Problems With Senator Specter’s Proposed Asbestos Trust Fund

Start Up and Funding

• Start-Up Funding. The legislation contemplates up front funding of approximately $42 billion in the first five years. Yet by the time the administrative apparatus of the Fund is established, there will likely be between 400,000 and 600,000 pending claims. These claims would require at least $30 billion in awards by 2006, money the Fund will not yet have accrued. Simultaneously, new claims will continue to accrue even though the Fund lacks the resources to pay the prior claims
  
  This insufficient level of funding is compounded by Rand estimates that the Fund will face approximately 19,000 mesothelioma claims at its inception. Based on the proposed awards in the legislation, this will entitle these claimants alone to approximately $20 billion of the up front funding at inception. Simply put, the monies will not be there

• According to Dr. Mark Peterson (Co-Founder of the RAND Corporation's Institute for Civil Justice, former court expert on asbestos claims value and procedure for four U.S. District and Bankruptcy Courts and "Special Advisor to the Courts" regarding the Manville Trust) it will take at least two years to establish the bureaucracy designed to administer the Trust. Moreover, the Trust will not contain sufficient assets to pay the pending claims until 2011 or 2012.
• Fund Solvency. The increase in values under Judge Becker's bill will cause the size of the trust fund to greatly exceed any amount the defendants and insurers are willing to pay. While these proposed values, at a minimum, should be incorporated into any bill, they would increase the size of the fund beyond the $140 million projected in the CBO's April 20, 2004 estimate of S. 2290 to Senator Nickles. In that letter, the CBO stated, "that operations of the fund would increase budget deficits by $13 billion over the 10-year period." The CBO also estimated claims exceeding $75 billion in the first ten years and $140 billion for the life of the Trust Fund. The letter further noted: "In our cost estimate for S. 1125, we concluded that revenue collections and interest earnings were likely to be sufficient to pay the estimated cost of claims under that bill. That is not the case for S. 2290."
• Transparency Absent. The bill fails to resolve the issue of transparency. Consequently, it is unclear who is participating at what levels as well as their solvency. In fact, the issue has been made worse by the inclusion of the provision allowing insurers to determine the allocations between them after the legislation is passed. This places the issue in a state of more uncertainty given many insurers opposition to the bill.
• Insurance Contributions are Unknown. The insurance industry's assessments are severable and not joint-i.e. others do not have to make up for those who refuse to pay. Foreign insurers are strongly resisting the bill and it is questionable whether they, like any company, can be compelled to pay into the Fund, especially since U.S. courts may not have jurisdiction over them.

The reality is that this bill has still not solved one of the fundamental problems with the legislation - setting forth a sufficient amount of money to adequately compensate victims and establishing a mechanism to make sure the monies are raised and a process to ensure that the funds are fully received and paid out to victims.

• Plans to Save The Program Are Born on the Backs of Victims. The supporters of the legislation know that the funding remains a problematic issue. The reality, however, is that structures have been incorporated in the bill to address the solvency issue by limiting as much as possible the number of persons who can claim from the Fund. These restrictions are evidenced by:
• The increase in the burdens of proof for asbestos diseases from asbestos being "a contributing factor," to a "substantial contributing factor," a much higher burden of proof and one that is significantly higher than required by the courts. The legislation will effectively require asbestos to be the only possible cause-a principle not required by any current state law.
• The severe caps on attorneys' fees to ensure claimants have difficulty obtaining quality attorneys that may aid them in challenging adverse decisions, including low awards or total rejections.
• The wide authority given to the Administrator in the sunset provision to make recommendations to tighten the medical criteria standards to address solvency issues and the open-ended time period given in actually shutting the program down. This is designed to give Congress the ability to affirm the Administrator's recommendations, as the argument will be that closing the program down and returning everyone to the tort system would be an economic disaster. In the end, the program will be saved on the backs of victims.

Sunset of the Fund

• Sunset Provision Has Not Been Improved and Remains Illusory. This Provision gives the impression that the sunset provision has been liberalized in comparison to S. 2290. S. 2290 provided that if the Administrator made a determination that the Fund may not be sufficient to meet obligations, the Administrator was to prepare an annual report with a range of alternatives, one of which could include termination of the program no sooner than 7 years after enactment. While the current bill shortens the first opportunity for sunset to 5-years, there is no provision which would provide a self-executing sunset.

