants to fair compensation--especially if the bill is going 
to take away their right to proceed in court.
---------------------------------------------------------------------------
    \7\See e.g. Oral Statement of Senator Arlen Specter, Senate 
Committee on the Judiciary, Executive Session, 109th Cong., May 19, 
2005, at 48.
---------------------------------------------------------------------------
    As it stands, the bill does not contain sufficient funding 
to adequately compensate all victims. The bill lacks 
transparency regarding what the companies will pay, leaving in 
great doubt whether the proposed funding will ever be raised. 
Additionally, it imposes higher costs on thousands of medium 
and small businesses than they face in the present court 
system. It also involves Federal outlays of tens of billions of 
dollars, thereby placing taxpayers at risk of having to absorb 
these costs without repayment because of the strong possibility 
of the Trust Fund's failure.
    When the Committee considered this issue during the last 
Congress, the Committee- reported bill, S. 1125, included up to 
$153 billion in funding. However, corporate defendants and 
insurers objected to paying that much money. Accordingly, 
following the Committee's action, S. 1125 was rewritten without 
the benefit of Committee deliberations, and re-introduced 
directly on the floor of the Senate as S. 2290.
    The revised bill, S. 2290, included only $118 billion in 
funding, even though the Congressional Budget Office (CBO) 
estimated that its benefits would cost $139 billion,\8\ not 
counting interest payments on any amounts that the Trust Fund 
would have to borrow, which have been estimated to be $32 
billion or more.\9\
---------------------------------------------------------------------------
    \8\See letter from Douglas Holtz-Eakin, Director, Congressional 
Budget Office, to Senator Don Nickles, April 20, 2004, at 5.
    \9\Analysis of Mark Peterson, April 13, 2005, p. 1; see also 
Statement of Mark A. Peterson Before the Senate Judiciary Committee 
Hearing of S. 852 ``Fairness in Asbestos Injury Resolution Act of 
2005,'' p. 6. April 26, 2005.
---------------------------------------------------------------------------
    CBO's cost estimate and analysis assumed that only 10 to 15 
percent of non-malignant claims would qualify for payment.\10\ 
Yet, well-qualified outside experts, such as David Austern of 
the Manville Trust, and Dr. Mark Peterson formerly with the 
RAND Corporation, predict that at least 55 percent or as high 
as 75 percent of claimants will qualify for compensation under 
the Trust Fund. Importantly, CBO admits its estimate is 
uncertain, and notes that if the expected claims are 
underestimated by merely 5 percent, the Trust Fund would 
require an additional $10 billion of funding to operate.\11\
---------------------------------------------------------------------------
    \10\See letter from Douglas Holtz-Eakin, Director, Congressional 
Budget Office, to Senator Don Nickles, April 8, 2005, at 3.
    \11\See Nickles letter, April 20, 2004, at 5.
---------------------------------------------------------------------------
    The funding problem is worse under S. 852. This year's bill 
includes $140 billion as the cap on funding. While this amount 
was agreed to outside the Committee's jurisdiction in private 
negotiations between Senators Frist and Daschle at the end of 
the last Congress, it was part of a negotiated compromise that 
they undertook for a different bill, with different medical 
criteria, and different claims values. According to experts, 
$140 billion bears no relationship to the amount truly needed 
to fully fund the benefits provided under S. 852.\12\ Indeed, 
the Committee has repeatedly narrowed the benefits provided to 
victims to try to ensure that the cost of S. 852 never exceeds 
$140 billion.
---------------------------------------------------------------------------
    \12\See Peterson testimony at 3-5.
---------------------------------------------------------------------------
    We believe this approach is backwards. The Committee should 
have retained the same set of medical criteria that were 
unanimously agreed to in a bipartisan manner by this Committee 
during the last Congress. This year's bill also should have 
developed reasonable claims values and insisted on the funding 
necessary to pay those benefits. Even accepting CBO's 
unrealistic estimate of a 10 to 15 percent approval rate for 
filing of non-malignant claims, outside experts believe that S. 
852 will cost at least $189 billion.\13\
---------------------------------------------------------------------------
    \13\See Nickles letter, April 20, 2005, at 5.
---------------------------------------------------------------------------
    Moreover, estimates of the number of asbestos claims and 
the amount necessary to pay those claims have proven woefully 
understated throughout the history of such predictions. Simply 
put, if corporate defendants and insurers pay no more than $140 
billion, the Trust Fund will not be able to pay the promised 
benefits to present and future victims.\14\
---------------------------------------------------------------------------
    \14\See also Peterson testimony at 3-5.
---------------------------------------------------------------------------
    CBO has not yet analyzed S. 852. However, it has already 
prepared cost estimates of previous similar bills, S. 1125 and 
S. 2290, which can be helpful in evaluating the solvency of the 
Trust Fund to be created by S. 852. S. 1125, the version 
approved by the Committee in the last Congress, would have 
required a maximum of $153 billion from corporate defendants 
and insurers to pay into the Trust Fund. That bill provided 
compensation levels which were significantly lower than those 
contained in S. 852.
    That bill, S. 1125, also allowed pending cases with a value 
of approximately $5 billion to remain in the court system. 
However, these pending cases have been brought into the Trust 
Fund by later versions of the bill, thereby creating an 
additional demand on the Trust Fund. CBO estimated that the 
cost of paying all the claims covered by S. 1125 at the claims 
values set in that bill would be $123 billion.
    It is worth noting that even with the exclusion of the $5 
billion of pending cases and the relatively low claims values 
in S. 1125, CBO nevertheless found that the amount of money 
needed to pay all the claims and to fund other operating 
expenses during the first 10 years would virtually equal the 
amount collected from corporate defendants and insurers during 
that period. If the $5 billion pending cases had not been left 
outside the Trust Fund, the costs would have exceeded revenues. 
CBO cautioned:

          There is a risk that the actual number of claims 
        received could exceed our estimate. There is also a 
        risk that revenues collected could be less than we 
        estimate. If either event were to occur, the amounts 
        collected could be insufficient to pay all claims.\15\
---------------------------------------------------------------------------
    \15\CBO Cost Estimates for S. 1125, October 2, 2003, at 2.

    This simply highlights what we all know--the Trust Fund 
will suffer from serious financial demands during the first 
decade of operation and we must ensure that the funds will be 
sufficient to cover those expenses. Otherwise, we are 
legislating certain failure.
    As indicated above, S. 2290 was introduced by Senator Frist 
to address various dissatisfactions raised by the corporate 
defendants and insurers with provisions of S. 1125. That 
revised bill sharply reduced the amount of money available to 
pay the claims of asbestos victims to a maximum of $118 
billion, which was $35 billion less than the amount approved by 
the Committee.
    At the same time, S. 2290 increased the compensation levels 
for some of the disease categories. CBO's analysis of S. 2290 
determined that the Trust Fund would face claims totaling about 
$140 billion, far more than the total available funding. As a 
result, CBO concluded that the Fund would need to borrow 
substantially in its early years of operation and that 
ultimately, ``the sunset provisions * * * would have to be 
implemented by the Asbestos Fund's administrator.''\16\
---------------------------------------------------------------------------
    \16\See Nickles letter, April 20, 2005, at 4.
---------------------------------------------------------------------------
    The CBO's letter emphasized the uncertainty of projecting 
Trust Fund finances:

          One area in which the potential costs are 
        particularly uncertain is the number of applicants who 
        will present evidence sufficient to obtain a 
        compensation award for nonmalignant injuries. CBO 
        estimates that about 15% of individuals with 
        nonmalignant medical conditions due to asbestos 
        exposure would qualify for awards under the medical 
        criteria and administrative procedures specified in the 
        bill. The remaining 85% of such individuals would 
        receive payments from the Fund to monitor their future 
        medical condition. If that projection were too high or 
        too low by only 5 percentage points, the lifetime cost 
        to the Asbestos Fund could change by $10 billion.\17\
---------------------------------------------------------------------------
    \17\See Kickles letter, April 20, 2005, at 6.

    CBO's estimate of the percentage of nonmalignant claims 
that would qualify for a monetary award is extremely low 
compared to the experience of the Manville Trust and other 
studies. This assumption alone could result in a very 
substantial underestimation of the actual cost of the Trust 
Fund's financial liability. The $140 billion estimate of S. 
2290's cost may well be too low.
    CBO's analysis of S. 2290 raises serious doubt about the 
solvency of S. 852. Many of the claims values in S. 852 have 
been raised above the levels set in S. 2290. While S. 852 has 
eliminated one disease category, the overall cost of payments 
is likely to be higher than under the earlier bill. Interest 
costs resulting from large scale borrowing by the Trust Fund 
are also likely to be higher.
    S. 852 provides a maximum of only $140 billion in 
contributions from corporate defendants and insurers, which is 
exactly the amount CBO estimated to be the cost of the less 
generous compensation provided for by S. 2290. Yet the current 
bill, S. 852, provides no cushion at all, and no margin for any 
financial error. As a result, the probability is more than 
great that the Trust Fund to be created by S. 852 will be 
seriously underfunded from the beginning and will remain so 
throughout its operation.
            1. Number of future claims remains impossible to ascertain
    The only way to ensure an adequate funding level is to base 
the total amount of the Trust Fund on some rational estimate of 
current and future claims activity. However, the bill fails to 
link the proposed funding to any reasonable estimate of claims. 
Without this information, or some meaningful mechanism to 
tailor the funding and assessments to the actual number of 
claimants, there is no assurance that sufficient funding will 
be available to adequately compensate victims. That means 
either the Trust Fund is doomed to fail, or claimants will be 
shortchanged down the line.
    In its analysis of S. 1125, CBO raised several red flags 
concerning the potential claims and liability costs:
           ``Estimates of future claims * * * contain a 
        number of potential sources of error in forecasting.''
           ``Forecasts of asbestos claims * * * have 
        failed to accurately predict the magnitude, scope and 
        evolution of asbestos claims.''
           ``Projections * * * in recent decades of the 
        number of asbestos claims * * * were, in hindsight, 
        much too low, suggesting that there is a significant 
        risk of underestimating the number of future asbestos 
        claims.''
           ``Furthermore, there is uncertainty about 
        how claims would qualify under the criteria of the 
        bill.''
           ``Various projections of the number of 
        nonmalignant cases and their distributions among the 
        categories specified in the bill vary greatly.''
    However, neither CBO nor the Asbestos Study Group, the 
primary proponent of this legislative solution and the likely 
source of the underlying data that were used in the CBO 
estimates, has provided evidence of the assumptions they rely 
upon, that only 15 percent of nonmalignant claims, and fewer 
than one in four of all claimants would qualify for payment. 
Instead, past experiences contradict the assumption. Lessons 
from the Manville Trust, one of the first major asbestos 
trusts, are revealing. In testifying before the Committee, 
Manville Trust's general counsel, David Austern warned:

          [T]here is almost no likelihood that as many as 85% 
        of the nonmalignant claims filed pursuant to S. 1125 
        will qualify only for Level I (the non-paying medical 
        monitoring category). Our best estimate * * * is that 
        over two-thirds and as many as three-quarters of the 
        nonmalignant claims filed pursuant to S. 1125 will 
        qualify for compensation at Level II or higher.\18\
---------------------------------------------------------------------------
    \18\Letter from David Austern, General Counsel to the Manville 
Trust, to Rebecca Seidel and J. Edward Pagano, Committee on the 
Judiciary, October 9, 2003, emphasis added.

