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Nearly 30 years ago, the first of a series of bills to remove asbestos litigation from the tort system by creating an industry-funded mechanism to administratively pay asbestos claims was introduced into Congress. The need for a legislative fix of asbestos litigation has long been manifest. After many unsuccessful efforts to resolve the asbestos litigation crisis, the Senate is poised to take up consideration of S.852, The Fairness In Asbestos Injury Resolution Act of 2005. This essay is a preliminary effort to present some context for discussion of certain aspects of S.852 and to estimate the costs that may be incurred for resolution of personal injury asbestos claims if S.852 is enacted.
To date, over 850,000 individual claimants have filed suit against over 8,400 manufacturers, distributors installers and sellers of asbestos-containing products distributed across most of U.S. industries, as well as against owners of buildings and plants in which asbestos is present, claiming injury from exposure to asbestos. Since each plaintiff sues approximately 60-70 different defendants and bankruptcy trusts, the total number of claims probably numbers in excess of 50,000,000.
A number of factors account for the significant impetus to current consideration of legislative proposals that range from limiting compensation available in the tort system to plaintiffs whose injuries meet specified medical and exposure criteria to the creation of an administrative alternative to asbestos and exposure litigation. These factors include: the number of asbestos lawsuits; the almost $80 billion in costs already imposed; an even larger sum projected for future costs; 500,000 jobs lost or not created because of the litigation; the further financial consequences of the litigation's impact on capital markets; and the concern for the integrity of the civil justice system as most recently voiced by a federal judge presiding over the silica MDL proceeding that X-ray readers, diagnosing doctors, screening companies and lawyers were engaged in a scheme to manufacture diagnoses for money.
S.852, which is now before the Senate, is the product of an extended and extensive negotiation between a number of stakeholders, including, inter alia, businesses, insurers, labor unions, and lawyers. The bill proposes creation of a $140 billion trust ("Trust Fund") funded mostly by business and insurers, to pay claims that meet the medical and exposure criteria set out in the bill. In this essay, I examine the financial costs, in addition to the $140 billion to be paid into the Trust Fund, which may be incurred to resolve current and future personal injury claims based upon asbestos exposure.
In attempting to quantify the costs that "fixing" the asbestos litigation crisis may generate and, in particular, those costs additional to the Trust Fund, I am neither advocating adoption or rejection of S.852 or any other legislative "fix" of the massive civil justice system failure that I describe in this essay. Moreover, though I consider the costs that may be incurred in addition to the Trust Fund to be created if S.852 is enacted, I am not expressing any view as to the likelihood of the bill's passage.
To set the stage for my analysis, I first consider the benefits that can be realized by enacting legislation to create an administrative mechanism for resolution of asbestos claims in place of the tort system. I then present a brief history of asbestos litigation, including the development of an entrepreneurial model of claim generation, followed by a brief summary of legislative efforts to fix the asbestos litigation crisis. I then briefly summarize S.852's legislative history and current format. Finally, I consider the costs which contributors to the trust fund may additionally have to bear to resolve personal injury asbestos claims. I identify five such areas of costs:
1. asbestos claims handled and paid over the past thirty months since S.1125 was first discussed;
2. "exigent" claimants who qualify for special treatment under S.852;
3. subrogation and workers' compensation claims;
4. pending lawsuits where evidence has commenced, lawsuits where a final judgment has been entered, and certain settlements; and
5. silica/mixed dust claims.
Considering only the costs that I have been able to quantify, my analysis indicates that the costs that defendants and insurers may incur for resolution of personal injury asbestos claims, in addition to the $140 billion to be paid into the Trust Fund, could range from approximately $37 billion to $60 billion. To this should be added the cost of four other exceptions that may impose costs outside the Trust Fund that I have not quantified: (i) trial court verdicts; (ii) cases where the presentation of evidence has commenced; (iii) certain settlements; and (iv) silica claims. Each will add unspecified sums to the cost of resolving personal injury asbestos litigation.
The assumptions I have made in quantifying costs and the reports and studies I have relied upon (which I have not attempted to validate), may generate outcomes that are too high or too low. I have set out these costs and acknowledged my inability to quantify certain other costs, however, as an invitation to undertake a similar calculus to those who seek to meaningfully compare the costs of the tort and bankruptcy systems (which I have not attempted to quantify), with the costs that may be incurred for resolution of personal injury asbestos claims if S.852 is enacted.
Cardozo Law Review
Asbestos, silica, cancer, mesothelioma, silicosis
An Analysis of the Financial Impact of S. 852: The Fairness in Asbestos Injury Resolution Act of 2005,
Cardozo Law Review