  Instead, the proposed provisions provide the Administrator with a number of victim unfriendly alternatives to sunsetting the Act. The bill requires the Adminstrator to suggest tightened medical and exposure criteria, elimination of medical screening and monitoring as well as reduction in awards. These measures would have the effect of watering down or even eliminating compensation for victims. Such alternatives put Bill supporters in the position of agreeing in advance to a system of diluted compensation that they would never agree to at the enactment stage.

Exposure Criteria

• The Dates for the Weighted Exposure Criteria are misplaced. Between fiscal years 1996 and 2001, 3,000 of OSHA's inspections and more than 15,000 of its violations involved asbestos. The EPA has determined that as many as 35 million homes, schools and businesses are currently contaminated with asbestos containing Zonolite insulation. According to OSHA, 1.3 million workers are currently being exposed to asbestos. Some of these workers will develop asbestos related diseases over the next 10 to 50 years. The weighted exposure criteria assume that asbestos is no longer a problem in this country. The government's own watchdogs have proven otherwise. If exposure to asbestos continues to this day, why does the weighted exposure criteria favor those exposed long ago at the expense of the unwitting who are still being exposed?
  
  The exposure criteria assume different weighted exposures for different dates of employment. For example, the bill assumes that if you worked in a trade working with asbestos, such work after 1976 had only half the exposure of those working in it prior to 1976, and that the work in the trade after 1986 was only ten percent the exposure that would have occurred prior to 1976. These assumptions are arbitrary. No one can assume that exposure during any one time period was worse than that in any other. As EPA and OSHA studies have shown, people are still being exposed to dangerous levels of asbestos in and outside the workplace. Moreover, these agencies are often forced to keep this information quite so as not to alarm the populous. If people aren't told, how are they to know that they were even exposed? How would they even begin going about proving their claim?
  
  Many current exposures are occurring outside the workplace. Situations involving neighborhood, environmental and home exposure remain problematic and the employment exposures (which the FAIR Act concentrates on) are not the problem they once were. For example, many current exposures involve environmental/neighborhood contaminations that are the result of conduct that occurred years ago. Yet the effects are still being felt equally by those in the zone of danger today (e.g. Libby, 9/11, Dearborn, and El Dorado). Why should those who worked at a plant years ago be treated any differently than those who work in the same environment today? Why should a drywaller or painter who installed drywall prior to 1976 be treated any differently than the same tradesman who removes it today? Why should someone who built the World Trade Center be treated any differently than someone who breathed in asbestos after its destruction?
  
  The medical and exposure criteria discriminate against those with non-occupational exposure as well as those exposed more recently. These two assumptions fail to account for the majority of asbestos exposures during the last 40 years. These exposures are a result of home remodeling projects, tear out of "old asbestos" at older manufacturing plants, automotive repair (brake and clutch work), and neighborhood exposure (e.g. a shuttered plant that processed asbestos or dumped it in the area).

Lung Cancer Claims

• Former Level VII Lung Cancer Claims Eliminated. The latest draft has eliminated all Level VII (under S. 1120 and 2290) lung cancer claims. Workers with millions of asbestos fibers in their lungs and over fifteen years of asbestos exposure will not be able to file claims with the Trust or in court. These victims will be left without any recourse. Some critics have asserted that the original Level VII cancer claims converted the legislation into a smoker's compensation bill. Sen. Specter has not only excluded smokers and ex-smokers within this group, but he has also prevented non-smokers with lung cancer from obtaining compensation. This change threw out the baby with the bath water.
  
  It is the medical consensus that people with heavy asbestos exposure are at a substantially increased risk of lung cancer, regardless of whether they also have asbestosis or pleural disease. Scores of studies have concluded that both smokers and non-smokers with asbestos exposure are at an increased risk of lung cancer with or without asbestosis or pleural disease. The Surgeon General's 1986 Report on Cancer in the Workplace found that smokers with asbestos exposure have a 50-90 times increased risk of developing lung cancer, while the risk from smoking alone was only eleven times.