    It should be noted that, while the criteria in S. 852 for 
malignant lung cancer claims has changed from the criteria in 
S. 1125 and S. 2290, the criteria for non-malignant claims has 
not been disturbed. Moreover, an insurance study of 225,000 
claims filed in the Babcock and Wilcox bankruptcy also 
contradicts CBO's previous estimates. This study found that 70 
percent of nonmalignant claims would qualify for payment under 
the criteria of S. 852 at Level II or higher.\19\
---------------------------------------------------------------------------
    \19\Charles E. Bates, Ph.D., ``Expert Report,'' Prepared for 
Babcock & Wilcox Insurers Joint Defense Group, August 18, 2003.
---------------------------------------------------------------------------
    Additionally, CBO's previous assumptions did not take into 
account claims that have arisen in 2003 and 2004.\20\ CBO 
assumes that the Trust Fund will receive 300,000 claims arising 
before 2005, which is the same number of claims that all 
parties have accepted as pending at the end of 2002 in their 
analyses made since early 2003. CBO's 2004 forecasts include no 
new claims filed in 2003 and 2004, even though substantial 
numbers of claims arose in those years. The Manville Trust 
alone has received about 120,000 claims in those two years, 
including over 6,700 new claims for mesothelioma.\21\
---------------------------------------------------------------------------
    \20\Letter from Douglas Holtz-Eakin, Director, Congressional Budget 
Office, to Senator Orrin G. Hatch, April 24, 2004, at 1-2.
    \21\Peterson testimony at 4.
---------------------------------------------------------------------------
    Historically, assumptions regarding future asbestos claims 
have proven exceedingly inaccurate. For example, during 1986, 
expert claims forecasters testified in the Manville bankruptcy 
court that between the late 1980s and 2049, the Manville Trust 
would receive between 83,000 and 100,000 claims.\22\ The 
Manville Trust began operations in 1988, yet as of today, only 
17 years later, the Manville Trust has received over 620,000 
claims.
---------------------------------------------------------------------------
    \22\Letter from Robert A. Falise, Chairman and Managing Trustee, 
Manville Personal Injury Settlement Trust, October 21, 2003.
---------------------------------------------------------------------------
    During 2001, the Manville Trust commissioned the fourth 
future claims forecast it has undertaken during its history. 
That forecast predicted that by 2049 the Manville Trust would 
receive between 750,000 and 2.7 million claims, in addition to 
the nearly 620,000 claims it had already received.
    Likewise, S. 852 is predicated on calculations from numbers 
that are literally impossible to ascertain. The actuarial 
estimates are educated guesses, at best, and thus now provide 
broad ranges of potential future claims. Currently the Manville 
Trust is paying mesothelioma victims only $17,500, instead of 
the $1,050,000 it predicted at its inception. It is now 
apparent that the guessing game of 1988 did not work. What, if 
anything, will prevent the program envisioned in S. 852 from 
becoming another Manville debacle when the methods used by the 
actuaries to calculate the Trust Fund has not changed?
    The CBO's 2004 letter noted that if the number of non-
malignant claims qualifying for payment at Level II or higher 
exceeds their projections by only five percent, it could 
increase costs by $10 billion. CBO also stated: ``Small changes 
in other assumptions--including such routine variables as the 
future inflation rate--could also have a significant impact on 
long-term costs.''\23\ Unfortunately, future claimants will 
suffer greatly if the current calculations again prove 
inaccurate. Since the bill has no provisions to increase the 
total amount of funding for the Trust Fund, future claimants 
are likely to face decreased benefits or a bankrupt Trust Fund. 
Congress should not knowingly enact bill with so many 
uncertainties.
---------------------------------------------------------------------------
    \23\Nickles letter, April 20, 2004, at 5.
---------------------------------------------------------------------------
    Finally, we note that asbestos is still not banned in the 
United States. This means that today, many more thousands of 
workers and others continue to be exposed to this deadly 
substance. According to the Occupational Safety and Health 
Administration, 1.3 million workers are currently being exposed 
to asbestos. Consequently, there is major uncertainty as to how 
many victims there will be in the future and whether the Trust 
Fund will be able to compensate them.
    Moreover, the Trust Fund has a proposed life of only 30 
years. Thus, it is a cruel reality that people who are being 
exposed today and in the future will have no source of 
compensation for asbestos-related injuries they suffer after 
the Trust Fund's demise in 30 years, or perhaps even sooner.
            2. Up-front funding is inadequate
    As noted, S. 852 contemplates up-front funding of 
approximately $42 billion in the first five years. According to 
the testimony of Dr. Peterson before this Committee,\24\ the 
Trust Fund will face between 15,000 and 19,000 mesothelioma 
claims at its inception. Based on the proposed awards values in 
the bill, these claimants alone will be entitled to 
approximately $20 billion of the up-front funding at inception. 
Simply put, the monies will not be there. Dr. Peterson also 
estimates it will take at least two years to establish the 
bureaucracy required to administer the Trust Fund, and that it 
will not contain sufficient assets to pay the pending claims 
until 2011 or 2012 at the earliest.\25\
---------------------------------------------------------------------------
    \24\Dr. Peterson was a founding member of the RAND Corporation's 
Institute for Civil Justice, has worked for four District and 
Bankruptcy Courts as an expert, and has served as ``Special Advisor to 
the Courts'' for the Manville Trust for over 14 years.
    \25\Peterson testimony at 3.
---------------------------------------------------------------------------
    Dr. Peterson testified that the Trust Fund will have to pay 
tens of billions of dollars of interest under every set of 
assumptions.\26\ He stated that:
---------------------------------------------------------------------------
    \26\Statement of Mark A. Peterson Before the Senate Judiciary 
Committee Hearing of S. 852 ``Fairness in Asbestos Injury Resolution 
Act of 2005,'' p. 6. April 26, 2005. See Table 3.

          The Fund's interest costs exceed $57 billion for all 
        models except CBO's original, optimistic forecast when 
        it is coupled with the assumption that revenues will 
        arrive precisely on time and in the amounts specified 
        in the Act. Except for this single, extremely 
        optimistic model, over 40% of the $140 billion that is 
        supposed to be paid asbestos claimants would instead go 
        to service the Trust Fund's enormous indebtedness. For 
        seven of the fifteen simulations, half or more of the 
        $140 billion will be spent on interest.\27\
---------------------------------------------------------------------------
    \27\Statement of Mark A. Peterson Before the Senate Judiciary 
Committee Hearing of S. 852 ``Fairness in Asbestos Injury Resolution 
Act of 2005,'' p. 6. April 26, 2005.

---------------------------------------------------------------------------
    Dr. Peterson concluded his testimony by warning that:

          [U]nder the assumptions of both supporters and 
        opponents, using realistic and rosy assumptions, the 
        FAIR Act will fail. In failing the Act will impose 
        great risks and costs on taxpayers, it will exacerbate 
        the circumstances for asbestos defendants and insurers 
        and will provide no compensation for the vast majority 
        of asbestos victims. The Act is an empty promise to 
        both sides of the asbestos litigation and it is 
        fiscally irresponsible.\28\
---------------------------------------------------------------------------
    \28\Statement of Mark A. Peterson Before the Senate Judiciary 
Committee Hearing of S. 852 ``Fairness in Asbestos Injury Resolution 
Act of 2005,'' p. 6. April 26, 2005.

    A lack of necessary up-front funding from the corporate 
defendants and insurers will necessitate massive borrowing by 
the Trust Fund to pay pending claims. Using CBO's model for up-
front funding needs, it appears that interest payments alone 
could equal $49 billion, which is 35 percent of the total 
amount of the Trust Fund.\29\ Yet, Dr. Peterson testified that 
$49 billion in interest is a best case scenario. He believes 
interest payments will certainly exceed $57 billion and could 
exceed $76 billion, under 15 different models which simulate 
claims filings under the Trust Fund.\30\ The reality is that 
more money could go to interest payments than to victims. Why 
would Congress create such a poorly-designed program that is 
sure to fail?
---------------------------------------------------------------------------
    \29\Peterson testimony at 3.
    \30\Peterson testimony at 3.
---------------------------------------------------------------------------
            3. Resulting additions to the budget deficit and taxpayer 
                    burden
    Notwithstanding any assurances by the bill's sponsors, it 
seems clear that S. 852 will require major Federal financial 
assistance. The bill already allows for massive borrowing from 
the Federal government, including over $40 billion in the early 
years. Many observers are skeptical that private borrowers will 
lend this money to the Trust Fund, and expect that Federal 
Government will become the principal lender to the Trust Fund.
    The borrowing allowed by the bill includes generous terms, 
including allowing repayment to be made decades later. Yet, 
because of the unstable funding mechanisms in the bill, there 
is a strong potential that these funds borrowed from the U.S. 
government or elsewhere will never be repaid. Moreover, given 
the strong likelihood of the program's failure--which even the 
bill's supporters acknowledge is a possibility--Federal 
taxpayers may absorb costs much higher than even the borrowed 
amounts.
    Congress' recent experience with another national 
compensation fund is an example of what could go wrong. The 
Black Lung Fund was designed to compensate coal miners with 
pneumoconiosis on a no-fault basis. Within a few years, 
however, the Department of Labor was granting awards in only 8 
percent of cases while the Social Security Administration paid 
70 percent. Despite the large number of denials, $8 billion in 
claims was paid during the first five years. Yet, prior 
predictions had pegged the total cost of the fund between $1.5 
and $3 billion.\31\ The real number of claims necessitated a 
massive government bailout of tens of billions of dollars.
---------------------------------------------------------------------------
    \31\Peter S. Barth, Professor Emeritus, The University of 
Connecticut, ``Commentary on the Creation of a Fund for Victims of 
Asbestos Caused Diseases'', February 15, 2005. Available at 
www.usaction.org
---------------------------------------------------------------------------
    One of the reasons for this massive failure is that the 
corporate interests who sought the legislative solution relied 
upon the Federal program to substantially reduce their own 
costs, not just to settle claims and to seek finality. This is 
the same scenario we are facing with asbestos corporate 
defendants and insurers who are advocating for S. 852.

B. Unanimously adopted medical criteria abandoned

    In the many years that this Committee has deliberated on 
creating an asbestos Trust Fund, no single provision received 
more broad bipartisan support than the medical criteria agreed 
upon by this Committee in 2003. These criteria were carefully 
worked out by Senators Hatch and Leahy with the help from 
expert medical advisors provided by both businesses and labor 
unions. When presented to the Committee during its 
consideration of S. 1125, this bipartisan medical criteria 
amendment was approved unanimously and hailed by all sides as a 
major constructive step. This bipartisan criteria amendment 
became the bedrock of the bill, and in all of the legislative 
proposals put forth since, the criteria remained unchanged, 
until now. S. 852 for the first time abandons the bipartisan 
consensus on medical criteria, leaving these lung cancer 
victims with no remedy.
            1. Exclusion of lung cancer victims with substantial 
                    asbestos exposure
    While S. 852 purports to establish a compensation fund for 
all victims of asbestos- induced disease, it excludes tens of 
thousands of lung cancer victims who have had more than fifteen 
years of substantial occupational exposure to asbestos. These 
severely ill individuals were included in previous versions of 
the trust fund bills, S. 1125, and S. 2290, from the last 
Congress. Under S. 852, they are denied any compensation from 
the Trust Fund and barred from pursuing their claims in court.
    The consensus medical criteria in S. 1125 recognized three 
categories of lung cancer victims, all of whom would have been 
eligible for compensation from the Trust Fund:
          1. Malignant Level VII--lung cancer victims who had 
        15 or more weighted years of exposure to asbestos;
          2. Malignant Level VIII--lung cancer victims who had 
        12 or more weighted years of exposure to asbestos and 
        evidence of bilateral pleural plaques, or bilateral 
        pleural thickening or bilateral pleural calcification; 
        and
          3. Malignant Level IX--lung cancer victims who had 10 
        or more weighted years of exposure to asbestos and 
        evidence of asbestosis.
    Asbestos exposure is a probable cause of the lung cancers 
in all three categories. Each category required evidence of a 
causal link, with more extensive evidence required at higher 
levels. Those lung cancer victims in Malignant Level VII were 
required to show a greater number of years of weighted exposure 
to asbestos since they could not show scarring from non- 
malignant asbestos disease on their lungs. They were also 
required to go through an individual case review before a panel 
of physicians to verify that asbestos was a contributing factor 
to their disease. Those victims qualifying under Level VII 
would have received a lower level of compensation than those 
who could demonstrate either pleural thickening or asbestosis. 
That was a reasonable way to proceed.
    Unfortunately, S. 852 rejects the consensus medical 
criteria and completely eliminates compensation for the lung 
cancer victims in the original Malignant Level VII. (S. 852 
renumbers the original Level VIII as Level VII, and the 
original Level IX as Level VIII.) It denies these victims all 
relief despite the fact that they had very extensive 
occupational exposure to asbestos over a long period of time. 
They are excluded despite the testimony of two distinguished 
medical experts--Dr. Laura Welsh and Dr. Philip Landrigan--that 
prolonged exposure to asbestos can cause lung cancer even if 
the victim does not also have markers of nonmalignant asbestos 
disease. In their testimony,\32\ they cited numerous medical 
authorities supporting their position. They even described 
their experience treating lung cancer victims whose disease was 
caused by asbestos but who had neither pleural thickening nor 
asbestosis.
---------------------------------------------------------------------------
    \32\Testimony of Dr. Philip J. Landrigan, MD, Professor of 
Occupational and Environmental Medicine, The Mount Sinai School of 
Medicine, Before the Senate Committee on the Judiciary, ``Hearing on a 
Bill to Create a Fiar and Efficient System to Resolve Claims of Victims 
for Bodily Injury Caused By Asbestos Exposure, and for Other 
Purposes,'' 109th Cong., April 26, 2005; See also Testimony of Dr. 
Laura Welch, Medical Director, Center to Protect Worker Rights, Before 
the Senate Committee on the Judiciary, ``Asbestos: The Mixed Dust and 
FELA Issues,'' 109th Cong. February 2, 2005, at 8.
---------------------------------------------------------------------------
    Dr. Landrigan, a nationally recognized expert in this 
highly specialized field of occupational medicine, testified at 
the Committee's April 26, 2005 hearing:

          Fibrosis is not on the critical pathway to the 
        development of lung cancer. Or to say that in plain 
        English, a person does not need to have asbestosis, who 
        has been exposed to asbestos, to develop lung cancer. 
        The development of fibrosis is one pathological 
        process; the development of a cancer is a second 
        pathological process. The occurrence of asbestosis, 
        either parenchymal or pleural, is most certainly a 
        marker of exposure but it is not an inevitable 
        precursor of the development of cancer * * *
          I am very much concerned by the elimination of what 
        was previously called Category VII, the person who had 
        lung cancer without fibrosis. I feel that setting aside 
        the estimated 40,000 people that fall into that 
        category is going to result in people who truly have 
        lung cancer that was caused by asbestos being denied 
        compensation * * *\33\
---------------------------------------------------------------------------
    \33\Landrigan testimony at 117-119.

    At a later point in the hearing, he reemphasized this 
---------------------------------------------------------------------------
point:

          In our very large occupational medicine practice at 
        Mount Sinai, we have seen cases * * * of lung cancer in 
        asbestos workers with many years of substantive 
        exposure to asbestos, as defined in the bill here, who 
        have developed lung cancer who had no asbestosis 
        visible on x-ray. I edit the American Journal of 
        Industrial Medicine. I have for more than 15 years been 
        editor-in-chief, and we have published cases of lung 
        cancer in asbestos workers who had no radiographic 
        evidence of asbestosis.
          Going beyond our own experience at Mount Sinai, I 
        refer you to the Scandinavian Journal of Work, 
        Environment, and Health, arguably one of the three or 
        four best journals internationally in the field of 
        occupational medicine * * * It says right in here, a 
        direct quote from page 6 of this article, ``Heavy 
        exposure (to asbestos), in the absence of radiological-
        diagnosed asbestosis, is sufficient to increase the 
        risk of lung cancer,'' a direct quote.\34\
---------------------------------------------------------------------------
    \34\Landrigan testimony at 177.

    While there are some doctors who hold a contrary view, we 
believe that the clear weight of the evidence supports the 
conclusion that asbestos can be a substantial contributing 
factor to lung cancer in persons who were exposed to high 
levels of asbestos over long periods of time, even if they do 
not also have visible markings from nonmalignant asbestos 
disease on their lungs. Certainly, all of those lung cancer 
victims should not be categorically excluded from seeking 
compensation under the Trust Fund as a matter of law. The Trust 
Fund should be authorized to consider their claims for relief 
and provide appropriate compensation, as it was under S. 1125. 
In a situation where people are undeniably severely ill and 
undeniably had 15 or more years of weighted exposure to 
asbestos, it is terribly unjust to legislatively deny them all 
opportunity for compensation.
    One of the arguments we hear most frequently in favor of 
creating a Trust Fund is that in the current system, too much 
money goes to people who are not really sick and too little 
goes to those who are seriously ill. Lung cancer victims who 
have years of exposure to asbestos are the ones who are 
seriously ill. They are the ones this bill is supposed to be 
helping. Yet, they are being completely excluded.
    The rationale given by those who oppose inclusion of the 
Level VII lung cancer victims is that their disease is more 
likely to have been caused by smoking than by asbestos 
exposure. This argument does not withstand scrutiny.
    First, all Level VII lung cancer victims are removed from 
eligibility under the Trust Fund, even those who were 
nonsmokers. Victims with 15 or more weighted years of exposure 
to asbestos who had never smoked are denied compensation by S. 
852. Their ineligibility obviously cannot be justified based on 
the relationship between asbestos and smoking.
    Second, Dr. Landrigan testified that smokers who have 
substantial exposure to asbestos have 55 times the background 
risk of developing lung cancer, while smokers who were not 
exposed to asbestos have 10 times the background risk of 
developing lung cancer.\35\ This relationship is well-
established. Similar findings are documented in the Surgeon 
General's 1986 Report on Cancer in the Workplace, which 
determined that smokers with asbestos exposure have a 50-fold 
increased risk of developing lung cancer, while the risk from 
smoking alone was only ten times.\36\ Clearly, the asbestos 
exposure makes a huge difference.
---------------------------------------------------------------------------
    \35\Statement of Dr. Philip J. Landrigan, Before the Senate 
Committee on the Judiciary, ``Hearing on a Bill to Create a Fair and 
Efficient System to Resolve Claims of Victims for Bodily Injury Caused 
by Asbestos Exposure, and for Other Purposes,'' 109th Cong., April 26, 
2005, at 2.
    \36\``The Health Consequences of Smoking: Cancer and Chronic Lung 
Disease in the Workplace,'' Report of the Surgeon General, U.S. 
Department of Health and Human Services, at x. (1985)
---------------------------------------------------------------------------
    There is a powerful synergistic effect between asbestos and 
tobacco in the causation of lung cancer. Both are substantial 
contributing factors to the disease. We agree that a lung 
cancer victim with substantial asbestos exposure who smoked 
should receive less compensation from the Trust Fund than a 
nonsmoker with lung cancer. That principle appears throughout 
the bill. But smoking is not a valid reason to exclude the 
victim from all compensation, when he or she also had 
substantial asbestos exposure.
    Asbestos and tobacco companies are analogous to joint 
tortfeasors. Each is partly responsible and each should pay a 
proportionate share of the compensation. The involvement of one 
tortfeasor does not absolve the other tortfeasor from all 
responsibility. Without prolonged exposure to asbestos, the 
smoker would have been far less likely to contract lung cancer.
    The real reason for eliminating the Level VII lung cancer 
victims was not medical science, it was money. Precisely 
because there are tens of thousands of lung cancer victims in 
this category, the cost of compensating them is high. The 
inadequate scope of this bill was dictated by how much money 
the corporate defendants and insurers were willing to pay. 
Instead of first determining the cost of fairly compensating 
all the seriously ill victims of asbestos-induced disease and 
then setting the size of the Trust Fund at a level that would 
meet the need, the reverse was done. The $140 billion size of 
the Trust Fund was negotiated with the business community 
first, and then the medical criteria were narrowed to fit 
within the available funding. The result is that many deserving 
victims--including tens of thousands of lung cancer victims--
are denied compensation.
    During Committee consideration, Senator Kennedy offered 
three amendments to address this glaring deficiency in the 
bill. The first would have restored the eligibility for 
compensation of lung cancer victims with fifteen or more 
weighted years of exposure to asbestos.
    When that proposal was rejected, Senator Kennedy offered a 
second amendment that would have provided for a study by the 
Institute of Medicine ``to determine whether there is a causal 
link between asbestos exposure and lung cancer for individuals 
who have had substantial exposure to asbestos but have no 
evidence of bilateral pleural disease or of asbestosis.'' If 
the IOM report determined there was substantial scientific 
evidence demonstrating a causal relationship between asbestos 
exposure and these lung cancers, the Administrator of the Trust 
Fund was directed to establish an additional eligible disease 
category to compensate them.
    The Committee also rejected the proposal for an IOM study, 
vividly illustrating that the reason for excluding the lung 
cancer victims in the original Malignant Level VII from the 
Trust Fund was not medical but monetary. If the majority of the 
Committee really wanted the best scientific determination of 
whether a causal link exists between asbestos exposure and 
these lung cancers, they certainly would have approved this 
amendment. The amendment's defeat shows that the prime 
motivation of the supporters is to keep the cost of claims 
against the Trust Fund below the arbitrary financial ceiling 
that had already been negotiated with the corporate defendant 
and insurers who want this bill.
    Senator Kennedy's third amendment would have preserved the 
right of these lung cancer victims to seek compensation through 
the judicial system since they were being excluded from the 
Trust Fund. This, too, was rejected. In essence, these severely 
ill victims who have had very substantial exposure to asbestos 
are being told to suffer in a legally imposed silence with no 
recourse whatsoever.
    If S. 852 is not going to provide compensation for these 
lung cancer victims under the Trust Fund; justice requires, at 
the very least, that the bill not foreclose their right to seek 
compensation in the courts. They have that right today, and 
their cases have real value.
    When the victim has had substantial asbestos exposure and 
was not a smoker, the likelihood that the lung cancer was 
caused by asbestos is very high. When the victim has had 
substantial asbestos exposure and also smoked, the likelihood 
is that both contributed to the lung cancer. The interaction of 
asbestos exposure and smoking greatly increases the probability 
of lung cancer beyond the risk posed by either substance 
individually.
    As noted earlier, a smoker who was never exposed to 
asbestos has 10 times the background risk of developing lung 
cancer. A smoker who had substantial exposure to asbestos has 
55 times the background risk of developing lung cancer.\37\ 
Clearly, asbestos exposure makes a very substantial difference. 
The two substances are, in essence, joint tortfeasors in 
causing the disease. Those responsible for the asbestos 
exposure are partially liable for the lung cancer, and are 
obligated to compensate the victim accordingly.
---------------------------------------------------------------------------
    \37\Landrigan testimony at 2.
---------------------------------------------------------------------------
    S. 852 as written would take away the right of those 
victims to bring their cases to court, while providing them no 
right to recover from the Trust Fund. Congress has the right to 
substitute one remedy for another. But, it does not have the 
right to arbitrarily foreclose the existing remedy and provide 
no new remedy in exchange. To do so violates fundamental 
principles of due process. It is not only morally wrong, it is 
legally wrong.
    If the Trust Fund does not provide a remedy for a certain 
class of asbestos victims, then it cannot be the exclusive 
remedy for that category of claim. Victims who are 
categorically excluded from compensation under the Trust Fund 
cannot be precluded from seeking compensation in the judicial 
system. That principle is well established.
    Similar issues have arisen in a number of states regarding 
the scope of their workers' compensation statutes. Two recent 
state supreme court decisions illustrate this principle. The 
Oregon Supreme Court addressed this issue in the case of 
Smothers v. Gresham Transfer, Inc., 332 Ore. 83 (2001). The 
court ruled that a person with work-related injuries that were 
not compensable under the state's workers' compensation laws 
had a right to bring a civil action in the courts. Even though 
the statute provided that the workers compensation system was 
to be the exclusive remedy for work-related injuries, it could 
not deprive an injured worker of his remedy in court when it 
was not providing an alternative remedy for that worker in the 
administrative system.
    The Virginia Supreme Court came to a similar conclusion in 
Adams v. Alliant Techsystems Inc., 261 Va 594 (2001). It held 
that the Virginia Workers' Compensation Act does not bar a 
plaintiff from bringing a common-law cause of action against 
his employer to recover damages for hearing loss resulting from 
cumulative trauma when such a hearing loss was not a 
compensable injury or disease under the Act.
    The same principle applies here. Lung cancer victims with 
substantial exposure to asbestos who are categorically 
ineligible for compensation under the Trust Fund should not be 
precluded from seeking a remedy in the courts. If these victims 
can prove a causal link between asbestos exposure and their 
disease, they should be able to receive compensation through 
the courts in the future, just as they can today. That is only 
fair. Due process and fundamental principles of justice require 
nothing less.
            Raising standard to ``substantial contributing factor''
    A second major change in the consensus medical criteria 
made by this bill relates to the standard of proof which 
victims must meet to receive any compensation. Each of the 
medical criteria has been changed from S. 1125 to require the 
worker to prove that asbestos was a ``substantial contributing 
factor'' to his disease, rather than ``a contributing factor.'' 
This will raise the bar even higher for injured workers.
    It is a significant increase in the burden they must 
overcome to qualify under the Trust Fund. There is no question 
that the change was made to make it harder for victims to 
receive compensation. Rather than having to show that asbestos 
exposure was ``a contributing factor'' to their illness, 
victims will now have to address the relative impact of 
asbestos and other potential factors. That hurdle will be 
difficult for many of them.
    The original standard requiring that asbestos be ``a 
contributing factor'' has a history. It is the proof standard 
used in most state worker compensation laws involving exposure 
to toxic substances. ``Workers' Compensation Policy Review,'' a 
respected journal in this area of law, stated in an article 
examining statutory compensability standards:

          Under traditional standards, for either an accidental 
        injury or an occupational disease, a workers' 
        compensation claim is compensable if the work 
        contributed to or aggravated a preexisting condition. 
        That is, the general rule has been that the work does 
        not have to be the sole, major, or primary cause of a 
        disability in order for the worker to receive workers' 
        compensation benefits.\38\
---------------------------------------------------------------------------
    \38\Sara T. Harmon, ``Statutory Compensability Standards.'' 
Workers' Compensation Policy Review, 1, 2 (2001): 15-28, at 15.

    That is still the majority rule in state workers' 
compensation laws and it is the standard we should enact for 
the Trust Fund in S. 852.
    Even in litigation, the victim only needs to prove that 
asbestos was a contributing factor to his disease. In a 
unanimous decision rendered just last year, the Georgia Supreme 
Court spoke to exactly this issue. The court considered and 
rejected the concept of elevating the standard of proof in 
asbestos litigation from ``contributing factor'' to 
``substantial contributing factor.'' The court stated:

        It would be a departure from (tort law) analysis to add 
        the requirement that the causal connection must be 
        substantial * * * Once the term ``substantial factor'' 
        is employed in the general negligence law vocabulary, 
        there is the danger that it will be used not only to 
        describe a general approach to the legal cause issue, 
        but will turn into a separate and independent hurdle 
        that the plaintiff will have to overcome in addition to 
        the standard elements of a claim of negligence. So, 
        too, has there been great difficulty and disparity in 
        courts' definition of ``substantial factor * * *
          Thus, refusing to endorse the additional hurdle that 
        each individual tortfeasor's conduct must constitute a 
        ``substantial'' contributing factor in the plaintiff's 
        injury in order to be considered a proximate cause 
        thereof will neither subject defendants like John Crane 
        to unjust liability nor open the floodgates of asbestos 
        litigation.\39\
---------------------------------------------------------------------------
    \39\John Crane, Inc. v. Jones, 604 SE 2d 822, 825 (2004).

    By adding ``substantial,'' the current language in S. 852 
goes beyond what would be required to establish proximate cause 
in a court case. It would create, in the court's words, ``a 
separate and independent hurdle'' that victims of asbestos-
induced disease would have to overcome. Certainly, it should 
not be harder for a victim to receive compensation from the 
Trust Fund in a supposedly no-fault system than it currently is 
in an adversarial court system. That is exactly what this bill 
will do--set a more burdensome standard to recover from the 
Trust Fund than to recover in the courts. That would go against 
the entire concept of a Trust Fund. It is unfair and 
unreasonable.
    The bill should not be erecting additional barriers to 
compensation under the Trust Fund. This is supposed to be a no-
fault system. It is supposedly minimizing the need for each 
claimant to have an attorney, making the system non-
adversarial. This language change--requiring proof of 
``substantiality''--will make the process of qualifying for 
compensation much more complex than it should. It will create 
serious proof problems in many cases. Many victims will need to 
obtain legal representation to overcome this additional burden.
    The medical criteria in this bill retain the requirement 
from S. 1125 that there be proof that the asbestos exposure was 
substantial. Many of the disease categories require a minimum 
number of weighted years of exposure before the worker can even 
apply for compensation. But requiring substantial exposure is 
not the same as requiring that the exposure be a substantial 
contributing factor.
    Under the terms of the Trust Fund, the Administrator will 
know the victim is seriously ill, he had substantial exposure 
to asbestos, and his medical condition is consistent with 
asbestos- induced disease. That should be sufficient. Creating 
an additional hurdle for seriously ill workers to jump is 
inconsistent with the stated goals of the bill.
    During Committee consideration, Senator Kennedy offered an 
amendment to restore the ``contributing factor'' standard of 
proof contained in the consensus medical criteria unanimously 
adopted by the Committee in 2003. Unfortunately, it was 
defeated. The supporters of this bill seem intent on erecting 
new and difficult hurdles for injured claimants. That is wrong.
            3. Requirement for bilateral impairment not based on 
                    science
    In another example of how S. 852 is not based on sound 
medical science but rather on economic expediency, the bill's 
medical criteria include a requirement of ``bilateralism'' that 
makes no sense.
    The bill is replete with references to the need for 
``bilateral'' pleural plaques, ``bilateral'' thickening, 
``bilateral'' calcification, and ``both lower lung zones'' but 
nowhere in the bill is there an explanation for why both lungs 
of a victim need to be affected with asbestos-related injury. 
Neither can the sponsors of S. 852 explain why such a 
requirement is in the bill.
    On the contrary, medical experts have indicated that there 
is no medical or scientific basis for requiring both lungs to 
be impaired before a claimant can qualify under this bill. For 
example, Dr. Philip Landrigan of the Mount Sinai School of 
Medicine who testified before the Committee on April 26, 2005, 
stated:

          The requirement that pleural disease be bilateral to 
        be considered the consequence of exposure to asbestos 
        is not warranted by medical evidence. Asbestos-related 
        scarring often develops unevenly and almost always 
        begins unilaterally. Miller and Lilis showed a clear 
        relationship between degree of pleural scarring and 
        loss of FVC independent of whether the pleural changes 
        were bilateral.\40\
---------------------------------------------------------------------------
    \40\Dr. Philip J. Landrigan, April 26, 2005 testimony before the 
United States Senate Committee on the Judiciary, pp. 3-4.

    Dr. Landrigan also testified that ``requiring that the 
damage be bilateral, has no basis in biology or medicine.''\41\ 
The only possible reason for including this is to make the 
medical criteria as tough as possible in order to limit the 
number of claimants who may qualify under the bill.
---------------------------------------------------------------------------
    \41\Id at p. 4.
---------------------------------------------------------------------------
    On numerous occasions throughout the hearing and Committee 
consideration of the bill, Senator Durbin pointed out this 
illogical requirement, yet the language of the bill as passed 
by the Committee still contains this flaw.
            4. Other problems
    Under the revised medical criteria, asbestos-related 
cancers of the larynx, esophagus, stomach and colon may also 
receive no compensation. Each claim for such cancers must be 
reviewed by a physician's panel which may deny compensation. 
Based on a future report of the Institute of Medicine, 
compensation for these cancers may be completely eliminated.
    Although the Committee has narrowed the medical criteria to 
prevent victims from receiving compensation, where the medical 
criteria are outdated and the scientific consensus of the 
American Thoracic Society suggests the criteria should be 
broadened, the Committee refused to do so. Currently, the 
criteria require 5 years of occupational exposure to qualify 
for non- malignant compensation. American Thoracic Society's 
guidelines currently provide that 5 years occupational exposure 
is not necessary for a diagnosis of non-malignant asbestos 
disease.\42\ In this regard, the medical criteria are too 
stringent and should be loosened.
---------------------------------------------------------------------------
    \42\``Diagnosis and Initial Management of Non-malignant Diseases 
Related to Asbestos,'' American Thoracic Society, published in American 
Journal of Respiratory Critical Care Medicine, Vol. 170, pp. 691-715, 
2004.
---------------------------------------------------------------------------
    Another problem with the medical criteria is that some 
years of exposure are discounted and count for less than other 
years of exposure. Workers exposed after 1986 are required, as 
a practical matter, to have decades of exposure to asbestos 
before they can qualify for any compensation. For instance, ``a 
person with lung cancer and pleural plaques who began 
occupational exposure to asbestos in 1974 would need 52 years 
of work exposure (through 2025, or `until' 2026) to meet the 
12-year weighted exposure in the bill.''\43\ Few workers will 
be able to show such long exposure, and this ``discounting'' of 
``weighted years'' again seems an effort simply to restrict 
compensation to individuals, rather than rely on hard 
science.\44\
---------------------------------------------------------------------------
    \43\Landrigan testimony at 3.
    \44\Landrigan testimony at 3.
---------------------------------------------------------------------------

C. Requirement of occupational exposure

    Initially, S. 852 was crafted to compensate only those 
individuals who were clearly exposed to asbestos in the 
workplace. Reluctantly, the spouses and children of these 
workers, if they could prove a link to occupational exposure, 
were given some limited rights of recovery under the bill if 
they become ill. Then, the residents of Libby, Montana, were 
afforded special provisions under this bill. But, 
unfortunately, thousands of others who may develop asbestos-
related diseases have only been provided a weak study which 
will determine whether they can recover under S. 852. Again, 
the financial concerns of the defendants are overriding common 
sense and fairness.
    Why should people who have resided near asbestos processing 
plants for decades, and who have reported clouds of asbestos 
dust in their neighborhoods, or the use of donated asbestos- 
laden products in their yards or schools, be denied any right 
of recovery under the Trust Fund or through court? We believe 
that is unjust.
    These are individuals who may not have worked at these 
plants, but who lived near places that received 10,000 tons or 
more of asbestos materials from the Libby, Montana, mine over 
the past few decades. Now, they have been told they will only 
be able to pursue a claim against this criminally-indicted 
corporation if future air sampling shows asbestos exposure 
levels equal to those in Libby, Montana. In other words, 
Congress is seeking to set up an impossible standard--
especially since most of these plants have been closed for a 
decade or more, and the Libby contamination level is far above 
the level that can cause asbestos diseases. Some individuals in 
these communities have already developed asbestos-related 
diseases without working in these plants, and they are barred 
by this bill from seeking redress in court.
    We believe fairness dictates that the residents of these 
other communities, which received 10,000 tons or more of 
asbestos or more of asbestos-containing material from Libby, 
Montana, should be afforded the same rights as those residing 
in Libby.
    The bill provides no rational basis for making the 
distinction between the residents of the following communities 
and residents of Libby: Beltsville, MD; Dallas, TX; Dearborn, 
MI; Denver, CO; Easthampton, MA; Edgewater, NJ; Ellwood City, 
PA; Glendale, AZ; Honolulu, HI; Los Angeles, CA; Marysville, 
OH; Minneapolis, MN; Minot, ND; New Castle, PA; New Orleans, 
LA; Newark, CA; Omaha, NE; Phoenix, AZ; Portland, OR; Portland, 
OR; Santa Ana, CA; Spokane, WA; St. Louis, MO; Tampa, FL; 
Trenton, NJ; Weedsport, NY; West Chicago, IL; Wilder, KY.\45\
---------------------------------------------------------------------------
    \45\See Environmental working group, ``Asbestos Hot Sports,'' April 
26, 2005, available at www/ewg.org/issues/asbestos/20050426/
hotspots.php.
---------------------------------------------------------------------------

