[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\
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\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).
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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\
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\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.
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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.
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\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\
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\41\See Section 403(d)(2).
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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\
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\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.
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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.
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\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.
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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.
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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\
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\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.
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\1\Stephen J. Carroll, Asbestos Litigation, Rand Inst. for Justice,
xvii (2005).
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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.
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\2\See Generally, Goodman, M., Cancer in Asbestos-Exposed
Occupational Cohorts: A Meta-Analysis, Cancer Causes and Control, 10:
453-65 (1999).
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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.
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\3\Carroll, supra note 1, at 105.
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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.
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\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).
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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\
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\5\Jonathan D. Glater, Civil Suits Over Silica in Texas Become a
Criminal Matter in New York, N.Y. Times (May 18, 2005).
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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.
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\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.
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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\
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\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.
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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.
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\3\Congressional Budget Office Cost Estimate, 2. 1125, Fairness in
Asbestos Injury Resolution Act of 2003, 16 (2003).
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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.
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\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.
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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\
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\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.
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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\
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\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.
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\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).
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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\
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\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.
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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.
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\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).
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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\
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\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.
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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.
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\16\Roger Parloff, Diagnosing for Dollars, Fortune Magazine, June
13, 2005, at 102.
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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:
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\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\
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\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\
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\19\Id..
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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.
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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\
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\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.
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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.
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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.
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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.
---------------------------------------------------------------------------
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\
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\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.
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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\
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\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\
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\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.
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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\
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\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\
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\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.
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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.
---------------------------------------------------------------------------
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.
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\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.
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\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.
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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.
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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\
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\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.
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\67\Letter from Professor Davis Strauss to the Honorable Arlen
Specter, April 20, 2005.
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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.
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\68\Letter from Theodore B. Olson to the Honorable John Cornyn,
April 18, 2005.
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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.