• Smokers Eliminated. The legislation has taken the draconian step of essentially eliminating lung cancer claims by smokers and ex-smokers, despite the well-documented explosive risk of combining these two carcinogens. The bill is written in a manner that essentially compels anyone who has smoked more than 100 cigarettes to disprove that their lung cancer was caused by smoking, notwithstanding evidence of asbestos fibers in their lungs. As it is impossible to prove a negative, these people are wiped out of the bill. What's even more tragic is these persons will be left with no legal recourse. They will be barred from recovery from the Fund, and likely will be barred from seeking recourse under another legal theory, even though the medical evidence demonstrates that asbestos exposure is even more dangerous when combined with smoking. Eliminating these claims raises questions about the constitutionality of the Congress taking away an individual's right without providing any alternative recourse for compensation of their injuries.
• Veterans will be Excluded. Most veterans will not qualify for any compensation under the lung cancer criteria. Even with weighted exposures (counted as two years for every actual year of exposure), most veterans will not be able to meet the 12 or 15 years of weighted exposure required by levels VII and VIII. Their tours were customarily for less than four years, and even if doubled under the weighted exposure provisions, they cannot meet these exposure requirements. Shipyard workers during WWII are treated more favorably under the weighted exposure criteria (each year counted as four of exposure) than their peers who served and fought. Moreover, they will not be able to make claims if they smoked.

Pending Cases

• Pending Claims Preempted. The bill will preempt all asbestos suits immediately upon enactment. The bill provides an exemption for persons with exigent claims, such as those with mesothelioma, that will be difficult to meet and costly to pursue. The bill takes them out of the tort system, then allows them to go back in if the fund is not up and running within 9 months - which was 6 months in the previous draft. The 9 month waiting period is too long for persons with mesothelioma, who could die within 3 to 6 months. Moreover, after 9 months, the party has to return to the court system and start anew. This means likely acquiring new legal representation and starting at the back of the line. But even if one survives these hurdles, the legislation imposes severe venue-based tort reform restrictions on such claims, going well beyond the bill's purported intent of confining the legislation to matters within the trust fund. Additionally, the bill proposes a double standard in preemption by calling for a preemption of state venue laws that are perceived as favorable to victims, but leaves in place state venue laws that are more restrictive than the reforms in the bill. Consequently, victims in states with restrictive venue laws will not be benefited by the bill.
  
  Even if the claim returns to the tort system after 9 months, many of the claimants will die during the delay. Even if they survive 9 months, there may not be enough time to reinstitute the case and bring it to conclusion prior to death. This is particularly true because the claimants will be unable to take any action within the nine months to preserve their claim, such as taking a video deposition of the injured party. The stay will, in effect, eliminate these claims. A better solution is to let their cases proceed.

• Overturns Settlement Agreements. A number of victims have settled claims with defendants in the tort system and are counting on payment of those settlements to pay their medical bills and take care of their families. Although the Bill suggests that final settlements where the only remaining act is payment will be honored, the proposed language carves out most torts settlements by requiring that a written settlement agreement be signed directly by the defendant or the insurer. Most settlements are finalized orally or by a confirming letter from counsel and require a release that is signed by the plaintiff but not the companies or insurers. The Bill allows defendants to create two classes of claimants - one who has an undisputed settlement with a writing signed by the defendant and one who has an undisputed settlement that is documented in the more typical manner.

The legislation would also overturn settlement agreements under the following circumstances:

• Agreements Awaiting Court Approval Overturned. In situations where the parties have agreed to a settlement but are awaiting court approval, the settlement will be voided. The claimant, having assumed their case was settled and organized their life accordingly, will have to start all over in the new system, without any compensation for their cost and hardship.
• Monetary Settlement Inconsistent with the Awards in the bill are Voided. The legislation requires all settlements to "expressly anticipate the passage of the Act and provide for the effects of the Act." This can only mean that the amount of settlements cannot exceed the monetary awards of the bill.
• The Bill Preserves Bankruptcy Settlements. The bill exempts bankruptcy settlements from the settlement restriction and application of the fund because those settlements tend to favor businesses.
• Proposed Settlement Process for Exigent Claimants. The legislation provides exigent claimants the option of settling their claim, after the original claim has been preempted, through a special settlement procedure. However, this process is complicated and filled with hurdles and loopholes - all to the advantage of defendants and the Administrator - and will likely result in victims either waiting longer than the 9 months provided for returning to the tort system, or getting very little compensation. A better solution is to allow their claims to proceed due to the uncertainty over start-up funding, adequacy of contributions, constitutional problems as well as establishment of a bureaucracy.