D. Fairness among contributors

    Limiting funding to $140 billion creates a financial 
windfall for those corporations most vocally advocating for the 
Trust Fund. For example, Tier 1 defendants with pending 
bankruptcies would pay $25.9 billion to asbestos victims if 
their bankruptcies were completed; yet, under S. 852 they will 
pay only $5.6 billion. Similarly, a handful of Fortune 500 
corporations will save billions under the Trust Fund, while 
many small businesses and others with limited asbestos 
liability exposure will pay more than their fair share.\46\
---------------------------------------------------------------------------
    \46\As a matter of simple mathematics and the definitions in S. 
852, every company in Tiers 3-6 would be required to pay more over the 
next 30 years (and without the benefit of insurance to cover the 
claims) than each such company has paid over its entire history in 
asbestos litigation. Some Tier 3 and Tier 4 companies will pay into the 
proposed National Fund more than six times their historical 
expenditures in asbestos litigation, while many Tier 1 and Tier 2 
companies who have much greater historical liability for asbestos 
claims will pay only a fraction of their historical expenditures. See 
Sections 201-203.
    One reason these lower tiers are paying more into the Fund than 
they (or their insurers on their behalf) have paid historically is 
because other, mostly larger corporations are paying less. Many of the 
Tier 2 companies have historic asbestos expenditure in excess of $100 
million per year. These companies are reducing their liability from 
paying out $50-$200 million (or more) per company per year in the court 
system to no more than $27.5 million per year under the Trust.
---------------------------------------------------------------------------
    Based on the proposed payment Tiers in the bill, many 
medium and small businesses already have determined that the 
bill will impose higher costs on them than what they currently 
endure in the court system. Many of these businesses had 
adequately insured themselves against any asbestos liabilities. 
However, S. 852 will not allow the crediting of such insurance. 
Consequently, these entities will lose their insurance coverage 
under the bill without any compensation from the government, 
and in turn, will have to meet the assessments that will be 
imposed on them to finance the Trust Fund.
    The constitutionality of this approach is expected to be a 
heavily litigated issue that may take years to resolve. Many of 
these businesses perceive the evisceration of their insurance 
premiums without due compensation as a Fifth Amendment Property 
Takings violation, and the new assessments as a tax on their 
businesses.
    In addition, S. 852 lumps asbestos ``premises'' defendants 
into the same contribution tiers and subtiers as asbestos 
``products'' defendants. These two groups are treated as if 
there were no difference between them, even though the level of 
culpability for a company that manufactured asbestos is clearly 
higher than for one that, for example, merely had a boiler 
wrapped in asbestos on its premises.
    The Coalition for Asbestos Reform is a broad coalition of 
businesses and insurers who oppose S. 852. This group, which 
includes many small and medium businesses, has written to 
Chairman Specter on several occasions expressing their concerns 
about the bill. In a letter dated January 3, 2005, the group 
focused on two key weaknesses of the bill:

          The Allocation of Payment Obligations on Defendant 
        Participants: As presently drafted, the Trust funding 
        arrangement would impose payment obligations on our 
        companies that would substantially exceed the asbestos-
        related costs we reasonably anticipate under the 
        existing tort system, while simultaneously stripping 
        many of us of our insurance coverage. Each of us can 
        demonstrate that we would fare better under the 
        existing tort and judicial system than under the 
        proposed funding mechanism. Indeed, the proposed 
        arrangement would impose inequitably large obligations 
        on companies with limited asbestos-related liabilities. 
        For some smaller companies, such obligations would mean 
        bankruptcy.
          The Separation of Companies From Their Insurance 
        Coverage: The proposed Trust funding arrangement would 
        eliminate many companies' rights to access long-held 
        insurance assets; in some cases such rights would be 
        eliminated even though the companies have insurance 
        sufficient to address their current and projected 
        asbestos liabilities. The abrogation of these insurance 
        contracts for which premiums have been paid--and the 
        transfer of those assets to the Trust--may well 
        represent an unconstitutional taking.\47\
---------------------------------------------------------------------------
    \47\Letter from Coalition for Asbestos Reform to Senator Arlen 
Specter, January 3, 2005, at 1 (emphasis added).

    In an April 6, 2005, letter to Chairman Specter, the group 
reiterated its concerns about the cost burdens on small and 
---------------------------------------------------------------------------
medium-sized businesses:

          Manifestly Unfair Allocation Formula: The formula for 
        assigning mandatory payments is almost certain to be 
        the direct cause of a number of bankruptcy filings for 
        otherwise financially sound companies. Each version of 
        the FAIR Act has increased the payment burden on 
        defendant companies, and has based each company's 
        ability to pay on its historic asbestos defense costs. 
        These allocations--across all tiers of the FAIR Act--
        fail to recognize that many defendant companies have 
        paid only insurance premiums related to asbestos 
        defense, and would be obligated to make payments to the 
        Trust Fund that far exceed their anticipated 
        liabilities under the current tort system. By shifting 
        the burden of paying for asbestos claims from the 
        companies with the greatest asbestos exposure to a host 
        of other businesses--including many small and medium 
        sized entities--the bill creates a substantial 
        likelihood that a cascading series of defaults will 
        rapidly lead to the insolvency of the Trust Fund * * 
        *\48\
---------------------------------------------------------------------------
    \48\Letter from Coalition for Asbestos Reform to Senator Arlen 
Specter, April 6, 2005, at 1.

    Moreover, if the Trust Fund does become insolvent as many 
believe it will,\49\ employers will face a return to the court 
system without the benefit of their insurance coverage. Under 
the bill, they must continue to make contributions to the Trust 
Fund for the final twenty-plus years to pay off the bonds. 
Since the post-sunset court claims will be paid out of pocket, 
a torrent of bankruptcies will surely follow.
---------------------------------------------------------------------------
    \49\See Peterson testimony at 3, 5.
---------------------------------------------------------------------------

E. A risky startup

    The funding shortfall is most acute in the early years of 
the Trust Fund when the 400,000 to 500,000 pending claims will 
be immediately transferred to the Trust Fund for payment.\50\ 
Rather than make defendants and insurers actually pay the costs 
of the Trust Funds' early years, S. 852 relies on borrowing 
against the Trust Fund's future assets to pay present claims. 
Interest costs generated by this early borrowing will be huge, 
representing a significant reduction in the monies available to 
pay claims.\51\ We are skeptical that private borrowers will 
lend this money to the Trust Fund, and expect the Federal 
government will become the principal lender to the Trust Fund.
---------------------------------------------------------------------------
    \50\See Peterson testimony at 3, 5. Note: On October 2, 2003, the 
Congressional Budget Office estimated there were 300,000 claims 
pending, without counting claims arising in 2003 and 2004.
    \51\See Peterson testimony at 3, 5.
---------------------------------------------------------------------------
    This concern about the Trust Fund's viability during the 
start up was raised at the Committee's April 26, 2005, hearing 
by Professor Eric Green of Boston University Law School, who 
serves as a court-appointed Legal Representative for future 
asbestos claimants in four asbestos-related bankruptcy 
proceedings and as a Special Master in several major state and 
federal court asbestos cases:

          The delays that are all but built into the Bill are 
        especially troublesome because the Fund will face a 
        tremendous backlog of claims and a correspondingly 
        burdensome payment obligation in its early years * * * 
        Given the number of estimated pending claims against 
        all companies, by its fourth year the Fund would need 
        to borrow $50 billion to meet its liabilities--an 
        amount that is approximately $10 billion more than the 
        maximum permitted under the Bill. Such a loan would 
        cause all future contributions--assuming they are 
        timely made--to go to debt service. The Fund's 
        liabilities will outstrip its revenues from the 
        beginning.
          For the Fund to be economically feasible, the precise 
        contributions must be determined before its enactment, 
        and binding commitments must be obtained from the 
        contributing firms. Currently, these do not exist. A 
        substantial number of expected contributors from 
        industry and insurance are on public record as 
        rejecting any commitment to Fund the bill. Their 
        resistance will result in years of post-enactment 
        rancor, controversy, and litigation. The delay and 
        uncertainty that will dog the Fund under the current 
        Bill should not be accepted, since the intended 
        beneficiaries of the Bill, asbestos victims, will be 
        made to wait still longer for compensation, while their 
        conditions worsen, their medical costs increase, and 
        their number escalates.
          Absent a federal guarantee, the Bill's uncertain 
        funding and weak enforcement provisions shift onto the 
        backs of the sick and needy asbestos victims, 
        especially those in the future, the risk of delay and 
        failure.\52\
---------------------------------------------------------------------------
    \52\Testimony of Eric Green, Before the Senate Committee on the 
Judiciary, ``Hearing on a Bill to Create a Fair and Efficient System to 
Resolve Claims of Victims for Bodily Injury Caused by Asbestos 
Exposure, and for Other Purposes,'' 109th Cong., April 26, 2005, at 9-
10.
---------------------------------------------------------------------------

F. Lack of transparency

    S. 852 continues to lack transparency regarding who the 
participants will be and what they will be required to 
contribute. While this bill, in some areas, such as the medical 
criteria and the claims values, is very specific, in other 
areas, such as funding requirements, it remains frustratingly 
vague. In fact, the bill does not require a specific 
determination of the amounts to be paid, by whom, or when, 
until after the Trust Fund is up and running.
    This order of events is clearly backward. As Senators 
charged with understanding and voting on this bill, we need to 
know--not just estimate, assume, or guess--that this Trust Fund 
will have the assets to work before it forcibly removes people 
from the courts where they currently have the right to seek 
compensation.
    Because asbestos victims will be losing their common law 
right to a trial by their peers, they at least deserve to know 
that the Trust Fund will have adequate funds to compensate 
them. How can we even begin to assure them of this fact if we 
do not even know how much various companies are really going to 
pay into the Trust Fund?
    When we repeatedly asked for this crucial information, we 
did not receive it. For this reason, Senator Biden offered an 
amendment in Committee to require the application of the 
transparency provisions already in the bill--which determine 
who is paying how much, and therefore whether there really will 
be as much money as is currently assumed--before the Trust Fund 
goes into effect.
    The amendment would have ensured that there is a 
responsible, viable funding plan in place and that the Trust 
Fund will really work. After all, who would start a $140 
billion business without a specific, viable financial plan? 
Unfortunately, proponents of the bill refused to acknowledge 
this weakness in the bill, and defeated the amendment.
    The bill would bring within its ambit thousands of small 
companies that are not even aware they will be expected to pay 
into the Trust Fund. A number of companies have already 
announced their plans to sue to prevent any assessments or 
taking of their property and resources. The challenges by these 
businesses alone could keep the program mired in litigation for 
several years.
    Unfortunately, the proposed formulas for determining the 
amounts that defendant corporations and insurance companies 
will pay provide no guarantee that the payments will produce 
the proposed $140 billion in overall funding, or the annual 
contributions of $5 billion. In fact, the payment formulas for 
insurance companies will not even be determined until after 
enactment of the bill. Nor are there sufficient enforcement 
provisions in the Act to ensure the parties contribute their 
required sums.

