Asbestos Reform

I attended the Mealey's Wall Street Forum on asbestos litigation yesterday, as I have done the prior two years. Once again, the speaker involved in drafting federal reform legislation was guardedly optimistic that it could be done this year. The consensus among the ten or so asbestos pros whom I queried was (as it has been for three years that I have been informally polling the issue) that the legislation was going nowhere. In a nutshell, the proposed legislation calls for industry and insurance companies to fund a $140 billion trust to be administered by the federal government. Claims for asbestos related injury would be handled administratively and paid out according to a schedule of benefits. Noone would then be allowed to sue for asbestos related injury.

My personal view is that the federal legislation represents yet another usurpation of state power by the federal government. As an advocate for business interests, I do not like the discussion draft circulated by Senator Specter for a couple of other reasons: (1) the trust fund sunsets if it runs out of money, and all the cases go back to the tort system; and (2) the plan provides payouts for claimants with no demonstrable asbestos related injury and expensive medical surveillance for unimpaired claimants. Accordingly, the plan provides for more payments than necessary to compensate victims fairly and makes it more likely that it will ultimately run out of money.

What business wants is finality and calculability and reasonable compensation for victims. The plan provides neither. Moreover, if the trust sunsets, what happens to all the insurance assets that well run companies have managed to marshall to cover their liability? If the trust runs for ten years and sunsets, you can be sure that the insurers will have ring fenced their risk and that it will be like starting from square one in getting coverage back in place. There is also the chance that the business lobby will be able to socialize the risk and that the government will bail out the trust in a massive corporate giveaway and turn it into another redistribution program.

That 90% of claimants are unimpaired is what makes asbestos litigation so unmanageable. Without unimpaired claimants, the risk would be entirely calculable by epidemiological modeling, and what is wanted is a way to weed out such claims and associated transaction costs. Some states (notably Mississippi) have worked on this, and the solution is for courts to do a better job at insisting that only colorable claims be advanced. Alternative legislation calling for the application of medical criteria would do a lot to solve the problem, and it would do so while doing less violence to the principle of federalism. It would leave the costs to the claimants and the tortfeasors and permit both fair compensation and calculability.