In order to receive an offer of settlement, a claimant will have to meet the following requirements:

Within 60 days upon enactment, the claimant has to submit to the Administrator and all defendants a statement indicating that the claimant would like to pursue an offer of settlement. Within this time, however, the claimant will have to endure much logistical hardship involving a transition from a pending claim that is immediately taken out of court and subject to new rules. These difficulties include potential termination of his or her existing representation and other actions involving the unraveling of his or her pending claim and then determining how to have his or her claim processed through the new system.

After dealing with the above actions in the first 60 days, the claimant, over the next 60 days (an additional 2 months) will have to provide the following information to all defendants and the Administrator:

• The amount due to be received in relation to any other settlements that would qualify as a collateral source, together with copies of all settlement agreements and related documents sufficient to show the accuracy of that amount. This means defendants could question the accuracy of any documents or requests other proof, thus extending the period;
• All the information the claimant would be required to provide under Sections 115 and 121 of the legislation. In general, this means that the claimant will have to meet all of the new medical evidence and criteria requirements under the legislation. This means new screening, diagnoses, and physicians' certification in the second 2- month time period. The defendants or the Administrator could challenge the veracity of the information, thus extending the time.
  • Section 115 pertains to medical evidence auditing procedures. It requires the Administrator to develop methods for evaluating medical evidence submitted as part of a claim. If an audit shows that the medical evidence from a particular physician or facility is not credible, then the evidence is to be deemed unacceptable for the purpose of an award. Although this generally is to apply to evidence submitted for an award under the bill, because a claimant electing the settlement process also is subject to Section 115, the evidence that they submit could be subject to an audit, either by the election of the Administrator or the request of the defendant.
  • Section 121 sets for the criteria that have to be satisfied for each disease level, including mesothelioma victims under Level X. As part of the information to be submitted to qualify for the settlement process, the claimant will have submit medical evidence meeting the new federal requirements;
• A certification by the claimant that the information provided is true and complete.

This second 2-month period could very well take longer than 2 months because the next phase of the process allows for the defendants, within 30 days of the above 3 forms of information being submitted, to make an offer of settlement in good faith. The provision, however, provides that the defendants do not have to make the offer within 30 days until "after service of a complete set of information." However, if any of the medical evidence is questioned and becomes subject to an audit, as Section 115 allows, it could be determined that the claimant has not satisfied the requirement for having a complete set of information. Accordingly, the time period could be much longer than the 2 months described above for the submission of the information. What is almost certain, however, is that whenever, that time period is satisfied, the defendant will likely use all 30 days to make an offer. This means that at a minimum, by the time the claimant gets to the point of receiving an offer or counter offer from the defendants, 150 days would have elapsed, given that the claimant, even without an audit, will likely need all of the first 2-month requirements to meet the informational requirements.

Additionally, any offer from defendants is not to exceed what the claimant would receive under the bill, minus any previous settlements.

Within 20 days of receiving the offer from the defendant, the claimant is to either accept or reject the offer. If the defendants' offer is equal to 100 percent of what the claimant would receive under the Fund, then the claimant is to accept the offer. At this point, 170 days would have transpired. If the claimant accepts the offer, the defendants are to make a lump sum payment within 30 days. At that point, 200 days would have elapsed, under the best possible case scenario.

The bill provides that if a defendant refuses to make a settlement offer, then the claimant may go to court and recover an amount equal to 150 percent of what the claimant would have received under the legislation. This 150% limit on recovery in the tort system is an insufficient disincentive for defendants who fail to make a legitimate offer.

Moreover, if a victim has received at least the scheduled amount from some of the defendants in their lawsuit before the bill's passage, the remainder of the claim against other, solvent, responsible defendants is completely offset and wiped out by the Specter Bill. The remainder of the claim is worthless once the bill becomes law. This is an unlawful taking of property.

Burden of Proof Raised for Claimants.

• The legislation has raised the burden of proof for claimants from the evidentiary requirement that asbestos was a "contributing factor," to the requirement that it was a "substantial factor," in causing the disease. This is an enormous burden to meet, and one that claimants would not have to meet in a court of law. We have a situation where the Congress has acted to take away individual's right, and then has subjected them to a process akin to the legal system, but with a higher burden of proof. This provision is consistent with the intent of the legislation: abolish the legal system to shield the companies - like W.R. Grace - liable for the asbestos disaster and then limit as much as possible the ability of victims to recover from the fund by: higher burdens of proof; limited funding; and open-ended sunset provision that provides the Administrator a means of saving the program by making the criteria even more stringent in order to reduce the number of eligible claimants.