G. A sunset in name only

    A guiding principle for us in considering asbestos 
litigation reform bill has always been to make sure that 
victims are treated as well as possible given the constraints 
of a Trust Fund system. A second guiding principle has been 
that, if the Trust Fund fails to operate as promised, the 
victims' rights should be restored to their status under the 
common law system; they should exit a failed system no worse 
off than they entered it.
    Supporters of this bill have recited the ``need for 
certainty,'' that is, the need to know that (1) they will pay a 
set amount of money into the Trust Fund, and (2) they will not 
be subject to the vagaries of litigation down the road. We 
believe that asbestos victims are entitled to the same 
certainty as corporations and insurers.
    It is for this reason that Senator Biden offered an 
amendment during the Committee's deliberation of S. 1125 in the 
last Congress to create a sunset of the Trust Fund if it ran 
out of money. That amendment, which passed the Committee with 
the largest bipartisan majority of any amendment during that 
markup session, provided that if the Trust Fund ever failed to 
pay 95 percent of its claims value, or 95 percent of its 
claimants, the Trust Fund would sunset and victims would return 
to the court system from which they had been removed.
    S. 852 includes a ``sunset'' provision, but it is a sunset 
in name only. Under the new provision, if the Administrator of 
the Trust Fund thinks that there will be a shortfall of monies 
in the Trust Fund, he--an individual with a vested interested 
in maintaining the solvency of Trust Fund--can recommend any 
number of measures to salvage the Trust Fund. These include 
lowering the award values or making the medical criteria even 
more stringent. Under either scenario, victims of asbestos 
disease would do even worse under the revised Trust Fund than 
they would under the law as enacted.
    During this year's consideration in Committee, Senator 
Biden offered an amendment to ensure that the Administrator 
could not save the solvency of the Trust Fund on the backs of 
the victims. Specifically, the Administrator would have been 
limited to two options: (1) sunsetting the Trust Fund to permit 
victims to return to court; or (2) raising more money from 
those making contributions to the Trust Fund, so the program 
could remain operational.
    In addition, the Biden amendment would have required not 
merely a vague analysis of the Trust Fund by the Administrator; 
it would have required the Administrator to certify his 
findings, not unlike the requirements of corporate executives 
under the Sarbanes-Oxley corporate accountability law and 
similar laws.
    Also, while the sunset in the bill would return cases only 
to federal court, the state court where the exposure occurred, 
or the state court where the claimant resides--a provision far 
more restrictive than the current laws allow, Senator Biden's 
amendment would have permitted a return to the state court 
where the defendant is headquartered or has its principal place 
of business, or the state court of any state where the 
defendant has at least 10 percent of its employees or conducts 
10 percent of its sales.
    Thus, this year's Biden sunset amendment was a far cry from 
what this Committee adopted two years ago. It was significantly 
weaker, a compromise. Yet, it was still defeated.
    The key concept adopted by the Committee in the last 
Congress--that the Trust Fund must terminate and permit victims 
to return to court if it does not pay substantially all of its 
claims--has been abandoned. We believe Chairman Specter was 
correct two years ago, when he spoke forcefully in favor of a 
mandatory, self-executing sunset:

          We are taking away a right to jury trial, which is 
        very substantial, it is a fundamental right, and I 
        think in the interest of the workers who are injured 
        and not being compensated that it is a tough balancing 
        act * * * But I want to be sure, Mr. Chairman, that if 
        the companies do not put up the money or whatever point 
        the Trust is out of money and there is no more money to 
        be collected by injured people, at least at that stage, 
        they have access to the courts.
          Unfortunately, under the current sunset formula, 
        claimants are likely to be stuck in a faltering system 
        while the Administrator seeks to stiffen the medical 
        criteria and/or reduce the compensation for claimants. 
        Since Congress will have to approve these 
        recommendations, we had better be prepared to re-open 
        this debate in the next several years. Maybe then my 
        colleagues will see the wisdom of encouraging increased 
        contributions to the Fund by including a real sunset 
        provision in the Act.\53\
---------------------------------------------------------------------------
    \53\S. Rep. No. 109-118, at 198 (2003)

    In addition, the chaos that would result if there was, in 
fact, a sunset and assets had to be redistributed back to the 
current bankruptcy trusts is not addressed by the bill. Given 
that these existing trusts would have been completely shutdown 
(assuming the bill survived constitutional challenge) it would 
take years to reconstitute them.
    As Professor Green testified:

          In its current form, the Bill requires that all the 
        monies now held in Trust for current and future 
        claimants be transferred to the national fund. This 
        transfer would cause the existing Trusts, with assets 
        in the billions, to be shut down. The hundreds of 
        skilled employees around the country who have been 
        processing claims would be fired. In some cases, those 
        Trusts and their claims processing units have been 
        adjusting claims for nearly twenty years with 
        considerable expertise. For the sake of efficiency and 
        economies of scale, many of the Trusts have combined 
        facilities * * *
          If the national fund's projected shortfall becomes a 
        reality, then the Trusts that exist today are to be 
        revived. But it will take tens of millions of dollars 
        to recreate what already exists in the private sector 
        today. The Trusts' claims adjustment facilities will 
        have been dismantled, their claims adjusters fired, 
        their Trustees discharged, and their final tax returns 
        filed. The Bill provides no practical transition plan 
        to enable claimants to go back to the tort system or to 
        the Trusts.\54\
---------------------------------------------------------------------------
    \54\Statement of Eric Green, Before the Senate Committee on the 
Judiciary, ``Hearing on a Bill to Create a Fair and Efficient System to 
Resolve Claims of Victims for Bodily Injury Caused by Asbestos 
Exposure, and for Other Purposes,'' 109th Cong., April 26, 2005, at 11-
12.
---------------------------------------------------------------------------

H. Inadequate claims values

    The principal argument of supporters, that S. 852 
represents an improvement over S. 1125, rests on the idea that 
claims values have been increased and subrogation has been 
prohibited to preserve the value of awards for the victims. 
These are certainly positive steps. However, many of the 
compensation values, especially for the most seriously ill 
victims, are still too low. The victims in many cases will 
receive less than they would get in court today, even after 
attorney's fees are deducted.\55\
---------------------------------------------------------------------------
    \55\It bears noting, however, that not all values have increased. 
The consensus value included in draft bill for Category II with $35,000 
but was inexplicitly lowered to $25,000 in S. 852. In addition, while 
the claims value for mesothelioma victims has been increased by a 
meager $25,000 from S. 2290, in real terms, that is a reduction in 
value. See http://www.aier.org/cgi-aier/colcalculator.cgi. Thus, the 
lowest and highest categories of claims values have been reduced by S. 
852 as compared to earlier versions of this bill, and they are far 
below what victims would receive in the court system.
---------------------------------------------------------------------------
    Further, new medical treatments for mesothelioma are now 
being implemented. These treatments are very expensive. As 
medical costs for mesothelioma victims increase, their awards 
under the Trust Fund have not risen proportionately. An 
amendment to provide medical benefits to mesothelioma victims, 
similar to the medical benefits provided to successful 
claimants under the Energy Employees Occupational Illness 
Compensation Program Act (``EEOICPA''), to ensure that 
treatment expenses would not reduce their awards, was not acted 
on by the Committee.
    Other efforts to allow for extraordinary medical or family 
expenses to be considered, were also rejected. The only 
concession has been to authorize the Administrator to consider 
increasing compensation to younger mesothelioma victims with 
dependants, but at the expense of older victims. But even this 
is not guaranteed under S. 852, nor are there additional funds 
provided for to make such payments.
    In addition, the court system currently compensates workers 
with substantial asbestos exposure and lung cancer regardless 
of whether the patient also has nonmalignant disease. The Trust 
Fund will not. Our efforts to reinstate compensation for this 
group of asbestos victims were rejected in Committee. Since one 
of the major justifications for asbestos reform is to provide 
more money to those who are truly sick, we believe there is no 
justification for denying compensation to victims with lung 
cancer or other diseases currently being compensated through 
the courts.

I. Replacing one adversarial process with another

    S. 1125 and S. 2290 from the last Congress aimed to 
streamline the administrative process, in order for victims to 
recover compensation more easily. Both bills relied on medical 
presumptions and simplified proof of exposure to facilitate 
recovery. However, S. 852 reintroduces an adversarial 
environment by making proof of claims more difficult and by 
removing some presumptions favoring compensation.
    As discussed above, whereas previous bill required victims 
to prove that asbestos was a ``contributing factor'' to their 
disease, under S. 852 victims are now required to prove that 
asbestos was a ``substantial contributing factor'' to their 
disease. In many instances, however, it is not possible to 
gauge the relative contribution of different environmental 
factors. This is a much higher burden than victims have to meet 
in court.
    On top of the new and difficult burden, S. 852 requires 
claimants to, among other things, demonstrate substantial 
occupational exposure and employment history; catalog all 
collateral source payments; set forth evidence to support an 
assertion of non-smoking, and even in the case of exigent 
claimants, identify each appropriate defendant as if the claim 
could be heard in court, consistent with Rule 11 standards for 
attorneys under the Federal Rules of Civil Procedure.
    One of the justifications for setting up an administrative 
system has been to simplify and ease the burden of proof for 
victims, as a tradeoff for giving up their common law rights. 
As the administrative burden rises for victims, the tradeoff 
becomes less fair.
    While S. 852 has made the claims process more adversarial 
and has layered on more review by the Physician's Panel than 
previous iterations, it has simultaneously made it more 
difficult for victims to engage professional advocates to plead 
their case. The bill imposes a severe cap on fees for victims' 
attorneys, 5 percent of the amount awarded to claimants. This 
will complicate, if not make it impossible, for many victims to 
engage quality attorneys to aid them in presenting complex 
claims both before the Administrator and before the Physician's 
Panel, and challenging adverse decisions, including low awards 
or total rejections.
    Even United States District Judge Edward Becker--the chief 
architect of the bill--in his January 11, 2005, testimony 
before the Judiciary Committee, warned against severe 
attorneys' fee caps, on the grounds that Congress would hinder 
the ability of persons to obtain effective legal counsel.\56\
---------------------------------------------------------------------------
    \56\Testimony of Judge Edward Becker, Before the Senate Committee 
on the Judiciary, In the Matter of: Fairness in Asbestos Injury 
Resolution Act, 109th Cong., January 11, 2004, at 14-15.
---------------------------------------------------------------------------
    In contrast, the bill contains no caps on the attorneys for 
the corporate defendants or insurers. Thus, these entities will 
be free to challenge any adverse decisions and the 
constitutionality of the program without such restrictions.

J. Collateral source rule not fair to victims

    S. 852 requires any payment made to a claimant from the 
Trust Fund be reduced by the amount of any ``collateral 
source'' compensation the claimant may have received from 
previous court proceedings or settlements relating to asbestos 
injuries. It is fair and reasonable to offset the sum that a 
claimant has actually received from other sources for asbestos 
injury, in order to avoid a situation of ``double dipping'' 
with the Trust Fund. But it is completely unfair to offset from 
the claimant money that never ended up in the claimant's 
pocket.
    It is a standard practice in litigation for jury awards or 
settlements to often include costs and expenses in addition to 
attorney's fees as part of the total amount of money awarded to 
the plaintiff. However, these extra costs, fees, and expenses 
are not for the victim but for his legal representatives. If 
such items are included under the bill's collateral source 
rule, then it has the effect of reducing the amount of payment 
provided by the Trust Fund to the victim dollar for dollar for 
amounts that the victim never received.
    During Committee consideration, Senator Durbin offered an 
amendment that would have corrected this problem by amending 
the definition of collateral source compensation in the bill to 
make it clear that the calculation of collateral source offset 
is based on ``net'' compensation, not ``gross.'' That way, an 
asbestos victim who loses his right to a jury trial and is 
forced into making a claim with the Trust Fund is not penalized 
further by having additional amounts offset from a claim 
payment that he never received.
    Unfortunately, in another example where the interests of 
the corporate defendants trumped the interests of asbestos 
victims, the Committee rejected this amendment. Senator Durbin 
argued that ``if we are going to have a fair set-off, it would 
be a set-off of the money actually received by the victim * * * 
as opposed to the gross amount which was subject to attorneys' 
fees and costs.'' But Chairman Specter asserted that, ``there 
is really the companion issue of how much the defendants ought 
to be credited.''\57\
---------------------------------------------------------------------------
    \57\Executive Business Meeting, Senate Committee on the Judiciary, 
May 25, 2005, pp 8-9.
---------------------------------------------------------------------------

K. Unfair treatment of asbestos victims with pending or settled cases

    Under S. 852, the victims of asbestos disease are asked to 
bear the burden of the multi-year delay anticipated before the 
Trust Fund becomes operational and ready to pay victims. It 
will take time to promulgate rules and to set up the elaborate 
bureaucratic structure created by the bill. It will take time 
to determine which companies are obligated to pay into the 
Trust Fund and how much each one must contribute. It will take 
time for the insurance industry to develop a formula 
apportioning its funding obligation amongst the individual 
insurers. Finally, it will take a great deal of time to resolve 
the myriad of legal challenges that will inevitably confront 
this bill should it be enacted.
    Rather than permitting asbestos claims to continue to be 
adjudicated in the courts until the Trust Fund is able to 
process and pay them, the bill imposes an immediate two year 
stay on nearly all asbestos personal injury cases. According to 
CBO estimates, at least 60,000 to 80,000 claimants with serious 
asbestos disease will be subject to this two-year stay.\58\ 
This will create an extreme hardship on many seriously ill 
victims with cases already pending in the courts. With their 
health deteriorating and unable to work, medical bills and 
other expenses are steadily mounting. It is wrong to put them 
into a two-year legal limbo.
---------------------------------------------------------------------------
    \58\Statement of Margaret Seminario, Director, Safety and Health 
Department, American Federation Labor and Congress of Industrial 
Organizations, Before the Senate Committee on the Judiciary, ``Hearing 
on a Bill to Create a Fair and Efficient System to Resolve Claims of 
Victims for Bodily Injury Caused by Asbestos Exposure, and for Other 
Purposes,'' 109th Cong., April 26, 2005, at 3.
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    Even the sickest victims--those with less than a year to 
live--will see their cases halted should S. 852 become law. 
While the stay imposed on them is for nine months, rather than 
two years, it can still have a devastating impact.
    There is no compelling reason why all asbestos cases should 
be stayed as soon as the bill passes. The provision is the 
result of the insistent demands of corporate defendants and 
insurers who want a two year payment holiday. Yet, S. 1125, the 
bill approved by the Committee in the last Congress, did not 
give in to this unreasonable demand by the business community. 
It recognized the principle that the courts should remain 
available to asbestos victims until another system of 
compensation is in place and ready to process claims. It 
expressly provided that cases in the court system could 
continue uninterrupted until the Administrator certified that 
the Trust Fund was operational. That is the right standard, and 
the Committee was wrong to abandon it in S. 852.
            1. Even exigent cases are subject to a stay
    Under the bill as drafted, even exigent health claims 
currently pending in the courts will be automatically stayed 
for nine months as of the date of enactment. An exigent health 
claim is one in which the victim has been diagnosed ``as being 
terminally ill from an asbestos-related illness and having a 
life expectancy of less than one year.''
    By definition, these cases all involve people who have less 
than a year to live due to mesothelioma or some other disease 
caused by asbestos exposure. Their cases would all be stayed 
for nine months. Nine months is an eternity for someone with 
less than a year to live.
    The stay language is written so broadly that it would stop 
all forward movement of a case in the court system. A trial 
about to begin would be halted. An appellate ruling about to be 
issued would be barred. Even the deposition of a dying witness 
could not be taken to preserve his testimony. The stay would 
deprive victims with less than a year to live of their last 
chance at a day in court. We cannot believe that the authors of 
this bill intended such a harsh result. At the markup, several 
members expressed deep concern about this provision.
    The bill does contain language allowing an ``offer of 
judgment'' to be made during the period of the stay in the hope 
of producing a settlement. However, this provision is unlikely 
to resolve many cases because it requires the agreement of the 
defendants. There is little incentive for defendants to agree 
to a settlement when the case has been stayed. Those who have 
tried cases know that it is only the imminence of judicial 
action which produces a settlement in most cases. Delay is the 
asbestos defendant's best ally; and under this bill, the case 
is delayed for at least nine months and may never be allowed to 
resume if the Trust Fund becomes operational. If, however, 
these exigent cases were not stayed, and judicial proceedings 
could continue, there would be far more likelihood of cases 
settling under the offer of judgment process.
    We strongly believe that, at a minimum, all exigent cases 
should be exempted from the automatic stay in the bill. Victims 
with less than a year to live certainly should be allowed to 
continue their cases in court uninterrupted until the Trust 
Fund becomes operational. Their ability to recover compensation 
in court should not be halted until they are able to receive 
compensation from the Trust Fund. It is particularly unfair to 
leave these dying victims in a legal limbo. For them, the old 
adage is especially true--justice delayed is justice denied.
    Under the bill, defendants would receive a credit against 
what they must contribute to the Trust Fund for whatever 
payments they make to these dying victims; so they would not be 
``paying twice,'' as some have claimed.
    Allowing the exigent cases to go forward in the courts 
without interruption is a matter of simple fairness. Staying 
the cases of victims who have less than a year to live is 
bureaucratic insensitivity at its worst. Most of these victims 
will not live to see the doors of the Trust Fund open. At the 
markup, an amendment was offered by Senator Kennedy to strike 
the provision staying exigent cases, but it was defeated.
    We should not deprive these dying victims of their last 
chance--their only chance--to receive some measure of justice 
before asbestos-induced disease silences them. They should be 
allowed to receive compensation in their final months to ease 
their suffering. They should be allowed to die knowing that 
their families are financially provided for. S. 852 in its 
current form takes that last chance away from them.
    Incidentally, S. 852, as introduced, did not specify 
whether the benefits of an exigent claimant who pass away while 
awaiting such benefits under the Trust Fund could be passed on 
to the surviving widow or children. Senator Durbin offered an 
amendment, which the Committee adopted unanimously, that would 
provide such benefits to the surviving family members. Yet even 
such a non-controversial change to the bill set off an active 
round of deliberations among the corporate defendants 
supporting the bill, which forced the Chairman to revisit the 
issue in two additional sessions of Committee consideration. 
The language that survived in S. 852 is not as clean as the 
original Durbin amendment, but it nevertheless addresses the 
core concerns raised by Senator Durbin, to provide 
compassionate benefits to the surviving family members of 
asbestos victims.
            2. Impact of multiple stays and venue rules
    Other aspects of the treatment of pending cases are also 
troublesome. If the Trust Fund is not operational after two 
years, the stay is lifted for all claimants. However, asbestos 
victims cannot necessarily return to the courts where their 
cases were pending. New, restrictive venue provisions are put 
in place by S. 852 which will require some of these seriously 
ill victims to start their cases from scratch in a new court. 
This will further postpone, in some cases by years, the day 
when they finally receive compensation for their injuries.
    Finally, even if the stay is lifted and court proceedings 
resume, the cases will be halted again if and when the Trust 
Fund finally becomes operational, forcing victims to play an 
absurd game of ``red light-green light'' with their right to a 
day in court. Imagine the frustration of an asbestos victim 
whose case is stayed on the verge of trial by the enactment of 
S. 852. For two years, he has nowhere to go for financial 
relief while his health steadily worsens. After two years, the 
Trust Fund is still not up and running, so he can finally 
return to court.
    However, because of the new venue rules, he cannot return 
to the same court that was ready to hold his trial. Instead, he 
must refile in a new court and begin the litigation process 
anew. After spending a year pursuing this new court case, it is 
stayed because the Trust Fund is finally ready to process 
claims, three years after passage of the bill. Of course, the 
Trust Fund will be swamped with claims the day its doors open, 
so that unfortunate victim may wait another year or more before 
his claim is reached. It is difficult to imagine a more 
arbitrary and unfair system. Yet, that is the system which S. 
852, if enacted, will impose on thousands of seriously ill 
asbestos victims.
            3. Abrogating existing settlements
    S. 852 also abrogates many existing asbestos settlement 
agreements. A number of victims have settled claims with 
defendants in the court system and are counting on those 
settlements to pay their medical bills and take care of their 
families. Although the bill's proponents suggest that final 
settlements in which the only remaining act is payment will be 
honored, the proposed language actually excludes many such 
settlements.
    The language in the current bill requires that a written 
settlement agreement be signed directly by the defendant or the 
insurer, as well as the individual plaintiff.\59\ As permitted 
by state agency and contract law, most settlements are 
finalized either orally or by a confirming letter from counsel 
and require a release that is signed by the plaintiff but not 
the companies or insurers. This new requirement is likely to 
delay many pending settlements, thereby adding further to the 
large number of cases that will have to be adjudicated when the 
Trust Fund becomes operational.
---------------------------------------------------------------------------
    \59\The only circumstance in which a representative of the 
plaintiff is permitted to sign on his or her behalf in where the 
plaintiff is ``incapacitated.'' See section 403(c)(3)(A)(i)(II)(bb).
---------------------------------------------------------------------------
    The bill would also overturn settlement agreements awaiting 
court approval. In situations where the parties have agreed to 
a settlement but are awaiting court approval, the settlement 
will be voided. The bill also includes a complicated and 
ambiguous provision that may void settlements entered into by 
companies that later filed for bankruptcy but that would likely 
emerge from bankruptcy if the bill passes.
    Under S. 852, a victim, having assumed his or her case was 
settled, will suddenly have to start all over in the new Trust 
Fund system, without any compensation for the cost and hardship 
of having his or her settlement superceded by the terms of the 
Act. Victims who have already settled their cases but have yet 
to receive payments will be compelled to relinquish the money 
that defendants have agreed to pay.
    Victims have a vested property right in these settlement 
contracts, and this bill would unconstitutionally deprive them 
of that property right without due process of law. Many of 
these cases have been entirely resolved, yet the victims will 
be forced to surrender the unpaid dollars to the wrongdoers who 
injured them. We cannot support these policies, which clearly 
favor the defendants over the injured parties.
    The purported purpose of the bill is to quickly and 
efficiently resolve claims. Instead, the bill will reopen old 
cases that all parties agreed were fairly and entirely 
resolved. Many of these people have passed up their day in 
court to reach a settlement and were counting on receiving 
those promised dollars quickly. Now that settlement will be 
taken away as well as their right to a trial.
    Processing claims for thousands of victims with settlement 
agreements will put an enormous burden on the Trust Fund. It is 
likely to delay compensation for all victims. We believe this 
is unnecessary and that existing settlements should be honored.
    In Committee, Senator Biden attempted to address some of 
these shortcomings by offering an amendment providing that a 
settlement agreement or confirmation of settlement would 
suffice to be considered final if it ``was authorized by the 
settling defendant or the settling insurer, and confirmed by, 
or with, counsel for the settling defendant or settling 
insurer.''
    Moreover, to address the criticism that his amendment would 
have opened the door to permitting so-called inventory 
settlement agreements--agreements that settle claims for 
future, or even hypothetical claimants, in advance--he included 
a provision in the amendment that would have required that the 
specific asbestos claim be settled for a specific sum with a 
specific named plaintiff. It simply aimed to recognize in the 
bill settlement agreements that are universally recognized in 
the courts as legitimate and enforceable. The amendment was 
rejected.

L. Labor department delays in administering the trust fund

    Despite repeatedly seeking assurances that the Department 
of Labor (``DOL'') can administer S. 852, we have received no 
such assurances. There is reason to believe DOL cannot have the 
Trust Fund up and running as quickly as S. 852 contemplates.
    For example, S. 852 calls for regulations governing the 
Trust Fund to be issued within 90 days, but courts are unlikely 
to enforce such a deadline, and the bill provides no penalty if 
the goal is not met. The Office of Management and Budget also 
has a right to review and revise the regulations under the 
Executive Order. In past compensation programs, much simpler to 
administer than the Asbestos Trust, DOL has taken longer than 
90 days to develop implementing regulations.
    Disease compensation has consistently proven to be 
extremely difficult to administer. Other compensation programs 
adopted by Congress and administered by DOL have each cost 
more, faced a higher volume of claims, and faced greater claims 
processing delays than proponents of the program acknowledged 
during Congressional consideration.
    Though supporters of the Black Lung law argued that there 
would be several thousand claimants in total, in fact, in the 
first two years of the program, 350,000 claims were 
submitted.\60\ In the case of EEOICPA, approximately 3,000 
successful claimants were forecast when the law was advocated 
in 2000.\61\ Yet, by December 31, 2004, over 60,000 claims had 
been submitted to DOL, almost 13,000 claims had been paid, and 
many others were in the process of adjudication.\62\ Clearly 
the advocates of these programs greatly underestimated the 
number of individuals who would file valid claims.
---------------------------------------------------------------------------
    \60\Peter S. Barth, Professor Emeritus, University of Connecticut, 
February 15, 2005, ``Commentary on the Creation of a Fund for Victims 
of Asbestos Caused Diseases,'' at 5. Available at www.usaction.org.
    \61\Barth at 13.
    \62\Barth at 11.
---------------------------------------------------------------------------
    A consequence of this massive underestimating of potential 
claims was that the forecasted costs by the proponents proved 
exceedingly low--including the federal government's 
compensation costs for each program. For example, at the time 
of enactment, supporters of the Black Lung program estimated 
the maximum annual costs would be approximately $100 
million.\63\ Yet, in the first 10 years of the program, the 
Social Security Administration alone had expended $8 
billion.\64\ Moreover, a Trust Fund to pay DOL's share has a 
debt to the U.S. Treasury that currently exceeds $8 
billion.\65\ Clearly, the actual costs have far exceeded the 
expected future costs. We believe the same is likely to happen 
with this proposed Trust Fund.
---------------------------------------------------------------------------
    \63\Barth at 8-9.
    \64\Barth at 9.
    \65\Barth at 9.
---------------------------------------------------------------------------
    In addition, the initial underestimation of the actual 
number of claims contributed greatly to the delays in providing 
compensation to claimants. Moreover, in some cases, it resulted 
in payments being received after the applicant had died from 
the relevant disease. Other delays were the result of more time 
being needed to develop appropriate regulations, and to 
evaluate the evidence submitted by claimants or their 
survivors.