Mesothelioma Victims Treated Unfairly.

• Mesothelioma victims are also treated unfairly by the Specter Bill. The "one size fits all" approach to mesothelioma compensation under the Bill will result in a grave injustice to many asbestos victims. New, radical treatments offer these victims a chance for extended life, but in many instances these treatments cost hundreds of thousands or even millions of dollars--as much as all or most of their scheduled award. The court system currently allows these victims to require the asbestos companies to pay all of the cost of this treatment, plus other losses they've suffered.
  
  Theoretically, the bill provides for "special adjustments" ofmesotheliomaawards to a tiny percentage of these asbestos victims, but this provision is best described as the "rob Peter to pay Paul" provision. Awards for certain claimants less than 51 years old can be adjusted upwards by the administrator, but only if he can adjust downward the payments of enoughmesotheliomavictims who are over 65 to pay for the difference (Level IX adjustments may be made "[I]f the Administrator determines that the impact of all adjustments on the fund is revenue neutral…" See, section 131, p.92). This is unfair to the older victims, and inadequate for the younger ones.

Libby, Montana

Even the mildest asbestos disease claimants from Libby Montana receive at least 400,000 dollars, while the basic asbestosis victim from anywhere else only gets 25,000 dollars, if he or she qualifies at all (most do not) (See, Section 121, p.90 and section 131, p.91). This is unfair to other former asbestos mine and plant workers. There are hundreds of expansion plants throughout the US to which asbestos-containing vermiculite ore from Libby was shipped. There are hundreds of towns throughout the U.S. which grew up in the shadows of asbestos mines, factories, steel mills, shipyards, powerhouses and refineries, where millions of tons of asbestos was installed, manufactured, processed, or removed.

According to the Environmental Working Group:

• At least 345 Californians died in 2002 from the deadly asbestos cancer, mesothelioma, and the often-fatal non-cancer disease, asbestosis, according to the most recent data from the National Centers for Health Statistics of the Centers for Disease Control (NCHS 2005). Mesothelioma was responsible for more than two thirds (244) of the cases, compared to 101 asbestosis fatalities that year. More than one third of the deaths, 132, were in three metropolitan areas, Los Angeles, San Diego, and Oakland with 53, 46, and 33 fatalities respectively (NCHS 2005).
• California led the nation in asbestos mortality between 1979 and 2002, with 4,618 reported casualties for just these two forms of asbestos disease. The top California metropolitan areas for asbestos mortality during that time were Los Angeles, San Francisco, and San Diego, with 861, 604 and 420 reported deaths respectively. The majority of these casualties are older men. Hundreds more died from mesothelioma during this period, but are not reflected in federal statistics due to reporting oversights described below.

The number of people killed each year in California from these two signature asbestos diseases more than doubled between 1990 and 2002, from 171 to 345 reported fatalities. From 1979, when reporting began, through the most recent year for which data are available (2002), the rate of mesothelioma mortality in California increased at about 3.5 percent per year; for asbestosis the increase was roughly 4.4 percent annually.

When the government began tracking mesothelioma as a cause of death, mortality nationwide more than doubled, from 935 in 1998, to 2,343 in 1999.

It would be unfair to single out the folks of Libby, Montana for special compensation for the same hardships faced my thousands of Americans throughout the nation.

General Issues

• The amount of asbestos reserves and asbestos related liabilities will remain confidential and not subject to disclosure under FOIA. This defeats some of the purposes of the legislation. The defendants wash away the liabilities, but don't have to disclose anything!
• The June 23, 2003 edition of the Budget Bulletin for the Republican Staff of the Senate Budget Committee also concludes that S. 1125 runs afoul of budgetary rules and would face a point of order under section 302 of the Budget Act because an increase in revenues cannot be used to offset the increased spending that would be charged against the Judiciary Committee's allocation. This bill does not remedy the problem.
• Legislation Will Become More Restrictive in Conference. As bad as the above problems with the bill are, the legislation at this stage represents the maximum benefits that the backers will be able to offer victims. As it goes through the process, including a possible legislative conference, a number of the provisions are likely to become even more restrictive toward victims - especially concerning the issue of funding - based on the theory that it will be impossible to stop a legislative conference report.

The above was not prepared by RGW,PC. It was written by a colleague.