M. Litigation delays

    If S. 852 is enacted into law, the program contemplated by 
this legislation will surely face numerous immediate court 
challenges from a variety of interested parties, including 
defendants, insurers and victims' groups. Over 8,500 
defendants, insurers, and private trusts are currently involved 
in the asbestos litigation. Several of these entities, 
including the Manville Trust, have indicated they may challenge 
the bill as a ``taking'' of their property without due process 
of law.
    This concern about delay due to protracted legal challenges 
was discussed at length at the Committee's April 26, 2005, 
hearing by Professor Green:

          My greatest concern about the bill is its lack of 
        certainty and clarity regarding whether, and when, the 
        necessary contributions will be made by industry and 
        insurers. In its current form, the Bill sets forth 
        total contribution amounts but fails to address the 
        resistance that will stand in the way of ever 
        collecting those amounts. Based on statements that 
        persons in the industry and insurance sectors have 
        already made with respect to this Bill and prior 
        versions, the resistance to collection will be as 
        stubborn and as time-consuming to overcome as possible.
          It is wishful thinking and a major mistake to 
        underestimate this problem. In the entire history of 
        asbestos litigation, only a handful of industrial firms 
        and even fewer insurers have ever voluntarily faced up 
        to the cost of resolving their full asbestos 
        liabilities. The rest of the firms and insurers that 
        are being counted on under this Bill to pay their 
        allocated contributions have by and large fought and 
        resisted every attempt to hold them accountable. What 
        makes anyone think they will now accept their allocated 
        responsibilities and pay up their shares on time and 
        without a fuss?''\66\
---------------------------------------------------------------------------
    \66\Green statement at 6-7.

    The following are among the other expected constitutional 
challenges to S. 852:
           Cancellation of Businesses' Insurance 
        Contracts. In an April 20, 2005 letter to the 
        Committee, Professor David Strauss of the University of 
        Chicago law school contends the taking of a defendant's 
        insurance proceeds, combined with a required 
        contribution to the Trust Fund, could prove to be 
        unconstitutional.\67\ The medium and small-sized 
        businesses that would be adversely affected by the bill 
        include entities that have sufficiently insured 
        themselves against future asbestos liabilities. 
        However, S. 852 will not allow the crediting of such 
        insurance. Consequently, these entities will lose their 
        insurance coverage under the bill without any 
        compensation from the government, and in turn, will 
        have to meet the assessments that would be imposed on 
        them to finance the national Trust Fund independently. 
        This is expected to be a heavily litigated issue that 
        may take years to resolve, as many perceive the 
        evisceration of premiums they have paid without due 
        compensation as a Fifth Amendment Property Takings 
        violation, and the additional assessments as a tax.
---------------------------------------------------------------------------
    \67\Letter from Professor Davis Strauss to the Honorable Arlen 
Specter, April 20, 2005.
---------------------------------------------------------------------------
           Confiscation of Assets of Settled Trusts. 
        According to an April 18, 2005, letter from former 
        Solicitor General Ted Olson to Senator Cornyn, the 
        taking of the assets of the bankruptcy Trusts is also 
        unconstitutional. In his letter, Mr. Olson indicated 
        that his firm represents such Trusts and plans to file 
        suit to protect their assets if the bill continues to 
        allow for the confiscation of those Trusts.\68\ The 
        bill's supporters, however, are relying on the $7.4 
        billion from those Trusts to meet the Trust Fund's 
        initial funding needs. If a court rules for Trusts in 
        this challenge, the Trust Fund will be short $7.4 
        billion of the $42 to $60 billion required for an 
        effective startup period. On the other hand, if the 
        bankruptcy Trusts' funds are allowed to be transferred 
        to the new Trust Fund, and the funds are paid to 
        claimants, then the U.S. Treasury could be responsible 
        for reimbursing these Bankruptcy Trusts, with interest.
---------------------------------------------------------------------------
    \68\Letter from Theodore B. Olson to the Honorable John Cornyn, 
April 18, 2005.
---------------------------------------------------------------------------
           Suits by Businesses over the Allocation 
        Formulas. The Coalition for Asbestos Reform has already 
        advised Congress that its members will challenge the 
        proposed assessments on them as well as the 
        cancellation of their insurance coverage. And it is 
        likely that even some of the companies advocating for 
        the bill will challenge their particular assessments as 
        unfair to them.
           Legal Challenges by Victims' Groups. Court 
        challenges are also expected by victims who are not 
        covered by the Trust Fund but who, nevertheless, will 
        have their rights to a jury trial eviscerated. This 
        will surely include some lung cancer victims with 
        substantial asbestos exposure who have been excluded 
        from the Trust Fund and others who have suffered 
        environmental or community-based exposure to asbestos. 
        Individuals residing outside Libby, Montana, but 
        similarly affected by environmental exposure to 
        asbestos, are likely to have strong claims based on the 
        Fourteenth Amendment's Equal Protection clause. And 
        individuals with enforceable settlement agreements may 
        challenge the bill's voicing of those agreements.
    S. 852 borrows the procedures for expedited judicial review 
from the Bipartisan Campaign Reform Act of 2001 (McCain-
Feingold). The constitutional challenge under that law took 20 
months before the Supreme Court's final resolution. McCain-
Feingold's expedited review provision is similar to the 
provision in the Cable Television Consumer Protection and 
Competition Act of 1992, amending the Communications Act of 
1934. The constitutional challenge to that law took four and a 
half years to resolve. Clearly, the proposed ``expedited 
review'' standard is no guarantee of quick resolution of these 
likely multiple legal claims against S. 852.
    During the course of Committee consideration, a question 
arose as to what would happen if this bill were enacted and 
subsequently stayed by a court reviewing its constitutionality. 
Specifically, is it possible that victims, who will have been 
pulled out of court by the new law, will then neither be able 
to sue for damages nor pursue a claim against the Trust Fund 
for a period of years while the constitutional challenges are 
pending? The answer to that question is almost certainly yes--
in the event of a judicial stay of S. 852, victims will be 
stuck in litigation ``no man's land.'' That is patently unfair 
to these seriously ill claimants.
    For these reasons, Senator Biden offered an amendment to 
guarantee that, in the event of a judicial stay of this law, 
victims would be permitted to continue to pursue their claims 
in court until the challenge is resolved. That amendment, like 
so many others that sought to provide some basic fairness for 
claimants, was defeated.

N. Unfair restrictions placed on victims of silica disease

    This bill has provisions that impose arbitrary conditions 
for the filing of silica claims in court. It seriously 
restricts the legal rights of individuals who are suffering 
from diseases caused by exposure to silica dust even though it 
offers those victims no compensation whatsoever under the Trust 
Fund. That is not fair.
    The rationale is to prevent asbestos claims from being 
recycled as silica claims. The sponsors fear that lawyers will 
try to turn asbestos claims into silica claims. These fears are 
greatly exaggerated. Medical experts from both businesses and 
labor unions testified before the Committee that disease caused 
by exposure to silica is easily distinguishable from disease 
caused by exposure to asbestos. While someone whose lung 
disease was actually caused by asbestos may file a silica 
claim, there is very little likelihood of the case succeeding. 
The real cause of their illness would become apparent as soon 
as the defendant's doctors reviewed the medical evidence.
    While it is reasonable to establish a procedure to identify 
prior asbestos claims brought by persons filing silica 
lawsuits, the current provision goes too far. There are serious 
problems with the way the bill currently handles this issue. It 
severely limits the rights of some people who are suffering 
with real silica disease, preventing them from going to court 
and obtaining the compensation they deserve.
    One major problem is that the bill creates an entirely new 
medical criterion for filing a silica claim. It requires that 
someone who has both silica disease and asbestos disease must 
have functional impairment from their silica disease before 
they can go to court. This bill is not supposed to be a medical 
criteria bill for diseases in the court system. But that is 
what this does to silica cases. It dramatically raises the 
evidentiary bar that a victim of silica disease must clear in 
order to recover in court. Such a provision has no place in an 
Asbestos Trust Fund bill.

O. Special interest provisions and changes during markup

    S. 852 contains several provisions that appear vague and 
ambiguous, yet probably will tremendously benefit certain 
``stakeholders.'' These special interest provisions include 
financial exemptions for foreign and off-shore insurers, a 
significant offset credit for certain insurers, exemption for 
the largest companies from having to disclose prior asbestos 
expense history, exemption for a certain transaction involving 
the sale of friction products, and perhaps others we have yet 
to identify.
    Because these provisions are drafted in generic language, 
it is difficult to determine which corporate defendants and 
insurers would benefit financially or be harmed in comparison 
to other similarly situated entities.
    In addition, during the Committee consideration of S. 852, 
there were a myriad of major provisions added in a series of 
hastily drafted managers' amendments, and substantial 
substantive changes made to the bill that have not received 
careful examination. We hope the full Senate pays particular 
attention to these provisions, should the bill move forward.

                         IV. WINNERS AND LOSERS

    S. 852 will provide a huge financial windfall to a few 
large corporations that have substantial asbestos liabilities 
and those that failed to adequately insure for their 
liabilities. These include the companies that are largely 
responsible for the asbestos health and litigation problem that 
the country faces today.
    Included among these entities is the W.R. Grace Company, 
which is now under a federal criminal indictment for its 
asbestos actions. S. 852, if enacted, will relieve the costs 
and liabilities of these firms in two ways: (1) by 
significantly reducing the amount of compensation asbestos 
victims receive--in many instances the proposed compensation 
will not even equal cancer victims' medical and economic 
losses; and (2) by imposing greater costs on many small and 
medium-sized businesses, and American taxpayers, than they 
would be responsible for under the present system.
    The groups that will be most adversely impacted by the bill 
include:
           Millions of victims of these horrible 
        diseases caused by asbestos, including deadly lung 
        cancers such as mesothelioma, who will be under-
        compensated by the Trust Fund;
           Thousands of lung cancer victims and 
        community exposure victims who will have no means of 
        recovery once this bill is enacted;
           Thousands of small and medium-sized 
        businesses, including many that are unaware that they 
        will be compelled to finance the program out of their 
        own pockets and without any acceptance of liability 
        insurance coverage or credit; and
           American taxpayers, who also will likely be 
        compelled to subsidize the program at a cost of tens of 
        billions of dollars.

                             V. CONCLUSION

    For the reasons stated above, we believe that this bill is 
not the proper solution to the asbestos health and litigation 
problem. In its present form, the bill would be unfair to 
victims, small and medium-sized businesses and taxpayers. The 
advantages of the bill would flow to the corporations that have 
been most responsible for causing the problem that we face 
today. Congress should not be supporting such a one-sided bill.

                                   Edward M. Kennedy.
                                   Joseph R. Biden, Jr.
                                   Russell D. Feingold.
                                   Richard J. Durbin.
                      XII. Changes in Existing Law

    The Committee has determined that it is necessary, in order 
to expedite the business of the Senate, to dispense with the 
requirements of rule XXVI, paragraph 12, of the Standing Rules 
of the Senate, with regard to this legislation.

                                  
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